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WEIGHT WATCHERS INTERNATIONAL INC - 10-K405 - 20020327 - MARKET_RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to foreign currency fluctuations and interest rate
changes. The Company's 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. The Company has historically managed interest rates through
the use of, and the Company's 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 the Company's fixed rate
borrowings at December 29, 2001, a 10% change in market interest rates would
have less than a 5% impact on the fair value of the Company's long-term debt.
Based on variable rate debt levels at December 29, 2001, a 10% change in market
interest rates would have less than a 5% impact on the Company's net interest
expense.
Other than intercompany transactions between the Company's domestic and
foreign entities and the portion of the Company's senior subordinated notes that
are denominated in Euros, the Company generally does not have significant
transactions that are denominated in a currency other than the functional
currency applicable to each entity.
The Company enters into forward and swap contracts to hedge transactions
denominated in foreign currencies to reduce the currency risk associated with
fluctuating exchange rates. These contracts are used primarily to hedge certain
intercompany cash flows and for payments arising from some of the Company's
foreign currency denominated obligations. In addition, the Company enters into
interest rate swaps to hedge a substantial portion of its variable rate debt.
Changes in the fair value of these derivatives will be recorded each period in
earnings for non-qualifying derivatives or accumulated other comprehensive
income (loss) for qualifying derivatives.
Fluctuations in currency exchange rates may also impact the Company's
shareholders' equity. The assets and liabilities of the Company's non-U.S.
subsidiaries are translated into U.S. dollars at the exchange rates in effect at
the balance sheet date. Revenues and expenses are translated into U.S. dollars
at the weighted average exchange rate for the period. The resulting translation
adjustments are recorded in shareholders' equity as accumulated other
comprehensive income (loss). In addition, fluctuations in the value of the Euro
will cause the U.S. dollar translated amounts to change in comparison to prior
periods. Furthermore, the Company revalues its outstanding senior subordinated
Euro notes at the end of each period and the resulting change in value will be
reflected in the income statement of the corresponding period.
As part of the European Economic and Monetary Union, the Euro will replace
the national currencies of many of the European countries in which the Company
conducts business. The conversion rates between the Euro and the participating
nations' currencies were fixed irrevocably as of January 1, 1999, with the
participating national currencies scheduled to be removed from circulation
between January 1 and June 30, 2002, and replaced by Euro notes and coinage. The
effects of the Euro conversion on the Company's consolidated financial position
and results of operations have not been significant. The costs of the systems
and business process conversions were not material.
Each of the Company's 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.
The Company uses foreign currency forward contracts to more properly align
the underlying sources of cash flow with the Company's debt servicing
requirements. At December 29, 2001, the Company had long-term foreign currency
forward contracts receivables with notional amounts of $44.0 million and Euro
76.0 million, offset by foreign currency forward contracts payables with
notional amounts of L59.2 million and $21.9 million.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is incorporated by reference to the "Consolidated Financial
Statements and Notes" on pages F-1 through F-43, together with the report
thereon of PricewaterhouseCoopers LLP on page F-44.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
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PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Set forth below are the names, ages as of December 29, 2001 and current
positions with the Company and its subsidiaries of the executive officers and
directors. Directors are elected at the annual meeting of shareholders.
Executive officers are appointed by, and hold office at, the discretion of the
directors.
NAME AGE POSITION
---- -------- --------
Linda Huett............................... 57 President and Chief Executive Officer, Director
Richard McSorley.......................... 57 Chief Operating Officer, NACO
Clive Brothers............................ 48 Chief Operating Officer, Europe
Scott R. Penn............................. 30 Vice President, Australasia
Thomas S. Kiritsis........................ 57 Vice President, Chief Financial Officer
Robert W. Hollweg......................... 59 Vice President, General Counsel and Secretary
Raymond Debbane(1)........................ 46 Chairman of the Board
Jonas M. Fajgenbaum....................... 29 Director
Sacha Lainovic(1)......................... 45 Director
Christopher J. Sobecki.................... 43 Director
Sam K. Reed(2)(3)......................... 54 Director
Marsha Johnson Evans(2)(3)................ 54 Director
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(1) Member of the Company's compensation and benefits committee.
(2) Member of the Company's audit committee.
(3) Named to the board of directors on February 12, 2002.
LINDA HUETT. Ms. Huett has been the President and a director of the Company
since September 1999. She became the Company's Chief Executive Officer in
December 2000. Ms. Huett joined the Company in 1984 as a classroom leader.
Ms. Huett was promoted to U.K. Training Manager in 1986. In 1990, Ms. Huett was
appointed Director of the United Kingdom operation and in 1993 was appointed
Vice President of Weight Watchers U.K. Ms. Huett graduated from Gustavas
Adolphus College and received her Masters in Theater from Yale University.
Ms. Huett is also a director of WeightWatchers.com, Inc.
RICHARD MCSORLEY. Mr. McSorley has served as the Company's Chief Operating
Officer for North America since January 2001. From 1992 until the Company's
purchase of Weighco, Mr. McSorley served in various capacities with Weighco
Enterprises, Inc., including as President since 1995 and Chief Executive Officer
since 1996. Mr. McSorley received his B.A. degree from Villanova University and
an M.B.A. from the University of Pittsburgh.
CLIVE BROTHERS. Mr. Brothers has served as the Company's Chief Operating
Officer for Europe since February 2001. Mr. Brothers joined the Company in 1985
as a marketing manager in the United Kingdom. In 1990, Mr. Brothers was
appointed General Manager, France and was appointed Vice
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President, Continental Europe in 1993. Mr. Brothers received a B.A. (Hons) in
Business Studies from Leeds Polytechnic in England and a diploma in Marketing
from the Chartered Institute of Marketing.
SCOTT R. PENN. Scott Penn has been a Vice President of the Company's
Australasia operations since September 1999. Mr. Penn joined the Company in 1994
as a Marketing Services Manager in Australia. In 1996, he was promoted to Group
Marketing Manager in Australia and in 1997 he was promoted to General
Manager--Marketing and Finance.
THOMAS S. KIRITSIS. Mr. Kiritsis has served as the Company's Vice
President, Chief Financial Officer since joining the Company in May 2000. From
June 1994 to April 2000, he was Senior Vice President of Finance of Olsten
Corporation. Mr. Kiritsis received a B.B.A. in Accounting from Hofstra
University and is a certified public accountant.
ROBERT W. HOLLWEG. Mr. Hollweg has served as the Company's Vice President,
General Counsel and Secretary since January 1998. He joined the Company in 1969
as an Assistant Counsel in the law department. He transferred to the Heinz law
department subsequent to Heinz's acquisition of the Company in 1978 and served
there in various capacities. He rejoined the Company after Artal Luxembourg
acquired the Company in September 1999. Mr. Hollweg graduated from Fordham
University and received his Juris Doctor degree from Fordham University School
of Law. He is a member of the American and New York State Bar Associations and a
former President of the International Trademark Association.
RAYMOND DEBBANE. Mr. Debbane has been the Company's Chairman of the board
of directors since the Company's acquisition by Artal Luxembourg on
September 29, 1999. Mr. Debbane is a co-founder and President of The Invus
Group, Ltd. Prior to forming The Invus Group, Ltd. in 1985, Mr. Debbane was a
manager and consultant for The Boston Consulting Group in Paris, France. He
holds an M.B.A. from Stanford Graduate School of Business, an M.S. in Food
Science and Technology from the University of California, Davis and a B.S. in
Agricultural Sciences and Agricultural Engineering from American University of
Beirut. Mr. Debbane is a director of Artal Group S.A., Ceres, Inc., Financial
Technologies International Inc. and Nellson Nutraceutical, Inc. Mr. Debbane is
also the Chairman of the board of directors of WeightWatchers.com, Inc. and
served as a director of Keebler Foods Company from 1996 to 1999.
JONAS M. FAJGENBAUM. Mr. Fajgenbaum has been a director of the Company
since the Company's acquisition by Artal Luxembourg on September 29, 1999.
Mr. Fajgenbaum is a Managing Director at The Invus Group, Ltd., which he joined
in 1996. Prior to joining The Invus Group, Ltd., Mr. Fajgenbaum was a consultant
for McKinsey & Company in New York from 1994 to 1996. He graduated with a B.S.
from the Wharton School of Business and a B.A. in Economics from the University
of Pennsylvania in 1994.
SACHA LAINOVIC. Mr. Lainovic has been a director of the Company since the
Company's acquisition by Artal Luxembourg on September 29, 1999. Mr. Lainovic is
a co-founder and Executive Vice President of The Invus Group, Ltd. Prior to
forming The Invus Group, Ltd. in 1985, Mr. Lainovic was a manager and consultant
for the Boston Consulting Group in Paris, France. He holds an M.B.A. from
Stanford Graduate School of Business and an M.S. in engineering from Insa de
Lyon in Lyon, France. Mr. Lainovic is a director of WeightWatchers.com, Inc.,
Financial Technologies International Inc., Nellson Nutraceutical, Inc. and
Unwired Australia Pty Limited, and also served as a director of Keebler Foods
Company from 1996 to 1999.
CHRISTOPHER J. SOBECKI. Mr. Sobecki has been a director of the Company
since the Company's acquisition by Artal Luxembourg on September 29, 1999.
Mr. Sobecki, a Managing Director of The Invus Group, Ltd., joined the firm in
1989. He received an M.B.A. from Harvard Business School. He also obtained a
B.S. in Industrial Engineering from Purdue University. Mr. Sobecki is a director
of
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WeightWatchers.com, Inc., Nellson Nutraceutical, Inc., Financial Technologies
International Inc. and iLife, Inc. He also served as a director of Keebler Foods
Company from 1996 to 1998.
SAM K. REED. Mr. Reed has 27 years of experience in the food industry. He
was formerly Vice Chairman and Director of Kellogg Company, the world's leading
producer of cereal and a leading producer of convenience foods. From 1996 to
2001, Mr. Reed was Chief Executive Officer, President and a Director of Keebler
Foods Company. Previously, he was Chief Executive Officer, of Specialty Foods
Corporation's $450 million Western Bakery Group division. He is a Director of
the Tractor Supply Company. Mr. Reed received a B.A. from Rice University and an
M.B.A. from Stanford University.
MARSHA JOHNSON EVANS. Ms. Evans is currently the National Executive
Director of Girl Scouts of the U.S.A., the world's preeminent organization
dedicated solely to girls. A retired Rear Admiral in the United States Navy,
Ms. Evans has served as superintendent of the Naval Postgraduate School in
Monterey, California and headed the Navy's worldwide recruiting organization
from 1993 to 1995. She is currently a director of the May Department Stores
Company and numerous nonprofit boards. Ms. Evans received a B.A. from Occidental
College and a Master's Degree from the Fletcher School of Law and Diplomacy at
Tufts University.
BOARD OF DIRECTORS
The Company's board of directors is currently comprised of seven directors.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION PROGRAMS
The Company's board of directors oversees the compensation programs of the
Company, with particular attention to the compensation for its Chief Executive
Officer and the other executive officers. It is the responsibility of the
Company's board of directors to review, recommend and approve changes to the
Company's compensation policies and benefits programs, to administer the
Company's stock plans, including approving stock option grants to executive
officers and other stock option grants, and to otherwise ensure that the
Company's compensation philosophy is consistent with the best interests of the
Company and is properly implemented.
The Company's compensation philosophy is to (1) provide a competitive total
compensation package that enables the Company to attract and retain key
executive and employee talent needed to accomplish the Company's goals, and
(2) directly link compensation to improvements in the Company's financial and
operational performance.
Total compensation is comprised of a base salary plus both cash and non-cash
incentive compensation, and is based on the Company's financial performance and
other factors, and is delivered through a combination of cash and equity-based
awards. This approach results in overall compensation levels which follow the
Company's financial performance.
The Company's board of directors reviews each senior executive officer's
base salary annually. In determining appropriate base salary levels,
consideration is given to the officer's impact level, scope of responsibility,
prior experience, past accomplishments and data on prevailing compensation
levels in relevant executive labor markets.
The Company's board of directors believes that granting stock options
provides officers with a strong economic interest in maximizing shareholder
returns over the longer term. The Company believes that the practice of granting
stock options is important in retaining and recruiting the key talent necessary
at all employee levels to ensure the Company's continued success.
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COMMITTEES OF THE COMPANY'S BOARD OF DIRECTORS
The standing committees of the Company's board of directors consist of an
audit committee and a compensation and benefits committee.
AUDIT COMMITTEE
The principal duties of the Company's audit committee are as follows:
- to oversee that the Company's management has maintained the reliability
and integrity of the Company's accounting policies and financial reporting
and the Company's disclosure practices;
- to oversee that the Company's management has established and maintained
processes to assure that an adequate system of internal control is
functioning;
- to oversee that the Company's management has established and maintained
processes to assure the Company's compliance with all applicable laws,
regulations and corporate policy;
- to review the Company's annual and quarterly financial statements prior to
their filing or prior to the release of earnings; and
- to review the performance of the independent accountants and make
recommendations to the board of directors regarding the appointment or
termination of the independent accountants.
The audit committee has the power to investigate any matter brought to its
attention within the scope of its duties and to retain counsel for this purpose
where appropriate.
COMPENSATION AND BENEFITS COMMITTEE
The principal duties of the compensation and benefits committee are as
follows:
- to review key employee compensation policies, plans and programs;
- to monitor performance and compensation of the Company's
employee-director, officers and other key employees;
- to prepare recommendations and periodic reports to the board of directors
concerning these matters; and
- to function as the committee which administers the incentive programs
referred to in "Executive Compensation" below.
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Company's executive officers has served as a director or member
of the compensation and benefits committee, or other committee serving an
equivalent function, of any entity of which an executive officer is expected to
serve as a member of the Company's compensation and benefits committee.
CLASSES AND TERMS OF DIRECTORS
The Company's board of directors is divided into three classes, as nearly
equal in number as possible, with each director serving a three-year term and
one class being elected at each year's annual meeting of shareholders. The
following individuals are directors and serve for the terms indicated:
CLASS 1 DIRECTORS (TERM EXPIRING IN 2002)
Raymond Debbane
Jonas M. Fajgenbaum
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CLASS 2 DIRECTORS (TERM EXPIRING IN 2003)
Sacha Lainovic
Christopher J. Sobecki
Marsha Johnson Evans
CLASS 3 DIRECTOR (TERM EXPIRING IN 2004)
Linda Huett
Sam K. Reed
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Company's common stock (collectively, "Reporting Persons") to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock of the Company. Such persons are required
by regulations of the Securities and Exchange Commission to furnish the Company
with copies of all such filings. Based on its review of the copies of such
filings received by it with respect to the fiscal year ended December 29, 2001
and written representations from certain Reporting Persons, the Company believes
that all Reporting Persons complied with all Section 16(a) filing requirements
in the fiscal year ended December 29, 2001.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended December 29, 2001,
the twelve months ended December 30, 2000, and for the fiscal year ended
April 29, 2000, the compensation paid to the Company's President and Chief
Executive Officer and to each of the next four most highly compensated executive
officers whose total annual salary and bonus was in excess of $100,000.
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SUMMARY COMPENSATION TABLE
TWELVE MONTH LONG-TERM COMPENSATION AWARDS
PERIOD SECURITIES UNDERLYING OPTIONS
COMPENSATION (NO. AWARDED)
------------------- --------------------------------
WEIGHT ALL OTHER
NAME AND PRINCIPAL POSITION TWELVE MONTHS ENDED SALARY BONUS WATCHERS WEIGHTWATCHERS.COM(5) COMPENSATION(6)
--------------------------- -------------------- -------- -------- -------- --------------------- ----------------
Linda Huett................. December 29, 2001 $250,016 $425,027 -- -- $ 93,497
President and December 30, 2000(4) 236,565 283,351 141,161 -- 84,531
Chief Executive Officer April 29, 2000 183,750 215,159 282,322 11,385 288,905
Thomas S. Kiritsis(1)....... December 29, 2001 204,844 252,034 -- -- 66,580
Vice President, Chief December 30, 2000 130,798 160,035 282,322 11,385 26,747
Financial Officer
Richard McSorley(2)......... December 29, 2001 192,534 252,034 282,322 -- 17,579
Chief Operating Officer,
North America
Clive Brothers.............. December 29, 2001 183,593 207,651 -- -- 30,872
Chief Operating Officer, December 30, 2000(4) 170,148 154,215 -- -- 29,639
Europe April 29, 2000 143,423 158,597 282,322 11,385 12,908
Robert W. Hollweg(3)........ December 29, 2001 157,245 198,058 -- -- 51,705
Vice President, General December 30, 2000(4) 142,510 100,013 282,322 11,385 43,519
Counsel and Secretary April 29, 2000 70,500 67,349 -- -- 11,325
Scott R. Penn............... December 29, 2001 117,711 94,350 -- -- 25,759
Vice President, December 30, 2000(4) 124,758 78,059 -- -- 28,484
Australasia
April 29, 2000 63,508 86,134 282,322 11,385 15,930
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(1) Mr. Kiritsis joined the Company on May 1, 2000.
(2) Mr. McSorley joined the Company on January 16, 2001.
(3) Mr. Hollweg rejoined the Company in September 1999. Prior to that time, he
was an employee of Heinz.
(4) Effective April 30, 2000, the Company changed its fiscal year end from the
last Saturday in April to the Saturday closest to December 31. To accurately
reflect annual compensation, the compensation reported for the twelve months
ended December 30, 2000 has been derived from the compensation for the eight
months ended December 30, 2000, plus the compensation for the four months
ended April 29, 2000, except that the shares underlying the options issued
in respect of WeightWatchers.com shares are not included in the executive
officer's compensation for the twelve months ended December 30, 2000 because
this grant of options is reflected in the executive officer's compensation
for the twelve months ended April 29, 2000. As a result, there is overlap in
the compensation reported for the twelve months ended December 30, 2000 and
the twelve months ended April 29, 2000.
(5) Awards of options with respect to shares of WeightWatchers.com common stock
owned by the Company were made to the named executives under the Company's
WeightWatchers.com 1999 Stock Incentive Plan of Weight Watchers
International, Inc. and Subsidiaries.
(6) For the fiscal year ended December 29, 2001, these figures include amounts
contributed under the Company's 401(k) savings plan and the Company's
non-qualified executive profit sharing plan of $80,005 for Ms. Huett,
$59,831 for Mr. Kiritsis, $43,689 for Mr. Hollweg and $11,552 for
Mr. McSorley. Also included are contributions to the U.K. Pension Plan of
$18,456 for Mr. Brothers and contributions to the Australia Pension Plan of
$16,000 for Mr. Penn, as well as auto lease expense for named executives.
In December 1999, the Company's board of directors adopted the "1999 Stock
Purchase and Option Plan of Weight Watchers International, Inc. and
Subsidiaries" under which selected employees were afforded the opportunity to
purchase shares of the Company's common stock and/or were granted options to
purchase shares of the Company's common stock. The number of shares available
for grant under this plan is 7,058,040 shares of the Company's authorized common
stock.
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The following table sets forth information regarding options granted during
the fiscal year ended December 29, 2001 to the named executive officers under
the Company's stock purchase and option plan.
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES OPTION GRANTS
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED TO
SECURITIES EMPLOYEES IN EXERCISE GRANT
UNDERLYING FISCAL YEAR OR DATE
OPTIONS ENDED BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) DECEMBER 29, 2001(2) (PER SHARE) DATE VALUE(3)
---- ---------- -------------------- ----------- ----------- ----------
Richard McSorley............. 282,322 38.6% $4.04 May 7, 2011 $457,364
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(1) Options were granted during the fiscal year ended December 29, 2001 under
the terms of the Company's option plan. No options under the plan were
exercised during the fiscal year ended December 29, 2001. Options are
exercisable based on vesting provisions outlined in the agreement.
(2) Percentage of total options granted are based on total grants made to all
employees during the fiscal year ended December 29, 2001.
(3) The estimated grant date's present value is determined using the
Black-Scholes model. The adjustments and assumptions incorporated in the
Black-Scholes model in estimating the value of the grants include the
following: (a) the exercise price of the options equals the fair market
value of the underlying stock on the date of grant; (b) an option term of
7.5 years; (c) dividend yield of 0% and volatility of 34.6% and (d) a risk
free interest rate ranging from 5.1% to 5.4%. The ultimate value, if any, an
optionee will realize upon exercise of an option will depend on the excess
of the market value of the Company's common stock over the exercise price of
the option.
Under the Company's 1999 Stock Purchase and Option Plan, the Company has the
ability to grant stock options, restricted stock, stock appreciation rights and
other stock-based awards. Generally, stock options granted under this plan vest
and become exercisable in annual increments over five years with respect to
one-third of options granted, and the remaining two-thirds of the options vest
on the ninth anniversary of the date the options were granted, subject to
accelerated vesting upon the Company's achievement of certain performance
targets. In any event, the options that vest over five years automatically
become fully vested upon the occurrence of a change in control of the Company.
In April 2000, the Company's board of directors adopted the
"WeightWatchers.com Stock Incentive Plan of Weight Watchers International, Inc.
and Subsidiaries" pursuant to which selected employees were granted options to
purchase shares of WeightWatchers.com common stock. The number of shares
available for grant under this plan is 400,000 shares of authorized common stock
of WeightWatchers.com. No options were granted during the fiscal year ended
December 29, 2001 to the named executive officers under the WeightWatchers.com
Stock Incentive Plan.
Under the Company's WeightWatchers.com Stock Incentive Plan, the Company has
the ability to grant stock options, restricted stock, stock appreciation rights
and other stock-based awards on shares of WeightWatchers.com common stock.
Generally, stock options under this plan vest in annual increments over five
years upon the Company's achievement of certain performance targets. These
options are not exercisable until the earlier to occur of (1) six months after
the tenth anniversary of the date the option was granted; and (2) a public
offering of WeightWatchers.com common stock or a private sale of the stock in
which an employee holding stock is entitled to participate under the terms of
the sale participation agreement entered into with Artal Luxembourg.
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The following tables set forth the number and value of securities underlying
unexercised options held by each of the Company's executive officers listed on
the Summary Compensation Table above as of December 29, 2001. None of the
Company's executive officers exercised any options in the fiscal year ended
December 29, 2001, and the Company does not have any stock appreciation rights.
AGGREGATED OPTIONS/SAR
VALUES AS OF DECEMBER 29, 2001
NUMBER OF WEIGHT WATCHERS VALUE OF WEIGHT WATCHERS
SECURITIES UNEXERCISED
FISCAL YEAR ENDED UNDERLYING UNEXERCISED IN-THE-MONEY
DECEMBER 29, 2001 OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 29, 2001 DECEMBER 29, 2001
----------------------- ----------------------------------- ---------------------------
ACQUIRED IN VALUES ----------------------------------- ---------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE (#) UNEXERCISABLE (#) EXERCISABLE UNEXERCISABLE
---- ------------ -------- --------------- ----------------- ----------- -------------
Linda Huett................ -- -- 207,036 216,447 $6,475,051 $6,769,380
Clive Brothers............. -- -- 136,456 145,866 $4,267,661 $4,561,959
Scott R. Penn.............. -- -- 136,456 145,866 $4,267,661 $4,561,959
Thomas S. Kiritsis......... -- -- 136,456 145,866 $4,267,661 $4,561,959
Robert W. Hollweg.......... -- -- 136,456 145,866 $4,267,661 $4,561,959
Richard McSorley........... -- -- 47,054 235,268 $1,381,600 $6,907,939
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NUMBER OF
WEIGHTWATCHERS.COM VALUE OF NUMBER OF
SECURITIES WEIGHTWATCHERS.COM HEINZ SECURITIES
UNDERLYING UNEXERCISED IN-THE-MONEY UNDERLYING UNEXERCISED
OPTIONS/SARS AT OPTIONS/SARSAT OPTIONS/SARS AT
DECEMBER 29, 2001 DECEMBER 29, 2001 DECEMBER 29, 2001
--------------------------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) (#) EXERCISABLE UNEXERCISABLE (#) (#)
---- ----------- ------------- ----------- ------------- ----------- -------------
Linda Huett.................. 5,692 5,693 -- -- 40,000 --
Clive Brothers............... 5,692 5,693 -- -- 40,000 --
Scott R. Penn................ 5,692 5,693 -- -- -- --
Thomas S. Kiritsis........... 5,692 5,693 -- -- -- --
Robert W. Hollweg............ 5,692 5,693 -- -- -- --
Richard McSorley............. -- -- -- -- -- --
VALUE OF HEINZ
IN-THE-MONEY
OPTIONS/SARS AT
DECEMBER 29, 2001
---------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
Linda Huett.................. -- --
Clive Brothers............... -- --
Scott R. Penn................ -- --
Thomas S. Kiritsis........... -- --
Robert W. Hollweg............ -- --
Richard McSorley............. -- --
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DIRECTORS COMPENSATION
The Company's executive directors and the Company's directors who are
associated with The Invus Group, Ltd. do not receive compensation except in
their capacity as officers or employees. Mr. Reed and Ms. Evans will receive
(1) annual compensation in the amount of $30,000, paid quarterly half in cash
and half in common stock of the Company; (2) $1,000 per Audit Committee meeting;
(3) options for 2,000 shares of the Company's common stock per year, with the
first grant on February 6, 2002, at an exercise price equal to the closing price
of the common stock of the Company on the day that the options are granted, the
options have a five year life and vest one year after the grant date; and
(4) reimbursement of reasonable out-of-pocket expenses associated with a
director's role on the board of directors.
EXECUTIVE SAVINGS AND PROFIT SHARING PLAN
The Company sponsors a savings plan for salaried and eligible hourly
employees. This defined contribution plan provides for employer matching
contributions up to 100% of the first 3% of an employee's eligible compensation.
The savings plan also permits employees to contribute between 1% and 13% of
eligible compensation on a pre-tax basis.
30
The savings plan also contains a profit sharing component for full-time
salaried employees that are not key management personnel, which provides for a
guaranteed monthly employer contribution for each participant based on the
participant's age and a percentage of the participant's eligible compensation.
In addition, the profit sharing plan has a supplemental employer contribution
component, based on the Company's achievement of certain annual performance
targets, and a discretionary contribution component.
The Company also established an executive profit sharing plan, which
provides a non-qualified profit sharing plan for key management personnel who
are not eligible to participate in the Company's profit sharing plan. This
non-qualified profit sharing plan has similar features to the Company's profit
sharing plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's common stock by (1) all persons known by the Company
to own beneficially more than 5% of the Company's common stock, (2) the
Company's chief executive officer and each of the named executive officers,
(3) each director, and (4) all directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days after December 29, 2001 are deemed
issued and outstanding. These shares, however, are not deemed outstanding for
purposes of computing percentage ownership of each other shareholder.
The Company's capital stock consists of common stock and preferred stock. As
of December 29, 2001, there were 105,499,987 shares of the Company's common
stock and 1,000,000 shares of the Company's preferred stock outstanding. On
March 1, 2002, the Company redeemed all of the Company's Series A Preferred
Stock held by Heinz for a redemption price of $25 million plus accrued and
unpaid dividends.
AS OF DECEMBER 29, 2001
------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
------------------------ ----------- ----------
Artal Luxembourg S.A.(1).................................... 80,517,663 76.3%
Linda Huett(2)(3)........................................... 301,244 *
Richard McSorley(2)......................................... 159,984 *
Clive Brothers(2)(3)(4)..................................... 231,064 *
Scott R. Penn(2)(3)(4)...................................... 382,311 *
Thomas S. Kiritsis(2)(3)(4)................................. 234,731 *
Robert W. Hollweg(2)(3)..................................... 254,090 *
Raymond Debbane(5)(6)....................................... -- --
Sacha Lainovic(6)........................................... -- --
Christopher J. Sobecki(6)................................... -- --
Jonas M. Fajgenbaum(6)...................................... -- --
All directors and executive officers as a group
(10 people)............................................... 1,563,424(3) 1.5%
|
* Less than 1.0%
(1) Artal Luxembourg may be contacted at 105, Grand-Rue, L-1661 Luxembourg,
Luxembourg. The parent entity of Artal Luxembourg S.A. is Artal Group S.A.
The address of Artal Group is the same as the address of Artal Luxembourg.
31
(2) The Company's officers may be contacted c/o Weight Watchers
International, Inc., 175 Crossways Park West, Woodbury, New York, 11797.
(3) Includes shares subject to purchase upon exercise of options exercisable
within 60 days after December 29, 2001, as follows: Ms. Huett 207,036
shares; Mr. Brothers 136,456 shares; Mr. Scott Penn 170,569 shares (includes
34,113 shares subject to options held by Mr. Scott Penn's spouse);
Mr. Kiritsis 136,456 shares; Mr. Hollweg 136,456 shares; and Mr. McSorley
65,876 shares.
(4) With respect to Mr. Scott Penn, includes 70,581 shares of the Company's
common stock and vested options to purchase 34,113 shares of the Company's
common stock held by Mr. Scott Penn's spouse. With respect to Mr. Thomas
Kiritsis, includes 4,167 shares of the Company's common stock held by
Mr. Thomas Kiritsis' spouse. With respect to Mr. Clive Brothers, includes
500 shares of the Company's common stock held by Mr. Clive Brothers' spouse.
(5) Mr. Debbane is also a director of Artal Group. Artal Group is the parent
entity of Artal Luxembourg. Mr. Debbane disclaims beneficial ownership of
all shares owned by Artal Luxembourg.
(6) The Company's non-executive directors may be contacted c/o The Invus
Group, Ltd., 135 East 57th Street, New York, New York 10022.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS' AGREEMENTS
Simultaneously with the closing of the Company's acquisition by Artal
Luxembourg, the Company entered into a shareholders' agreement with Artal
Luxembourg and Heinz relating to their rights with respect to the Company's
common stock. Subsequent transferees of Artal Luxembourg and Heinz must, subject
to limited exceptions, agree to be bound by the terms and provisions of the
agreement. Heinz has sold all shares of the Company's common stock held by it
and accordingly no longer has any rights or obligations under this agreement.
The Company and Artal Luxembourg recently terminated this agreement.
Shortly after the Company's acquisition by Artal Luxembourg, the Company
entered into a shareholders' agreement with Artal Luxembourg and Merchant
Capital, Inc., Richard and Heather Penn, Longisland International Limited, Envoy
Partners and Scotiabanc, Inc. relating to their rights with respect to the
Company's common stock held by these parties other than Artal Luxembourg.
Without the consent of Artal Luxembourg, transfers of the Company's common stock
by these shareholders are restricted with certain exceptions. Subsequent
transferees of the Company's common stock must, subject to limited exceptions,
agree to be bound by the terms and provisions of the agreement. Additionally,
this agreement provides the shareholders with the right to participate pro rata
in certain transfers of the Company's common stock by Artal Luxembourg and
grants Artal Luxembourg the right to require the other shareholders to
participate on a pro rata basis in certain transfers of the Company's common
stock by Artal Luxembourg.
32
REGISTRATION RIGHTS AGREEMENT
Simultaneously with the closing of the Company's acquisition by Artal
Luxembourg, the Company entered into a registration rights agreement with Artal
Luxembourg and Heinz. The registration rights agreement grants Artal Luxembourg
the right to require the Company to register its shares of the Company's common
stock for public sale under the Securities Act (1) upon demand and (2) in the
event that the Company conducts certain types of registered offerings. Heinz has
sold all shares of the Company's common stock held by it and accordingly no
longer has any rights under this agreement. Merchant Capital, Inc., Richard and
Heather Penn, Long Island International Limited, Envoy Partners and
Scotiabanc, Inc. became parties to this registration rights agreement under
joinder agreements, and each acquired the right to require the Company to
register and sell their stock in the event that the Company conducts certain
types of registered offerings.
PREFERRED SHAREHOLDERS' AGREEMENT
Simultaneously with the closing of the Company's acquisition by Artal
Luxembourg, the Company entered into a preferred shareholders' agreement with
Heinz that governed the Company's relationship concerning the Company's
Series A Preferred Stock. Subsequent transferees of Heinz, subject to limited
exceptions, had to agree to be bound by the terms and provisions of this
agreement. Artal Luxembourg and the Company had a preemptive right to acquire
the preferred stock from Heinz if Heinz received an offer to purchase any or all
of its preferred stock from a third party and it wished to accept the offer.
Heinz had the right to require the Company to redeem any or all of its shares of
the Company's preferred stock. This right, however, was limited by the
provisions contained in the Company's credit agreement and the indentures
pursuant to which the Company's senior subordinated notes were issued. On
March 1, 2002, the Company redeemed all of the Company's Series A Preferred
Stock held by Heinz for a redemption price of $25 million plus accrued and
unpaid dividends.
PUT/CALL AGREEMENT
On April 18, 2001, the Company entered into a Put/Call Agreement with Heinz.
Under this agreement, Heinz had an option to sell and the Company had an option
to purchase all of the Company's common stock currently owned by Heinz. Under
this agreement, Heinz has sold to the Company 6,719,254 shares of the Company's
common stock held by it for an aggregate purchase price of $27.1 million. Heinz
no longer holds any common stock of the Company.
LIMITED LIABILITY COMPANY AGREEMENT
Simultaneously with the closing of the Company's acquisition by Artal
Luxembourg, the Company contributed $2,500 in exchange for a 50% membership
interest in WW Foods, LLC, a Delaware limited liability company. Heinz owns the
remaining 50% interest. The purpose of WW Foods is to own, maintain and preserve
WEIGHT WATCHERS food and beverage trademarks that were contributed to it by
Heinz. WW Foods serves as the vehicle for licensing rights in those food and
beverage trademarks to the Company and to Heinz, and for the licensing of
program information by the Company to Heinz.
LICENSING AGREEMENTS
The licensing agreements govern the ownership and rights to use the WEIGHT
WATCHERS and other trademarks, service marks and related rights among the
Company, Heinz and WW Foods. As described below, the licensing agreements
address the parties' respective ownership and rights to use food and beverage
trademarks, service marks, program standards, program information, program
information trademarks and third party licenses. Heinz is also a party to an
operating agreement, which helps preserve and enhance these trademarks, service
marks and related rights and facilitates their orderly use by each party.
33
FOOD AND BEVERAGE TRADEMARKS
Under the licensing agreements, the Company distributed to Heinz and Heinz
contributed to WW Foods all WEIGHT WATCHERS trademarks and other trademarks the
Company owned relating to food and beverage products. However, Heinz retained
certain trademarks previously used by Heinz in connection with those food and
beverage trademarks that do not include the WEIGHT WATCHERS name (including, for
example, SMART ONES), which the Company distributed to Heinz. At the closing of
the Company's acquisition by Artal Luxembourg, WW Foods granted an exclusive,
worldwide, royalty-free, perpetual license to use the food and beverage
trademarks:
- to Heinz, for worldwide use on food products in specified product
categories (including frozen dinners, frozen breakfasts, frozen desserts
(excluding ice cream), frozen pizza and pizza snacks, frozen potatoes,
frozen rice products, ketchup, tomato sauce, gravy, canned tuna or salmon
products, soup, noodles (excluding pasta), and canned beans and pasta
products), and for use only in Australia and New Zealand in specified
additional food product categories (including mayonnaise, frozen
vegetables, canned fruits and canned vegetables); and
- to the Company, for use on all other food and beverage products.
The Company may promote, endorse and sell any of these licensed products
through the Company's classroom business and related activities, subject to
non-competition provisions with Heinz. Additionally, the Company may continue to
sell any food and beverage product (or comparable product) sold by the Company
in a particular country within the year preceding the closing of the Company's
acquisition by Artal Luxembourg, even if that product has been exclusively
licensed to Heinz. However, the Company may do so only within that country and
by using the same channels of distribution through which the product was sold
during that one-year period.
Some of the food and beverage trademarks and trademark applications were not
distributed to Heinz for contribution to WW Foods. These trademarks and
trademark applications include:
- trademarks consisting of registrations in multiple trademark classes,
where the classes include both food and beverage product classes and
classes relating to other types of products or services;
- pending applications that could not be transferred until a registration is
granted;
- trademark registrations and applications in countries that do not
recognize ownership of trademarks by an entity such as WW Foods;
- trademark registrations and applications in countries where the local law
imposes restrictions or limitations on the ownership or registration of
similar trademarks by unrelated parties; and
- program information trademarks (as defined below).
The Company retained legal ownership of these types of food and beverage
trademarks, which the Company holds in custody for the benefit of WW Foods.
At the closing of the Company's acquisition by Artal Luxembourg, the Company
granted to Heinz an exclusive, worldwide, royalty-free license to use those food
and beverage trademarks (or any portion covering food and beverage products)
that the Company holds in custody for the benefit of WW Foods in connection with
the other products licensed to Heinz by WW Foods. The Company has undertaken to
contribute any of these custodial trademarks (or any portion covering food and
beverage products) to WW Foods if WW Foods determines that the transfer may be
achieved under local law. If local law does not permit an existing registration
in multiple trademark classes to be severed so as to reflect separate ownership
of registrations in food and beverage product classes from registrations in
classes covering other types of products or services, (1) WW Foods will apply
for new registrations to cover the food and beverage products, (2) the Company
will cancel the portion of the multi-class registration
34
covering food and beverage products upon issuance of the new registrations and
(3) the Company will retain ownership of all remaining portions of the
multi-class registration. Heinz will pay the Company an annual fee of
$1.2 million until September 2004 in exchange for the Company's serving as the
custodian of the food and beverage trademarks held for the benefit of WW Foods.
OTHER MARKS
The Company retains exclusive ownership of all service marks and trademarks
other than food and beverage trademarks and, except for the rights granted to
WW Foods and to Heinz, the Company has 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 Company has exclusive control of the dietary principles to be followed
in any eating or lifestyle regimen to facilitate weight loss or weight control
employed by the classroom business such as WINNING POINTS. Except for specified
limitations concerning products currently sold and extensions of existing
product lines, Heinz may use the food and beverage related trademarks only on
Heinz licensed products that have been specially formulated to be compatible
with the Company's dietary principles. The Company has exclusive responsibility
for enforcing compliance with its dietary principles.
PROGRAM INFORMATION AND PROGRAM INFORMATION TRADEMARKS
The Company retains exclusive ownership of all program information,
consisting of:
- all information and know-how relating to any weight-loss program;
- all terminology; and
- all trademarks or service marks used to identify the programs or
terminology.
The Company granted an exclusive, worldwide, royalty-free license to
WW Foods (for sublicense to Heinz) to use the terminology and the related
trademarks and service marks, and the Company provided WW Foods (and through it,
Heinz) with access to and a right to use this information as may be reasonably
necessary to develop, manufacture or market food and beverage products in
accordance with the Company's dietary principles. Heinz granted a worldwide,
royalty-free license to WW Foods to use improvements that Heinz may develop in
the course of its use of the Company's dietary principles or weight-loss
program, which WW Foods sublicensed in turn to the Company.
THIRD PARTY LICENSES
Under the licensing agreements, the Company assigned to Heinz all licenses
that the Company previously granted to third parties, and Heinz retained all
existing sublicenses granted by it to third parties under a license previously
granted to Heinz that relate to the manufacture, distribution or sale of food
and beverage products. Heinz assumed the Company's obligations under these third
party licenses, and has the right to collect and keep all proceeds from them
until September 2004. Ownership of these licenses, to the extent they pertain to
products licensed to the Company by WW Foods, will be transitioned to the
Company over the five-year period following the Company's acquisition by Artal
Luxembourg. All proceeds from any of these licenses that cannot be transitioned
to the Company by September 2004 will be collected by Heinz and paid over to the
Company. Any sublicense that the Company or Heinz grants after the closing of
the Company's acquisition by Artal Luxembourg relating to use of the Company's
food and beverage related trademarks must conform to the terms of the WW Foods
licenses granted to Heinz and the Company.
35
Effective May 3, 2001, the Company agreed to manage these third party
licenses under an agreement with Heinz dated April 30, 2001 for a fee equal to
5% of the royalties from these licenses. This agreement also grants the Company
an option, exercisible in the Company's sole discretion, to buy the royalty
stream from these licenses prior to September 29, 2004 at a price computed using
a formula which adjusts for the then current royalty base, an assumed growth
rate over the balance of the period, the 5% management fee, the custodial fee,
an agreed discount rate and a tax rate.
HEINZ LICENSES
Subsequent to its acquisition by Artal Luxembourg, the Company entered into
three short-term licenses with Heinz and its affiliates regarding the
manufacture and marketing of certain food products (not licensed to Heinz by
WW Foods) under the Company's brand in the United Kingdom, Australia and in New
Zealand through WW Foods as described above. These products were ones that were
manufactured and marketed by Heinz prior to the Company's acquisition by Artal
Luxembourg.
MANAGEMENT AGREEMENT
Simultaneously with the closing of the Company's acquisition by Artal
Luxembourg, the Company entered into a management agreement with The Invus
Group, Ltd., the independent investment advisor to Artal Luxembourg. Under this
agreement, The Invus Group provides the Company with management, consulting and
other services in exchange for an annual fee equal to the greater of one million
dollars or one percent of the Company's EBITDA (as defined in the indentures
relating to the Company's senior subordinated notes). This agreement is
terminable at the option of The Invus Group at any time or by the Company at any
time after Artal Luxembourg owns less than a majority of the Company's voting
stock.
CORPORATE AGREEMENT
The Company has entered into a corporate agreement with Artal Luxembourg.
The Company has agreed that, so long as Artal Luxembourg beneficially owns 10%
or more, but less than a majority of the Company's then outstanding voting
stock, Artal Luxembourg will have the right to nominate a number of directors
approximately equal to that percentage multiplied by the number of directors on
the Company's board. This right to nominate directors will not restrict Artal
Luxembourg from nominating a greater number of directors.
The Company has agreed with Artal Luxembourg that both Weight Watchers and
Artal Luxembourg have the right to:
- engage in the same or similar business activities as the other party;
- do business with any customer or client of the other party; and
- employ or engage any officer or employee of the other party.
Neither Artal Luxembourg nor the Company, nor the Company's respective related
parties, will be liable to each other as a result of engaging in any of these
activities.
Under the corporate agreement, if one of the Company's officers or directors
who also serves as an officer, director or advisor of Artal Luxembourg becomes
aware of a potential transaction related primarily to the group education-based
weight-loss business that may represent a corporate opportunity for both Artal
Luxembourg and the Company, the officer, director or advisor has no duty to
present that opportunity to Artal Luxembourg, and the Company will have the sole
right to pursue the transaction if the Company's board so determines. If one of
the Company's officers or directors who also serves as an officer, director or
advisor of Artal Luxembourg becomes aware of any other potential transaction
that may represent a corporate opportunity for both Artal Luxembourg and the
Company,
36
the officer or director will have a duty to present that opportunity to Artal
Luxembourg, and Artal Luxembourg will have the sole right to pursue the
transaction if Artal Luxembourg's board so determines. If one of the Company's
officers or directors who does not serve as an officer, director or advisor of
Artal Luxembourg becomes aware of a potential transaction that may represent a
corporate opportunity for both Artal Luxembourg and the Company, neither the
officer nor the director nor the Company have a duty to present that opportunity
to Artal Luxembourg, and the Company may pursue the transaction if its board so
determines.
If Artal Luxembourg transfers, sells or otherwise disposes of the Company's
then outstanding voting stock, the transferee will generally succeed to the same
rights that Artal Luxembourg has under this agreement by virtue of its ownership
of the Company's voting stock, subject to Artal Luxembourg's option not to
transfer those rights.
WEIGHTWATCHERS.COM NOTE
On September 10, 2001, the Company amended and restated its loan agreement
with WeightWatchers.com, increasing the aggregate commitment thereunder to
$34.5 million. The principal amount may be advanced at any time or from time to
time prior to July 31, 2003. The note bears interest at 13% per year, beginning
on January 1, 2002, which interest, except as set forth below, shall be paid
semi-annually starting on March 31, 2002. All principal outstanding under this
note will be payable in six semi-annual installments, starting on March 31,
2004. The note may be prepaid at any time in whole or in part, without penalty.
Any borrowings over $26.2 million outstanding principal amount will begin
bearing interest immediately. As of December 29, 2001, $34.5 million of
principal was outstanding under this note.
WEIGHTWATCHERS.COM WARRANT AGREEMENTS
Under the warrant agreements that the Company entered with
WeightWatchers.com, the Company has received warrants to purchase an additional
6,394,997 shares of WeightWatchers.com's common stock in connection with the
loans that the Company made to WeightWatchers.com under the note described
above. These warrants will expire from November 24, 2009 to September 10, 2011
and may be exercised at a price of $7.14 per share of WeightWatchers.com's
common stock until their expiration. The Company owns 19.8% of the outstanding
common stock of WeightWatchers.com, or 38.7% on a fully diluted basis (including
the exercise of all options and all the warrants the Company owns in
WeightWatchers.com).
COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
In connection with the WeightWatchers.com note, the Company entered into a
collateral assignment and security agreement whereby the Company obtained a
security interest in the assets of WeightWatchers.com. The Company's security
interest in those assets will terminate when the note has been paid in full.
WEIGHTWATCHERS.COM INTELLECTUAL PROPERTY LICENSE
The Company has entered into an amended and restated intellectual property
license agreement with WeightWatchers.com that governs WeightWatchers.com's
right to use the Company's trademarks and materials related to the Weight
Watchers program.
The amended and restated license agreement grants WeightWatchers.com the
exclusive right to (1) use any of the Company's trademarks, service marks,
logos, brand names and other business identifiers as part of a domain name for a
website on the Internet; (2) use any of the domain names the Company owns;
(3) use any of the Company's trademarks on the Internet and any other similar or
related forms of interactive digital transmission that now exists or may be
developed later (provided
37
that the Company and the Company's affiliates, franchisees, and licensees other
than WeightWatchers.com can continue using the trademarks in connection with
online advertising and promotion of activities conducted offline); and (4) use
any materials related to the Weight Watchers program, including any text,
artwork and photographs, and advertising, marketing and promotional materials on
the Internet. The license agreement also grants WeightWatchers.com a
non-exclusive right to (1) use any of the Company's trademarks to advertise any
approved activities that relate to its online weight-loss business; and
(2) create derivative works. All rights granted to WeightWatchers.com must be
used solely in connection with the conduct of its online weight-loss business.
Beginning in January 2002, WeightWatchers.com will pay the Company a royalty
of 10% of the net revenues it earns through its online activities.
The Company retains exclusive ownership of all of the trademarks and
materials that the Company licenses to WeightWatchers.com and of the derivative
works created by WeightWatchers.com.
All of the rights granted to WeightWatchers.com in the license agreement are
subject to the Company's pre-existing agreements with third parties, including
franchisees.
The license agreement provides the Company with control over the use of its
intellectual property. The Company has the right to approve any e-commerce
activities, any materials, sublicenses, communication to consumers, products,
privacy policy, strategies, marketing and operational plans WeightWatchers.com
intends to use or implement in connection with its online weight-loss business.
WeightWatchers.com is obligated to adhere to strict quality standards, usage
guidelines and business criteria provided to WeightWatchers.com by the Company.
WeightWatchers.com and the Company will jointly own user data collected
through the website and both parties are required to adhere to the site's
privacy policy.
WEIGHTWATCHERS.COM SERVICE AGREEMENT
Simultaneously with the signing of the amended and restated intellectual
property license, the Company entered into a service agreement with
WeightWatchers.com, under which WeightWatchers.com provides the following types
of services:
- information distribution services, which include the hosting, displaying
and distributing on the Internet of information relating to the Company
and the Company's affiliates and franchisees;
- marketing services, which include the hosting, displaying and distributing
on the Internet of information relating to the Company's products and
services such as the Company's classroom meetings, the WEIGHT WATCHERS
MAGAZINE and AT HOME and similar products and services from the Company's
affiliates and franchisees; and
- customer communication services, which include establishing a means by
which customers can communicate with the Company on the Internet to ask
questions related to the Company's products and services and the products
and services of the Company's affiliates and franchisees.
The Company is required to pay for all expenses incurred by
WeightWatchers.com directly attributable to the services it performs under this
agreement, plus a fee of 10% of those expenses.
WEIGHTWATCHERS.COM SHAREHOLDERS' AGREEMENT
The Company entered into a shareholders' agreement with
WeightWatchers.com, Inc., Artal Luxembourg and Heinz that governs the Company's
and Artal Luxembourg's relationship with WeightWatchers.com as holders of its
common stock. Heinz has sold all of its shares in WeightWatchers.com back to
WeightWatchers.com and thus no longer has any rights under this
38
agreement. Subsequent transferees of the Company and of Artal Luxembourg must,
except for some limited exceptions, agree to be bound by the terms and
provisions of the agreement.
The shareholders' agreement imposes on the Company restrictions on the
transfer of common stock of WeightWatchers.com until the earlier to occur of
(1) September 29, 2004 and (2) WeightWatchers.com's initial public offering of
common stock under the Securities Act, except for certain exceptions. The
Company has the right to participate pro rata in certain transfers of common
stock of WeightWatchers.com by Artal Luxembourg, and Artal Luxembourg has the
right to require the Company to participate on a pro rata basis in certain
transfers of WeightWatchers.com's common stock by it.
WEIGHTWATCHERS.COM REGISTRATION RIGHTS AGREEMENT
The Company entered into a registration rights agreement with
WeightWatchers.com, Artal Luxembourg and Heinz with respect to the Company's
shares in WeightWatchers.com. Heinz has resold all of its shares in
WeightWatchers.com back to WeightWatchers.com and thus no longer has any rights
under this agreement. The registration rights agreement grants Artal Luxembourg
the right to require WeightWatchers.com to register its shares of
WeightWatchers.com common stock upon demand and also grants the Company and
Artal Luxembourg rights to register and sell shares of WeightWatchers.com's
common stock in the event WeightWatchers.com conducts certain types of
registered offerings.
WEIGHTWATCHERS.COM LEASE GUARANTEE
The Company has guaranteed the performance of WeightWatchers.com's lease of
its office space at 888 Seventh Avenue, New York, New York. The annual rental
rate is $.5 million plus increases for operating expenses and real estate taxes.
The lease expires in September 2003.
NELLSON CO-PACK AGREEMENT
The Company entered into an agreement with Nellson Nutraceutical, a
subsidiary of Artal Luxembourg, to purchase snack bar and powder products
manufactured by Nellson Nutraceutical for sale at the Company's meetings. Under
the agreement, Nellson Nutraceutical agreed to produce sufficient snack bar
products to fill the Company's purchase orders within 30 days of Nellson
Nutraceutical's receipt of these purchase orders, and the Company is not bound
to purchase a minimum quantity of snack bar products. The Company purchased
$18.7 million, $4.9 million and $4.3 million, respectively, of products from
Nellson Nutraceutical during the fiscal year ended December 29, 2001, the eight
months ended December 30, 2000 and the fiscal year ended April 29, 2000. The
term of the agreement runs through December 31, 2004, and the Company has the
option to renew the agreement for successive one-year periods by providing
written notice to Nellson Nutraceutical.
39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORT ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
The financial statements listed in the Index to Financial Statements and
Financial Statement Schedule on page F-1 are filed as part of this Form 10-K.
2. FINANCIAL STATEMENT SCHEDULE
The financial statement schedule listed in the Index to Financial Statements
and Financial Statement Schedule on page F-1 is filed as part of this
Form 10-K.
3. EXHIBITS
The exhibits listed in the Exhibit Index are filed as part of this
Form 10-K.
(b). REPORTS ON FORM 8-K
None.
40
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
ITEMS 14(A) 1&2
PAGES
--------
Consolidated Balance Sheets as of December 29, 2001,
December 30, 2000 and April 29, 2000...................... F-2
Consolidated Statements of Operations for the fiscal year
ended December 29, 2001, the eight months ended
December 30, 2000, and the fiscal years ended April 29,
2000 and April 24, 1999................................... F-3
Consolidated Statements of Changes in Stockholders' Deficit,
Parent Company Investment and Comprehensive Income for the
fiscal year ended December 29, 2001, the eight months
ended December 30, 2000, and the fiscal years ended
April 29, 2000 and April 24, 1999......................... F-4
Consolidated Statements of Cash Flows for the fiscal year
ended December 29, 2001, the eight months ended
December 30, 2000, and the fiscal years ended April 29,
2000 and April 24, 1999................................... F-5
Notes to Consolidated Financial Statements.................. F-6
Report of Independent Accountants........................... F-44
Schedule II--Valuation and Qualifying Accounts and Reserves
for the fiscal year ended December 29, 2001, the eight
months ended December 30, 2000, and the fiscal years ended
April 29, 2000 and April 24, 1999......................... F-45
|
All other schedules are omitted for the reason that they are either not
required, not applicable, not material or the information is included in the
consolidated financial statements or notes thereto.
F-1
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 29, 2001, DECEMBER 30, 2000 AND APRIL 29, 2000
(IN THOUSANDS)
DECEMBER 29, DECEMBER 30, APRIL 29,
2001 2000 2000
------------ ------------ ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 23,338 $ 44,501 $ 44,043
Receivables (net of allowances:
December 29, 2001 -- $726; December 30, 2000 -- $797;
April 29, 2000 -- $609)................................. 13,619 14,678 12,877
Notes receivable, current................................. -- 2,106 2,791
Foreign currency contract receivable...................... -- 5,364 --
Inventories, net.......................................... 26,205 15,044 9,328
Prepaid expenses.......................................... 15,944 11,099 8,360
Deferred income taxes..................................... 4,773 648 94
-------- -------- --------
TOTAL CURRENT ASSETS.................................... 83,879 93,440 77,493
Property and equipment, net................................. 10,725 8,145 7,001
Notes and other receivables, noncurrent..................... 325 5,601 7,045
Goodwill (net of accumulated amortization:
December 29, 2001 -- $68,783; December 30, 2000 --
$59,216; April 29, 2000 -- $55,430)....................... 234,302 150,901 152,565
Trademarks and other intangible assets (net of accumulated
amortization:
December 29, 2001 -- $20,608; December 30, 2000 --
$19,871; April 29, 2000 -- $19,423)....................... 6,863 6,648 7,163
Deferred income taxes....................................... 136,281 67,207 67,574
Deferred financing costs, net............................... 9,164 13,513 14,666
Other noncurrent assets..................................... 1,309 762 700
-------- -------- --------
TOTAL ASSETS............................................ $482,848 $346,217 $334,207
======== ======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Short-term borrowings due to related party................ $ 2,888 $ 1,730 $ 1,489
Portion of long-term debt due within one year............. 15,699 14,120 14,120
Accounts payable.......................................... 17,698 11,989 12,362
Salaries and wages........................................ 15,133 10,544 10,125
Accrued interest.......................................... 7,810 9,662 4,082
Accrued restructuring costs............................... 283 2,485 4,786
Foreign currency contract payable......................... 2,811 -- 486
Other accrued liabilities................................. 23,529 23,215 19,583
Income taxes.............................................. 9,139 3,660 6,786
Deferred revenue.......................................... 13,020 5,836 4,632
-------- -------- --------
TOTAL CURRENT LIABILITIES............................... 108,010 83,241 78,451
Long-term debt.............................................. 458,320 456,530 460,510
Deferred income taxes....................................... 3,169 3,107 2,941
Other....................................................... 870 121 546
-------- -------- --------
TOTAL LONG-TERM DEBT AND OTHER LIABILITIES.............. 462,359 459,758 463,997
======== ======== ========
Commitments and contingencies
Redeemable preferred stock.................................. 25,996 25,996 25,875
SHAREHOLDERS' DEFICIT
Common stock, $0 par 1,000,000 shares authorized; 111,988
shares issued; outstanding 105,500 shares at December 29,
2001 and 111,988 at December 30, 2000 and April 29,
2000...................................................... -- -- --
Treasury stock, at cost, 6,488 shares at December 29,
2001...................................................... (26,196) -- --
Accumulated deficit......................................... (73,998) (216,507) (231,663)
Accumulated other comprehensive loss........................ (13,323) (6,271) (2,453)
-------- -------- --------
TOTAL SHAREHOLDERS' DEFICIT............................. (113,517) (222,778) (234,116)
-------- -------- --------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' DEFICIT................................. $482,848 $346,217 $334,207
======== ======== ========
|
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001, THE EIGHT MONTHS ENDED
DECEMBER 30, 2000, AND THE FISCAL YEARS ENDED APRIL 29, 2000 AND APRIL 24, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ ---------- ----------
(52 WEEKS) (35 WEEKS) (52 WEEKS) (53 WEEKS)
Meeting fees, net............................... $415,680 $184,102 $276,103 $266,140
Product sales and other, net.................... 208,190 89,073 123,471 98,468
-------- -------- -------- --------
Revenues, net................................. 623,870 273,175 399,574 364,608
Cost of revenues................................ 286,436 139,283 201,389 178,925
-------- -------- -------- --------
Gross profit.................................. 337,434 133,892 198,185 185,683
Marketing expenses.............................. 69,716 26,986 51,453 52,856
Selling, general and administrative expenses.... 73,029 34,424 53,759 51,501
Transaction costs............................... -- -- 8,345 --
-------- -------- -------- --------
Operating income.............................. 194,689 72,482 84,628 81,326
Interest expense (income)....................... 54,537 37,125 31,079 (7,168)
Other expense (income), net..................... 13,181 14,334 (13,367) 2,659
-------- -------- -------- --------
Income before income taxes, minority interest
and extraordinary item...................... 126,971 21,023 66,916 85,835
(Benefit from) provision for income taxes....... (23,198) 5,857 28,323 36,360
-------- -------- -------- --------
Income before minority interest and
extraordinary item.......................... 150,169 15,166 38,593 49,475
Minority interest............................... 107 147 834 1,493
-------- -------- -------- --------
Income before extraordinary item.............. 150,062 15,019 37,759 47,982
Extraordinary charge on early extinguishment of
debt, net of taxes of $1,784.................. 2,875 -- -- --
-------- -------- -------- --------
Net income.................................... $147,187 $ 15,019 $ 37,759 $ 47,982
======== ======== ======== ========
Preferred stock dividends....................... 1,500 1,000 875 --
-------- -------- -------- --------
Net income available to common shareholders... $145,687 $ 14,019 $ 36,884 $ 47,982
======== ======== ======== ========
Basic net income per share:
Income before extraordinary item.............. $ 1.37 $ 0.13 $ 0.20 $ 0.17
Extraordinary item, net of taxes.............. (0.03) -- -- --
-------- -------- -------- --------
Net income.................................... $ 1.34 $ 0.13 $ 0.20 $ 0.17
======== ======== ======== ========
Diluted net income per share:
Income before extraordinary item.............. $ 1.34 $ 0.13 $ 0.20 $ 0.17
Extraordinary item, net of taxes.............. (0.03) -- -- --
-------- -------- -------- --------
Net income.................................... $ 1.31 $ 0.13 $ 0.20 $ 0.17
======== ======== ======== ========
Weighted average common shares outstanding:
Basic......................................... 108,676 111,988 182,206 276,430
======== ======== ======== ========
Diluted....................................... 110,975 112,171 182,206 276,430
======== ======== ======== ========
|
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT, PARENT
COMPANY INVESTMENT AND COMPREHENSIVE INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001,
THE EIGHT MONTHS ENDED DECEMBER 30, 2000, AND
THE FISCAL YEARS ENDED APRIL 29, 2000 AND APRIL 24, 1999
(IN THOUSANDS)
ACCUMULATED
COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
------------------- ------------------- PAID IN COMPREHENSIVE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL LOSS DEFICIT
-------- -------- -------- -------- ---------- -------------- ------------
Balance at April 25, 1998.............. 276,430
Comprehensive Income:
Net income...........................
Translation adjustment...............
Total Comprehensive Income.............
Net Parent settlements.................
Dividend...............................
---------------------------------------------------------------
Balance at April 24, 1999. 27248,948 248,948
Net Parent settlements.................
Recapitalization and settlement of
Parent company investment............ (164,442) -- -- -- $(72,100) $(12,764) $(268,547)
Deferred tax asset..................... 72,100
Comprehensive Income:
Net income........................... 37,759
Translation adjustment............... 10,311
Total Comprehensive Income.............
Preferred stock dividend............... (875)
-------------------------------------------------------------------------------------------------------------------------------
Balance at April 29, 2000.............. 111,988 -- -- -- -- (2,453) (231,663)
Elimination of foreign subsidiaries one
month reporting lag effective April
30, 2000............................. 1,137
Comprehensive Income:
Net income........................... 15,019
Translation adjustment............... (3,818)
Total Comprehensive Income.............
Preferred stock dividend............... (1,000)
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 30, 2000........... 111,988 -- -- -- -- (6,271) (216,507)
Comprehensive Income:
Net income........................... 147,187
Translation adjustment............... (3,132)
Changes in fair value of derivatives
accounted for as hedges............ (3,920)
Total Comprehensive Income.............
Preferred stock dividend............... (1,500)
Purchase of treasury stock............. 6,719 $(27,132)
Stock options exercised................ (93) 375 (177)
Sale of common stock................... (138) 561 (36)
Cost of public equity offering......... (2,965)
-------------------------------------------------------------------------------------------------------------------------------
Balance at December 29, 2001........... 111,988 -- 6,488 $(26,196) $ -- $(13,323) $ (73,998)
======================================================================================
Balance at April 25, 1998.............. $229,089 $ 229,089
Comprehensive Income:
Net income........................... 47,982 47,982
Translation adjustment............... 19,660 19,660
---------
Total Comprehensive Income............. 67,642
---------
Net Parent settlements................. (42,851) (42,851)
Dividend............................... (4,932) (4,932)
Net Parent settlements................. (252,883) (252,883)
Recapitalization and settlement of
Parent company investment............ 3,935 (349,476)
Deferred tax asset..................... 72,100
Comprehensive Income:
Net income........................... 37,759
Translation adjustment............... 10,311
---------
Total Comprehensive Income............. 48,070
---------
Preferred stock dividend............... (875)
---------------------------------------
Balance at April 29, 2000.............. -- (234,116)
Elimination of foreign subsidiaries one
month reporting lag effective April
30, 2000............................. 1,137
Comprehensive Income:
Net income........................... 15,019
Translation adjustment............... (3,818)
---------
Total Comprehensive Income............. 11,201
---------
Preferred stock dividend............... (1,000)
---------------------------------------
Balance at December 30, 2000........... -- (222,778)
Comprehensive Income:
Net income........................... 147,187
Translation adjustment............... (3,132)
Changes in fair value of derivatives
accounted for as hedges............ (3,920)
---------
Total Comprehensive Income............. 140,135
---------
Preferred stock dividend............... (1,500)
Purchase of treasury stock............. (27,132)
Stock options exercised................ 198
Sale of common stock................... 525
Cost of public equity offering......... (2,965)
---------------------------------------
Balance at December 29, 2001........... $ -- $(113,517)
======================
|
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001,
THE EIGHT MONTHS ENDED DECEMBER 30, 2000, AND
THE FISCAL YEARS ENDED APRIL 29, 2000 AND APRIL 24, 1999
(IN THOUSANDS)
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ ---------- ----------
(52 WEEKS) (35 WEEKS) (53 WEEKS) (52 WEEKS)
Operating activities:
Net income................................................ $147,187 $ 15,019 $ 37,759 $ 47,982
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization............................. 13,243 6,607 9,286 9,586
Amortization of deferred financing costs.................. 2,097 1,282 1,112 --
Deferred tax (benefit) provision.......................... (71,069) 104 8,541 9,279
Unrealized loss (gain) on derivative instruments.......... 1,125 (5,815) 499 --
Accounting for equity investment.......................... 17,344 17,604 -- --
Elimination of foreign subsidiaries one month reporting
lag....................................................... -- 1,206 -- --
Allowance for doubtful accounts........................... 6,330 198 (385) 118
Reserve for inventory obsolescence, other................. 2,718 3,993 3,360 1,923
Foreign currency exchange rate gain....................... (6,496) -- -- --
Extraordinary charges from early extinguishment of debt... 2,875 -- -- --
Other items, net.......................................... 191 (954) (2,492) 38
Changes in cash due to:
Receivables............................................. 231 (2,746) 13,424 (7,277)
Inventories............................................. (11,895) (8,902) (5,177) (1,849)
Prepaid expenses........................................ (5,605) (3,592) (801) (1,454)
Due from related parties................................ 1,158 241 (14,765) 3,693
Accounts payable........................................ 5,201 (303) (1,512) 3,083
Accrued liabilities..................................... 1,985 6,862 5,281 (10,076)
Deferred revenue........................................ 7,290 1,043 (1,753) (716)
Income taxes............................................ 7,654 (2,975) (2,492) 3,571
-------- -------- -------- --------
Cash provided by operating activities................... 121,564 28,872 49,885 57,901
-------- -------- -------- --------
Investing activities:
Capital expenditures...................................... (3,834) (3,626) (1,874) (2,474)
Advances and interest in equity investment................ (17,344) (15,604) -- --
Acquisitions.............................................. (97,877) -- -- --
Acquisitions of minority interest......................... -- (2,400) (15,900) --
Other items, net.......................................... (1,063) 3 (1,867) (565)
-------- -------- -------- --------
Cash used for investing activities...................... (120,118) (21,627) (19,641) (3,039)
-------- -------- -------- --------
Financing activities:
Net increase (decrease) in short-term borrowings.......... 748 (34) (5,455) 856
Proceeds from borrowings.................................. 60,042 -- 491,260 --
Repurchase of common stock................................ -- -- (324,476) --
Payment of dividends...................................... (1,500) (879) (2,796) (10,368)
Payments on long-term debt................................ (50,813) (7,060) (3,530) (1,081)
Deferred financing cost................................... (2,406) -- (15,861) --
Net Parent settlements.................................... -- -- (131,030) (37,076)
Purchase of treasury stock................................ (27,132) -- -- --
Cost of public equity offering............................ (1,017) -- -- --
Proceeds from sale of common stock........................ 525
Proceeds from stock options exercised..................... 198 -- -- --
-------- -------- -------- --------
Cash (used for) provided by financing activities........ (21,355) (7,973) 8,112 (47,669)
-------- -------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... (1,254) 1,186 (13,828) 493
Net (decrease) increase in cash and cash equivalents........ (21,163) 458 24,528 7,686
Cash and cash equivalents, beginning of fiscal
year/period............................................... 44,501 44,043 19,515 11,829
-------- -------- -------- --------
Cash and cash equivalents, end of fiscal year/period........ $ 23,338 $ 44,501 $ 44,043 $ 19,515
======== ======== ======== ========
|
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
Weight Watchers International, Inc. (the "Company") operates and franchises
territories offering weight loss and control programs through the operation of
classroom type meetings to the general public in the United States, Canada,
Mexico, the United Kingdom, Continental Europe, Australia, New Zealand, South
Africa, and Brazil.
RECAPITALIZATION:
On September 29, 1999, the Company entered into a recapitalization and stock
purchase agreement (the "Transaction") with its former parent, H.J. Heinz
Company ("Heinz"). In connection with the Transaction, the Company effectuated a
stock split of 58,747.6 shares for each share outstanding. The Company then
redeemed 164,442 shares of common stock from Heinz for $349,500. The number of
shares of the Company's common stock that was authorized and outstanding prior
to the Transaction has been adjusted to reflect the stock split. The $349,500
consisted of $324,500 of cash and $25,000 of the Company's redeemable Series A
Preferred Stock. After the redemption, Artal Luxembourg S.A. ("Artal") purchased
94% of the Company's remaining common stock from Heinz for $223,700. The
recapitalization and stock purchase was financed through borrowings under credit
facilities amounting to approximately $237,000 and the issuance of Senior
Subordinated Notes amounting to $255,000, due 2009. The balance of the
borrowings was utilized to refinance debt incurred prior to the Transaction
relating to the transfer of ownership and acquisition of the minority interest
in the Weight Watchers businesses that operate in Australia and New Zealand. The
acquisition of the minority interest resulted in approximately $15,900 of
goodwill. In connection with the Transaction, the Company incurred approximately
$8,300 in transaction costs and $15,900 in deferred financing costs. For U.S.
Federal and State tax purposes, the Transaction was treated as a taxable sale
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended. As a
result, for tax purposes, the Company recorded a step-up in the tax basis of net
assets. For financial reporting purposes, a valuation allowance of approximately
$72,100 was established against the corresponding deferred tax asset of
$144,200.
WEIGHCO ACQUISITION:
On January 16, 2001, the Company acquired certain business assets of Weighco
Enterprises, Inc., Weighco of Northwest, Inc. and Weighco of Southwest, Inc.
("Weighco"), for an aggregate purchase price of $83,800. See Note 3.
STOCK SPLIT:
On October 29, 2001, the Company's board of directors declared a
4.70536-for-one stock split, which became effective concurrent with the
effective date, November 15, 2001, of the registration statement filed by the
Company in connection with its initial public offering ("IPO"). All common
shares and per share amounts have been retroactively restated for the stock
split. In addition, stock options and the respective exercise prices have been
amended to reflect this split.
COMMON STOCK OFFERING:
On November 15, 2001, the Company traded 17,400 shares of its common stock
on the New York Stock Exchange at an initial price to the public of $24.00 per
share. The Company did not receive any
F-6
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION (CONTINUED)
of the proceeds from the sale of shares of the Company's common stock pursuant
to this initial public offering.
Simultaneous with the Transaction, the Company entered into a Registration
Rights Agreement with Artal, under which the Company is obligated at the request
of Artal, to register its common stock with the Securities and Exchange
Commission and pay all costs associated with such registration. As a result, all
costs incurred in connection with the Company's common stock offering have been
recorded in shareholders' deficit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGE IN FISCAL YEAR:
The Company changed its fiscal year from the last Saturday of April to the
Saturday closest to December 31st effective with the eight months commencing
April 30, 2000.
The following table presents certain financial information for the eight
months ended December 30, 2000 and December 18, 1999.
EIGHT MONTHS ENDED
-----------------------
DECEMBER DECEMBER
2000 1999
(35 WEEKS) (34 WEEKS)
---------- ----------
(UNAUDITED)
Revenues, net.......................................... $273,175 $236,974
Gross profit........................................... $133,892 $114,592
Income before income taxes and minority interest....... $ 21,023 $ 39,020
Provision for income taxes............................. $ 5,857 $ 15,150
Income before minority interest........................ $ 15,166 $ 23,870
Minority interest...................................... $ 147 $ 694
Net Income............................................. $ 15,019 $ 23,176
|
CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. In order to facilitate
timely reporting in prior periods, certain foreign subsidiaries ended their
fiscal years one month prior to the Company's fiscal year end with no material
impact on the consolidated financial statements. The one-month lag was
eliminated effective April 30, 2000. The effect on net income of these
subsidiaries for the period March 31, 2000 through April 29, 2000 was $1,137 and
was adjusted to opening accumulated deficit at April 30, 2000.
USE OF ESTIMATES:
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
F-7
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
TRANSLATION OF FOREIGN CURRENCIES:
For all foreign operations, the functional currency is the local currency.
Assets and liabilities of these operations are translated at the exchange rate
in effect at each year-end. Income statement accounts are translated at the
average rate of exchange prevailing during the year. Translation adjustments
arising from the use of differing exchange rates from period to period are
included in accumulated other comprehensive income (loss).
CASH EQUIVALENTS:
Cash and cash equivalents are defined as highly liquid investments with
original maturities of three months or less.
INVENTORIES:
Inventories, which consist of finished goods, are stated at the lower of
cost or market on a first-in, first-out basis, net of reserves for obsolescence
and shrinkage.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. For financial reporting
purposes, equipment is depreciated on the straight-line method over the
estimated useful lives of the assets (5 to 10 years). Leasehold improvements are
amortized on the straight-line method over the shorter of the term of the lease
or the useful life of the related assets (5 to 10 years). Expenditures for new
facilities and improvements that substantially extend the useful life of an
asset are capitalized. Ordinary repairs and maintenance are expensed as
incurred. When assets are retired or otherwise disposed of, the cost and related
depreciation are removed from the accounts and any related gains or losses are
included in income.
IMPAIRMENT OF LONG LIVED ASSETS:
The Company follows the provisions of Statement of Financial Accounting
Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of." This statement requires that certain
assets be reviewed for impairment and, if impaired, remeasured at fair value
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable.
In October 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
which supercedes SFAS No. 121. SFAS No. 144 provides updated guidance concerning
the recognition and measurement of an impairment loss for certain types of
long-lived assets. SFAS No. 144 is effective for the Company beginning
December 30, 2001. The Company does not expect the adoption of SFAS No. 144 to
have a material impact on the Company's fiscal 2002 financial statements.
F-8
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLES:
Goodwill, trademarks and other intangibles arising from acquisitions,
including the acquisition of previously franchised areas, are being amortized on
a straight-line basis over periods ranging from 3 to 40 years. Amortization of
goodwill, trademarks and other intangibles for the fiscal year ended
December 29, 2001, the eight months ended December 30, 2000, and the fiscal
years ended April 29, 2000 and April 24, 1999 was $10,511, $4,515, $6,304 and
$4,228, respectively.
During 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets." Effective December 30, 2001,
the Company will no longer be required to amortize indefinite life goodwill and
intangible assets as a charge to earnings for acquisitions completed prior to
June 30, 2001. For acquisitions completed after June 30, 2001, the provisions of
SFAS No. 141 and 142 were effective immediately.
In addition, the Company will be required to conduct an annual review of
goodwill and other intangible assets for potential impairment. The Company
estimates that the adoption of these standards will reduce amortization expense
for fiscal 2002 by approximately $6,400, net of taxes.
The Company accounts for software costs under the AICPA Statement of
Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". SOP No. 98-1 requires capitalization of
certain costs incurred in connection with developing or obtaining internally
used software. Software costs are amortized over 3 to 5 years.
REVENUE RECOGNITION:
The Company earns revenue by conducting meetings, selling products and aids
in its own facilities, by collecting commissions from franchisees operating
under the Weight Watchers name and by collecting royalties related to licensing
agreements. Revenue is recognized when registration fees are paid, services are
rendered, products are sold and commissions and royalties are earned. Deferred
revenue, consisting of prepaid lecture income, is amortized into income over the
period earned.
ADVERTISING COSTS:
Advertising costs consist primarily of national and local direct mail,
television, and spokesperson's fees. All costs related to advertising are
expensed in the period incurred. Total advertising expenses for the fiscal year
ended December 29, 2001, the eight months ended December 30, 2000, and the
fiscal years ended April 29, 2000 and April 24, 1999 were $66,749, $25,792,
$48,027 and $48,800, respectively.
INCOME TAXES:
The Company provides for taxes based on current taxable income and the
future tax consequences of temporary differences between the financial reporting
and income tax carrying values of its assets and liabilities. Under SFAS
No. 109, "Accounting for Income Taxes", assets and liabilities acquired in
purchase business combinations are assigned their fair values and deferred taxes
are provided for lower or higher tax bases.
F-9
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE INSTRUMENTS AND HEDGING:
The Company enters into forward and swap contracts to hedge transactions
denominated in foreign currencies to reduce the currency risk associated with
fluctuating exchange rates. These contracts are used primarily to hedge certain
intercompany cash flows and for payments arising from some of the Company's
foreign currency denominated obligations. In addition, the Company enters into
interest rate swaps to hedge a substantial portion of its variable rate debt.
Effective December 31, 2000, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," and its related amendment,
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities". These standards require that all derivative financial instruments
be recorded on the consolidated balance sheets at their fair value as either
assets or liabilities. Changes in the fair value of derivatives will be recorded
each period in earnings or accumulated other comprehensive income (loss),
depending on whether a derivative is designated and effective as part of a hedge
transaction and, if it is, the type of hedge transaction. Gains and losses on
derivative instruments reported in accumulated other comprehensive income (loss)
will be included in earnings in the periods in which earnings are affected by
the hedged item. As of December 31, 2000, the adoption of these new standards
resulted in an adjustment of $5,086 ($3,204 net of taxes) to accumulated other
comprehensive loss.
INVESTMENTS:
The Company uses the cost method to account for investments in which the
Company holds 20% or less of the investee's voting stock and the Company does
not have significant influence. Where the Company holds 50% or less of the
investee's voting stock or where the Company has the ability to exercise
significant influence over operating and financial policies of the investee, the
investment is accounted for under the equity method.
DEFERRED FINANCING COSTS:
Deferred financing costs consist of costs associated with the establishment
of the Company's credit facilities resulting from the Transaction. During the
fiscal year ended December 29, 2001, the Company incurred additional deferred
financing costs of $2,406 associated with the Weighco acquisition and
refinancing of its credit facilities. Such costs are being amortized using the
interest rate method over the term of the related debt. Amortization expense for
the fiscal year ended December 29, 2001, the eight months ended December 30,
2000 and the fiscal year ended April 29, 2000 was $2,097, $1,282 and $1,112,
respectively. In connection with the refinancing, the Company recognized an
extraordinary charge on the early extinguishment of debt of $2,875, net of
taxes. See Note 5.
COMPREHENSIVE INCOME:
Other comprehensive income represents the change in shareholders' deficit
resulting from transactions other than shareholder investments and
distributions. The Company's comprehensive income includes net income, changes
in the fair value of derivative instruments and the effects of foreign currency
translations.
F-10
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS:
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 is effective for
the Company beginning December 29, 2002. The Company does not expect the
adoption of SFAS No. 143 to have a material impact on its consolidated financial
position or results of operations.
In June 2001, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-14, "Accounting for Certain Sales Incentives," which is effective
no later than periods beginning after December 15, 2001. EITF Issue No 00-14
addresses the recognition, measurement and statement of earnings classification
for certain sales incentive. EITF Issue No. 00-14 is effective for the Company
beginning December 30, 2001. The Company has determined that the impact of
adoption or subsequent application of EITF Issue No. 00-14 will not have a
material effect on its consolidated results of operations.
RECLASSIFICATION:
Certain prior year amounts have been reclassified to conform to the current
year presentation.
3. ACQUISITIONS
On September 4, 2001, the Company completed the acquisition of Weight
Watchers of Oregon, Inc., for an aggregate purchase price of $13,500.
Substantially all of the purchase price in excess of the net assets acquired was
recorded as goodwill. The acquisition has been accounted for under the
provisions of SFAS No. 141, "Business Combinations". SFAS No. 141 requires that
all business combinations initiated after June 30, 2001 be accounted for by the
purchase method of accounting, thereby eliminating the pooling-of-interests
methods of accounting.
On January 16, 2001, the Company completed the acquisition of Weighco, for
an aggregate purchase price of $83,800 plus acquisition costs of $577. Assets
acquired include inventory ($1,884) and property and equipment ($1,801). The
excess of investment over the net book value of assets acquired at the date of
acquisition resulted in goodwill of $80,692. The acquisition was financed
through additional borrowings of $60,000 obtained pursuant to the Company's
Amended and Restated Credit Agreement, dated January 16, 2001, and cash from
operations.
These acquisitions have been accounted for under the purchase method of
accounting and accordingly, earnings have been included in the consolidated
operating results of the Company since the date of acquisition.
The following table presents unaudited pro forma financial information that
reflects the consolidated results of operations of the Company, including
Weighco, as if the acquisition had occurred as of the beginning of the period.
This pro forma information does not necessarily reflect the
F-11
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS (CONTINUED)
actual results that would have occurred, nor is it necessarily indicative of
future results of operations of the consolidated companies.
PRO FORMA
EIGHT MONTHS ENDED
DECEMBER 30,
2000
------------------
Revenue.................................................... $306,509
Net income................................................. $ 17,257
Per share information:
Basic and diluted earnings per share....................... $ 0.15
|
4. PROPERTY AND EQUIPMENT
The components of property and equipment were:
DECEMBER 29, DECEMBER 30, APRIL 29,
2001 2000 2000
------------ ------------ ---------
Leasehold improvements..................................... $18,059 $19,218 $17,954
Equipment.................................................. 36,071 31,921 30,900
------- ------- -------
54,130 51,139 48,854
Less: Accumulated depreciation and amortization............ 43,494 43,006 41,911
------- ------- -------
10,636 8,133 6,943
Construction in progress................................... 89 12 58
------- ------- -------
$10,725 $ 8,145 $ 7,001
======= ======= =======
|
Depreciation and amortization expense of property and equipment for the
fiscal year ended December 29, 2001, the eight months ended December 30, 2000,
and the fiscal years ended April 29, 2000 and April 24, 1999 was $2,732, $2,162,
$2,982 and $3,487, respectively.
F-12
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. LONG-TERM DEBT
DECEMBER 29, 2001 DECEMBER 30, 2000 APRIL 29, 2000
-------------------- -------------------- --------------------
EFFECTIVE EFFECTIVE EFFECTIVE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- --------- -------- --------- -------- ---------
EURO 100.0 million 13% Senior Subordinated
Notes due 2009............................ $ 88,380 13.00% $ 94,240 13.00% $ 91,160 13.00%
US $150.0 million 13% Senior Subordinated
Notes due 2009............................ 150,000 13.00% 150,000 13.00% 150,000 13.00%
Term A Loan due 2005........................ 63,639 6.95% 65,625 9.81% 71,875 9.22%
Term B Loan due 2007........................ 108,000 8.25% 74,438 10.95% 74,813 10.04%
Transferable Loan Certificate due 2007...... 64,000 8.25% 86,347 10.95% 86,782 10.04%
-------- -------- --------
474,019 470,650 474,630
Less Current Portion........................ 15,699 14,120 14,120
-------- -------- --------
$458,320 $456,530 $460,510
======== ======== ========
|
In connection with the Transaction, the Company entered into a credit
facility ("Credit Facility") with The Bank of Nova Scotia, Credit Suisse First
Boston and certain other lenders providing (i) a $75,000 term loan A facility
("Term Loan A"), (ii) a $75,000 term loan B facility ("Term Loan B"), (iii) an
$87,000 transferable loan certificate ("TLC") and (iv) a revolving credit
facility with borrowings up to $30,000 ("Revolving Credit Facility"). The Credit
Facility was amended and restated on January 16, 2001 to provide for an
additional $50,000 in borrowings in connection with the acquisition of Weighco
(see Note 3) as follows: (i) Term Loan A was increased by $15,000, (ii) the
Revolving Credit Facility was increased by $15,000 to $45,000 and (iii) a new
$20,000 term loan D facility ("Term Loan D"). On December 21, 2001, the Amended
and Restated Credit Facility dated January 16, 2001 was refinanced as follows:
(i) Term Loan B, Term Loan D and the TLC in the amount of $71,000, $19,000 and
$82,000, respectively were repaid and replaced with a new Term Loan B of
$108,000 and a new TLC of $64,000. No additional borrowings were incurred.
Borrowings under the Credit Facility are paid quarterly and bear interest at a
rate equal to LIBOR plus (a) in the case of Term Loan A and the Revolving Credit
Facility, 1.75% or, at the Company's option, the alternate base rate, as
defined, plus 0.75% and, (b) in the case of Term Loan B and the TLC, 2.50% or,
at the Company's option, the alternate base rate plus 1.50%. At December 29,
2001, the interest rates were 3.73% for Term Loan A, 4.40% for Term Loan B, and
4.43% for the TLC. All assets of the Company collateralize the Credit Facility.
In addition, as part of the Transaction, the Company issued $150,000 USD
denominated and 100,000 EUR denominated principal amount of 13% Senior
Subordinated Notes due 2009 (the "Notes") to qualified institutional buyers. At
December 29, 2001, the 100,000 EUR notes translated into 88,380 USD denominated
equivalent. The impact of the change in foreign exchange rates related to euro
denominated debt is reflected in the income statement. Interest is payable on
the Notes semi-annually on April 1 and October 1 of each year. The Company uses
interest rate swaps and foreign currency forward contracts in association with
its debt. The Notes are uncollateralized senior subordinated obligations of the
Company, subordinated in right of payment to all existing and future senior
indebtedness of the Company, including the Credit Facility. The notes are
guaranteed by certain subsidiaries of the Company.
F-13
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. LONG-TERM DEBT (CONTINUED)
The Credit Facility contains a number of covenants that, among other things,
restrict the Company's ability to dispose of assets, incur additional
indebtedness, or engage in certain transactions with affiliates and otherwise
restrict the Company's corporate activities. In addition, under the Credit
Facility, the Company is required to comply with specified financial ratios and
tests, including minimum fixed charge coverage and interest coverage ratios and
maximum leverage ratios.
The aggregate amounts of existing long-term debt maturing in each of the
next five years and thereafter are as follows:
2002. $ 15,699
2003........................................................ 20,161
2004........................................................ 17,630
2005........................................................ 17,029
2006........................................................ 1,720
2007 and thereafter......................................... 401,780
--------
$474,019
========
|
6. REDEEMABLE PREFERRED STOCK
The Company issued one million shares of Series A Preferred Stock in
conjunction with the Transaction. Holders of the Series A Preferred Stock are
entitled to receive dividends at an annual rate of 6% payable annually in
arrears. The liquidation preference of the Series A Preferred Stock is $25 per
share. If there is a liquidation, dissolution or winding up, the holders of
shares of Series A Preferred Stock are entitled to be paid out of the Company
assets available for distribution to shareholders an amount in cash equal to the
$25 liquidation preference per share plus all accrued and unpaid dividends prior
to the distribution of any assets to holders of shares of common stock.
Except as required by law, the holders of the preferred stock have no voting
rights with respect to their shares of preferred stock, except that (1) the
approval of holders of a majority of the outstanding shares of preferred stock,
voting as a class, is required to amend, repeal or change any of the provisions
of the Company's 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.
On March 1, 2002, the Company redeemed all of the Company's Series A
Preferred Stock held by Heinz for a redemption price of $25,000 plus accrued and
unpaid dividends.
7. TREASURY STOCK
On April 18, 2001, the Company entered into a Put/Call Agreement with Heinz,
pursuant to which Heinz acquired the right and option to sell during the period
ending on or before May 15, 2002, and the Company acquired the right and option
to purchase after that date and on or before August 15, 2002, 6,719 shares of
the common stock of the Company owned by Heinz. Under this agreement, during the
fiscal year ended December 29, 2001, Heinz has sold all of its shares to the
Company at fair value for an aggregate purchase price of $27,132, which was
funded with cash from operations. Heinz no longer holds any common stock of the
Company.
F-14
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. EARNINGS PER SHARE
Basic earnings per share ("EPS") computations are calculated utilizing the
weighed average number of common shares outstanding during the periods
presented. Diluted EPS includes the weighted average number of common shares
outstanding and the effect of common stock equivalents. The following table sets
forth the computation of basic and diluted EPS.
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
Numerator:
Net income.................................... $147,187 $ 15,019 $ 37,759 $ 47,982
Preferred stock dividends..................... 1,500 1,000 875 --
-------- -------- -------- --------
Numerator for basic and diluted EPS-income
available to common shareholders.......... $145,687 $ 14,019 $ 36,884 $ 47,982
======== ======== ======== ========
Numerator for basic and diluted EPS-
extraordinary item, net of taxes.......... $ 2,875 $ -- $ -- $ --
======== ======== ======== ========
Numerator for basic and diluted EPS-income
before extraordinary item................. $148,562 $ 14,019 $ 36,884 $ 47,982
======== ======== ======== ========
Denominator:
Denominator for basic EPS-weighted-average
shares.................................... 108,676 111,988 182,206 276,430
Effect of dilutive securities:
Stock options............................. 2,299 183 -- --
-------- -------- -------- --------
Denominator for diluted EPS-weighted-average
shares.................................... 110,975 112,171 182,206 276,430
======== ======== ======== ========
EPS:
Basic EPS:
Income before extraordinary item............ $ 1.37 $ 0.13 $ 0.20 $ 0.17
Extraordinary item, net of taxes............ (0.03) -- -- --
-------- -------- -------- --------
Net income.............................. $ 1.34 $ 0.13 $ 0.20 $ 0.17
======== ======== ======== ========
Diluted EPS:
Income before extraordinary item.......... $ 1.34 $ 0.13 $ 0.20 $ 0.17
Extraordinary item, net of taxes.......... (0.03) -- -- --
-------- -------- -------- --------
Net income.............................. $ 1.31 $ 0.13 $ 0.20 $ 0.17
======== ======== ======== ========
|
9. STOCK PLANS
WEIGHT WATCHERS INCENTIVE COMPENSATION PLANS:
On December 16, 1999, the board of directors adopted the 1999 Stock Purchase
and Option Plan of Weight Watchers International, Inc. and Subsidiaries (the
"Plan"). The Plan is designed to promote the long-term financial interests and
growth of the Company and its subsidiaries by attracting and
F-15
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. STOCK PLANS (CONTINUED)
retaining management with the ability to contribute to the success of the
business. The Plan is to be administered by the board of directors or a
committee thereof.
Under the stock purchase component of the plan discussed above, 1,639 shares
of common stock were sold to 45 members of the Company's management group at a
price of $2.13 to $4.04 per share.
Under the option component of the Plan, grants may take the following forms
in the committee's sole discretion: Incentive Stock Options, Other Stock Options
(other than incentive options), Stock Appreciation Rights, Restricted Stock,
Purchase Stock, Dividend Equivalent Rights, Performance Units, Performance
Shares and Other Stock--Based Grants. The maximum number of shares available for
grant under this plan was 5,647 shares of authorized common stock as of the
effective date of the Plan. In 2001, the number of shares available for grant
was increased to 7,058 shares.
Pursuant to the option component of the Plan, the board of directors
authorized the Company to enter into agreements under which certain members of
management received Non-Qualified Time and Performance Stock Options providing
them the opportunity to purchase shares of the Company's common stock at an
exercise price of $2.13 to $4.04. The options are exercisable based on the terms
outlined in the agreement. The exercise price was equivalent to the fair market
value at the date of grant.
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29,
2001 2000 2000
------------- ------------- ----------
Dividened yield......................................... 0% 0% 0%
Volatility.............................................. 34.6% 0% 0%
Risk-free interest rate................................. 5.1%-5.4% 5.9%-6.3% 6.5%-6.7%
Expected term (years)................................... 7.5 10 10
|
F-16
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. STOCK PLANS (CONTINUED)
A summary of the Company's stock option activity is as follows:
EIGHT MONTHS ENDED
DECEMBER 29, 2001 DECEMBER 30, 2000 APRIL 29, 2000
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- -------------- --------- --------------
Options outstanding,
Beginning of year............... 5,301 $ 2.13 4,934 $2.13 -- $ --
Granted......................... 731 $ 3.89 494 $2.13 4,934 $2.13
Exercised....................... (93) $ 2.13 -- $ -- -- $ --
Cancelled....................... (268) $ 2.13 (127) $2.13 -- $ --
------ ----- -----
Options outstanding, end of
year............................ 5,671 $ 2.35 5,301 $2.13 4,934 $2.13
Options exercisable, end of
year............................ 2,479 $ 2.19 1,325 $2.13 164 $2.13
Options available for grant, end
of year......................... 1,387 346 713
Weighted-average fair value of
options granted during the
year............................ $ 1.89 $0.98 $1.03
|
The weighted average remaining contractual life of options outstanding at
December 29, 2001, December 30, 2000 and April 29, 2000 was 8.3, 8.9 and
9.5 years, respectively.
WEIGHTWATCHERS.COM STOCK INCENTIVE PLAN OF WEIGHT WATCHERS INTERNATIONAL, INC.
AND SUBSIDIARIES:
In April 2000, the board of directors adopted the WeightWatchers.com Stock
Incentive Plan of Weight Watchers International, Inc. and Subsidiaries, pursuant
to which selected employees were granted options to purchase shares of common
stock of WeightWatchers.com, Inc. that are owned by the Company. The number of
shares available for grant under this plan is 400 shares of authorized common
stock of WeightWatchers.com, Inc. All options vest over a period of time,
however, vesting of certain options may be accelerated if the Company achieves
specified performance levels.
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29,
2001 2000 2000
------------ ------------ ---------
Dividend yield..................................... 0% 0% 0%
Volatility......................................... 0% 0% 0%
Risk-free interest rate............................ 5.1%-5.4% 5.9%-6.3% 6.5%
Expected term (years).............................. 10 10 10
|
F-17
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. STOCK PLANS (CONTINUED)
A summary of the Company's stock option activity is as follows:
EIGHT MONTHS ENDED
DECEMBER 29, 2001 DECEMBER 30, 2000 APRIL 29, 2000
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- -------------- --------- --------------
Options outstanding,
Beginning of year............... 173 $0.50 159 $0.50 -- $ --
Granted....................... -- $ -- 14 $0.50 159 $0.50
Exercised..................... -- $ -- -- $ -- -- $ --
Cancelled..................... (9) $0.50 -- $ -- -- $ --
--- ----- ---
Options outstanding, end of
year............................ 164 $0.50 173 $0.50 159 $0.50
Options exercisable, end of
year............................ 84 $0.50 43 $0.50 -- $0.50
Options available for grant, end
of year......................... 236 227 241
Weighted-average fair value of
options......................... $ -- $0.23 $0.16
granted during the year
|
The weighted average remaining contractual life of options outstanding at
December 29, 2001, December 30, 2000 and April 29, 2000 was 8.3, 9.3 and
10 years, respectively.
The pro forma effect of SFAS No. 123 on the Company's financial statements
would have been as follows under the 1999 Stock Purchase and Option Plan of
Weight Watchers International, Inc. and Subsidiaries and the WeightWatchers.com
Stock Incentive Plan of Weight Watchers International, Inc. and Subsidiaries:
EIGHT
MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29,
2001 2000 2000
----------------- ------------ ---------
Net Income:
As reported.............................................. $ 147,187 $15,019 $37,759
Pro forma................................................ $ 146,629 $14,984 $37,170
EPS:
As reported.............................................. $ 1.34 $ 0.13 $ 0.20
Pro forma................................................ $ 1.34 $ 0.12 $ 0.20
|
HEINZ INCENTIVE COMPENSATION PLANS--PRIOR TO THE TRANSACTION:
Certain qualifying employees of the Company were granted options to purchase
Heinz common stock under Heinz's stock option plans. These options under the
Plan have been granted at not less than market prices on the date of grant.
Stock options granted have a maximum term of ten years. Vesting occurs from one
to three years after the date of grant. Beginning in fiscal 1998, in order to
place greater emphasis on creation of shareholder value, performance-accelerated
stock options were
F-18
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. STOCK PLANS (CONTINUED)
granted to certain key executives. These options vest eight years after the
grant date, subject to acceleration if predetermined share price goals are
achieved.
The pro forma effect of SFAS No. 123 on the Company's financial statements
would have been as follows:
APRIL 24,
1999
---------
Net Income:
As reported............................................... $47,982
Pro forma................................................. 47,621
EPS:
As reported............................................... $ 0.17
Pro forma................................................. $ 0.17
|
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:
APRIL 24,
1999
---------
Dividend yield.............................................. 2.5%
Volatility.................................................. 22.0%
Risk-free interest rate..................................... 5.1%
Expected term (years)....................................... 5
|
10. INCOME TAXES
The following tables summarizes the (benefit) provision for U.S. federal,
state and foreign taxes on income:
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
Current:
U.S federal..................................... $ 27,550 $ 234 $ 5,727 $11,997
State........................................... 7,203 200 2,464 3,247
Foreign......................................... 11,394 5,319 11,591 11,837
-------- ------ ------- -------
$ 46,147 $5,753 $19,782 $27,081
-------- ------ ------- -------
Deferred:
U.S federal..................................... $(59,665) $ -- $ 7,800 $ 6,368
State........................................... (5,494) -- 368 312
Foreign......................................... (4,186) 104 373 2,599
-------- ------ ------- -------
$(69,345) $ 104 $ 8,541 $ 9,279
-------- ------ ------- -------
Total tax (benefit) provision..................... $(23,198) $5,857 $28,323 $36,360
======== ====== ======= =======
|
F-19
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. INCOME TAXES (CONTINUED)
The components of income before income taxes, minority interest and
extraordinary item consist of the following:
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
Domestic.......................................... $ 92,903 $ 9,399 $33,538 $48,199
Foreign........................................... 34,068 11,624 33,378 37,636
-------- ------- ------- -------
$126,971 $21,023 $66,916 $85,835
======== ======= ======= =======
|
The difference between the U.S. federal statutory tax rate and the Company's
consolidated effective tax rate are as follows:
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
U.S. federal statutory rate........................ 35.0% 35.0% 35.0% 35.0%
Foreign income taxes............................... 0.8 4.0 1.7 3.5
States' income taxes (net of federal benefit)...... 0.9 0.6 2.6 2.7
Goodwill amortization.............................. 0.2 1.0 0.4 0.8
Other.............................................. (1.6) 1.3 2.6 0.4
Valuation allowance................................ (53.6) (14.0) -- --
----- ----- ---- ----
Effective tax rate................................. (18.3%) 27.9% 42.3% 42.4%
===== ===== ==== ====
|
F-20
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. INCOME TAXES (CONTINUED)
The deferred tax assets and deferred tax (liabilities) recorded on the
balance sheet are as follows:
DECEMBER 29, DECEMBER 30, APRIL 29,
2001 2000 2000
------------ ------------ ---------
Depreciation/amortization.................................. $ 509 $ 333 $ 304
Provision for estimated expenses........................... 1,756 2,702 1,771
Operating loss carryforwards............................... 4,186 953 4,369
Transaction expenses....................................... -- -- 2,933
WW.com loan................................................ 12,765 6,513 --
Other...................................................... 411 143 216
Amortization............................................... 129,837 139,642 135,329
Less: Valuation allowance.................................. -- (71,903) (71,979)
-------- -------- -------
Total deferred tax assets.................................. $149,464 $ 78,383 $72,943
======== ======== =======
Transaction expenses....................................... $ (2,266) $ (4,374) $ --
Deferred income............................................ (5,799) (5,764) (4,985)
Other...................................................... (3,514) (3,497) (3,231)
-------- -------- -------
Total deferred tax liabilities............................. $(11,579) $(13,635) $(8,216)
======== ======== =======
Net deferred tax assets.................................... $137,885 $ 64,748 $64,727
======== ======== =======
|
On September 29, 1999 the Company effected a recapitalization and stock
purchase agreement with its former parent, Heinz. For U.S. tax purposes, the
Transaction was treated as a taxable sale under IRC section 338(h)(10),
resulting in a step-up in the tax basis of net assets and, recognition of a
deferred tax asset in the amount of $144,200. At the time of the Transaction,
the Company determined that it was more likely than not that a portion of the
deferred tax asset would not be utilized. Therefore, a valuation allowance of
$72,100 was established against the corresponding deferred tax asset. Based on
the Company's performance since the Transaction, the Company determined that the
valuation allowance is no longer required. Accordingly, the provision for taxes
for the fiscal year ended December 29, 2001 includes a one-time reversal
(credit) of the remaining balance of the valuation allowance of $71,903 related
to the Transaction.
As of December 29, 2001, various foreign subsidiaries of the Company had net
operating loss carry forwards of approximately $13,953, which can be carried
forward indefinitely.
As of December 29, 2001, the Company's undistributed earnings of foreign
subsidiaries are no longer considered to be reinvested permanently. The Company
will record a deferred tax liability or asset, if any, based on the expected
type of taxable or deductible amounts in future years, taking into account any
related foreign tax credits and withholding taxes. No deferred tax liability or
asset was required to be recorded for undistributed earnings of foreign
subsidiaries as of December 29, 2001.
F-21
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. RELATED PARTY TRANSACTIONS
WEIGHTWATCHERS.COM:
On September 29, 1999, the Company entered into a subscription agreement
with WeightWatchers.com, Artal and Heinz under which Artal, Heinz and the
Company purchased common stock of WeightWatchers.com for a nominal amount. The
Company owns approximately 19.8% of WeightWatchers.com's common stock while
Artal owns approximately 72.2% of WeightWatchers.com's common stock. The Company
accounts for its investment in Weighwatchers.com under the equity method of
accounting.
Under warrant agreements dated November 24, 1999, October 1, 2000, May 3,
2001, and September 10, 2001, the Company has received warrants to purchase an
additional 6,395 shares of WeightWatchers.com's common stock in connection with
the loans that the Company has made to WeightWatchers.com under the note
described below. These warrants will expire from November 24, 2009 to
September 10, 2011 and may be exercised at a price of $7.14 per share of
WeightWatchers.com's common stock until their expiration. The exercise price and
the number of shares of WeightWatchers.com's common stock available for purchase
upon exercise of the warrants may be adjusted from time to time upon the
occurrence of certain events.
On October 1, 2000, the Company amended its loan agreement with
WeightWatchers.com, increasing the aggregate principal amount from $10,000 to
$23,500. On that date, the unpaid principal and accumulated interest was rolled
over into the new loan. The Company further amended the agreement on May 3, 2001
and on September 10, 2001, increasing the aggregate amount to $28,500 and
$34,500, respectively. The principal amount may be advanced at any time or from
time to time prior to July 31, 2003. The note bears interest at 13% per year,
beginning on January 1, 2002, which interest shall be paid semi-annually
starting on March 31, 2002. All principal outstanding under this note will be
payable in six semi-annual installments, starting on March 31, 2004. The note
may be prepaid at any time in whole or in part, without penalty. During the
fiscal year ended December 29, 2001, the eight months ended December 30, 2000,
and the fiscal year ended April 29, 2000, the Company advanced
WeightWatchers.com $17,400, $14,800 and $2,000, respectively. The Company's
investment in WeightWatchers.com has been reduced by the equity losses
apportioned to the Company based upon its ownership interest, which are
classified in other expenses, net. The remaining loan balances have been
reviewed for impairment. As a result of such review, the Company has recorded a
full valuation allowance against the remaining loan balances.
The Company has guaranteed the performance of WeightWatchers.com's lease of
its office space at 888 Seventh Avenue, New York, New York. The annual rent is
$459,000 plus increases for operating expenses and real estate taxes. The lease
expires in September 2003.
NELLSON AGREEMENT:
On November 30, 1999, the Company entered into an agreement with Nellson
Neutraceutical, Inc. ("Nellson"), a wholly-owned subsidiary of Artal, to
purchase nutrition bar products manufactured by Nellson for sale at the
Company's meetings. Under the agreement, Nellson agrees to produce sufficient
nutrition bar products to fill the Company's purchase orders within 30 days of
receipt. The Company is not bound to purchase a minimum quantity of nutrition
bar products. The term of the agreement runs through December 31, 2004, and the
Company has the option to renew the agreement for successive
F-22
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. RELATED PARTY TRANSACTIONS (CONTINUED)
one-year periods by providing written notice to Nellson. Management believes the
provisions of the agreement are comparable to those the Company would receive
from a third party. Total purchases from Nellson for the fiscal year ended
December 29, 2001, the eight months ended December 30, 2000, and the fiscal year
ended April 29, 2000 were $18,706, $4,936 and $4,301, respectively.
MANAGEMENT AGREEMENT:
Simultaneously with the closing of the Company's acquisition by Artal, the
Company entered into a management agreement with The Invus Group, Ltd.
("Invus"), the independent investment advisor to Artal. Under this agreement,
Invus provides the Company with management, consulting and other services in
exchange for an annual fee equal to the greater of $1,000 or one percent of the
Company's EBITDA (as defined in the indentures relating to the Company's senior
subordinated notes), plus any related out-of-pocket expenses. This agreement is
terminable at the option of Invus at any time or by the Company at any time
after Artal owns less than a majority of the Company's voting stock.
Administrative expenses for the fiscal year ended December 29, 2001, the eight
months ended December 30, 2000 and the fiscal year ended April 29, 2000 were
$1,926, $683 and $583, respectively.
HEINZ LICENSING AGREEMENT:
At the closing of the Transaction, the Company granted to Heinz an exclusive
worldwide, royalty-free license to use the Custodial Trademarks (or any portion
covering food and beverage products) in connection with Heinz licensed products.
Heinz will pay the Company an annual fee of $1,200 for five years in exchange
for the Company serving as the custodian of the Custodial Trademarks.
PRIOR TO THE TRANSACTION:
Certain of Heinz' general and administrative expenses were allocated to the
Company. Total costs allocated include charges for salaries of corporate
officers and staff and other Heinz corporate overhead. Total costs charged to
the Company for these services were $1,000 and $2,156 for the fiscal years ended
April 29, 2000 and April 24, 1999, respectively.
In addition, Heinz charged the Company for its share of group health
insurance costs for eligible Company employees based upon location specific
costs, overall insurance costs and loss experience incurred during a calendar
year. In addition, various other insurance coverages were also provided to 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 $3,800 and $4,339 for the fiscal years ended April 29, 2000
and April 24, 1999, respectively, and are recorded in selling, general and
administrative expenses in the accompanying statements of operations.
Total costs charged to the Company by Heinz for other miscellaneous services
were $93 and $520 for the fiscal years ended April 29, 2000 and April 24, 1999,
respectively, and were recorded in selling, general and administrative expenses
in the accompanying statement of operations.
The Company maintained a cash management arrangement with Heinz. On a daily
basis, all available domestic cash was deposited and disbursements were
withdrawn. Heinz charged the Company
F-23
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. RELATED PARTY TRANSACTIONS (CONTINUED)
interest on the average daily balance maintained in an intercompany account. Net
interest expense related to this arrangement included in the statements of
operations was $1,700 and $3,081 for the fiscal years ended April 29, 2000 and
April 24, 1999, respectively. The interest rate charged to or received by the
Company was 5.5% in the fiscal year ended April 29, 2000 and 6.25% in the fiscal
year ended April 24, 1999.
Substantially all of the due from related parties of $133,783 at April 24,
1999 represents a note receivable from an affiliate of Heinz which was repaid in
June 1999. Interest income reflected in the statements of operations related to
this note receivable was $10,000 for the fiscal year ended April 24, 1999. The
interest rate charged by the Company was LIBOR plus 25 basis points.
Short-term borrowings due to an affiliate of Heinz of $16,250 at April 24,
1999 represented a note payable due April 28, 1999. Interest expense related to
the note payable was $35 for the fiscal year ended April 29, 2000 and $1,000 for
the fiscal year ended April 24, 1999.
Pension costs and postretirement costs were also charged to the Company
based upon eligible employees participating in the Plans.
12. EMPLOYEE BENEFIT PLANS
WEIGHT WATCHERS SPONSORED PLANS:
Effective September 29, 1999, the net assets of the Heinz sponsored employee
savings plan were transferred to the Weight Watchers sponsored plan upon
execution of the Transaction. The Company sponsors the Weight Watchers Savings
Plan (the "Savings Plan") for salaried and hourly employees. The Savings Plan is
a defined contribution plan which provides for employer matching contributions
up to 100% of the first 3% of an employee's eligible compensation. The Savings
Plan also permits employees to contribute between 1% and 13% of eligible
compensation on a pre-tax basis. Company contributions for the fiscal year end
December 29, 2001, the eight months ended December 30, 2000 and the fiscal year
ended April 29, 2000 were $823, $433 and $316, respectively.
The Company sponsors the Weight Watchers Profit Sharing Plan (the "Profit
Sharing Plan") for all full-time salaried employees who are eligible to
participate in the Savings Plan (except for certain senior management
personnel). The Profit Sharing Plan provides for a guaranteed monthly employer
contribution on behalf of each participant based on the participant's age and a
percentage of the participant's eligible compensation. The Profit Sharing Plan
has a supplemental employer contribution component, based on the Company's
achievement of certain annual performance targets, which are determined annually
by the Company's board of directors. The Company also reserves the right to make
additional discretionary contributions to the Profit Sharing Plan.
For certain senior management personnel, the Company sponsors the Weight
Watchers Executive Profit Sharing Plan. Under the Internal Revenue Service
("IRS") definition, this plan is considered a Nonqualified Deferred Compensation
Plan. There is a promise of payment by the Company made on the employees' behalf
instead of an individual account with a cash balance. The account is valued at
the end of each fiscal month, based on an annualized interest rate of prime plus
2%, with an annualized cap of 15%.
F-24
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company is currently applying for a determination letter to qualify the
Savings Plan under Section 401(a) of the IRS Code. It is the Company's opinion
that the IRS will issue a favorable determination letter as to the qualified
status of the Savings Plan.
HEINZ SPONSORED PLANS--PRIOR TO THE TRANSACTION:
Domestic employees participated in certain defined pension plans, a defined
contribution 401(k) savings plan and, for employees affected by certain IRS
limits, a section 415 Excess Plan, all of which are sponsored by Heinz. The
Company also provided post-retirement health care and life insurance benefits
for employees who meet the eligibility requirements of the Heinz plans. Retirees
share in the cost of these benefits based on age and years of service.
Company contributions to the Heinz Savings Plan include a qualified
age-related contribution and a matching of the employee's contribution, up to a
specified amount.
The following amounts were included in the Company's results of operations:
APRIL 29, APRIL 24,
2000 1999
--------- ---------
Defined Benefit Pension Plans.............................. $421 $1,456
Defined Benefit Postretirement Medical..................... $253 $ 577
Savings Plan............................................... $994 $2,170
|
In addition, foreign employees participated in certain Company sponsored
pension plans and such charges, which are included in the results of operations,
were not material.
13. RESTRUCTURING CHARGES
During the fourth quarter of fiscal 1997, the Company announced a
reorganization and restructuring program. The reorganization plan was designed
to strengthen the Company's classroom business and improve profitability and
global growth.
Charges related to the restructuring were recognized to reflect the exit
from the Personal Cuisine Food Option in United States company-owned locations,
the relocation of classes from certain fixed retail outlets to traveling
locations, and other initiatives involving the exit of certain under-performing
business and product lines.
Restructuring and related costs recorded in fiscal 1997 totaled $51,694
pretax. Pretax charges of $49,700 were classified as classroom operating
expenses and $1,994 as selling, general and
F-25
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. RESTRUCTURING CHARGES (CONTINUED)
administrative expenses. The major components of the fiscal 1997 charges and the
remaining accrual balances 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
Amounts utilized--2000................ -- -- (2,904) -- (2,904)
-------- ------- ------- ------- --------
Accrued restructuring costs--April 29,
2000................................ -- 489 4,297 -- 4,786
Amounts utilized--April 30 -
December 30, 2000................... -- (489) (1,812) -- (2,301)
-------- ------- ------- ------- --------
Accrued restructuring costs--
December 30, 2000................... -- -- 2,485 -- 2,485
Amounts utilized--2001................ -- -- (2,202) -- (2,202)
-------- ------- ------- ------- --------
Accrued restructuring costs--
December 29, 2001................... $ -- $ -- $ 283 $ -- $ 283
======== ======= ======= ======= ========
|
Asset write-downs of $16,900 consisted primarily of fixed assets and other
long-term asset impairments that were recorded as a direct result of the
Company's decision to exit businesses or facilities. Such assets were written
down based on management's estimate of fair value. Write-downs of $10,502 were
also recognized for estimated losses from disposals of classroom inventories,
packaging materials and other assets related to product line rationalizations
and process changes as a direct result of the Company's decision to exit
businesses or facilities.
Employee severance costs include charges related to both 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 in 2002.
F-26
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. CASH FLOW INFORMATION
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
Net cash paid during the year for:
Interest expense................................ $54,556 $31,639 $31,402 $2,748
Income taxes.................................... $39,474 $ 8,405 $13,601 $5,380
Noncash investing and financing activities were as
follows:
Deferred tax asset recorded as a component of
shareholders' deficit in conjunction with the
recapitalization of the Company............... -- -- $72,100 --
Redeemable preferred stock issued to Heinz...... -- -- $25,875 --
Reduction of existing receivable in connection
with the acquisition of minority interest..... -- $ 1,124 -- --
Fair value of assets acquired in connection with
the acquisitions of Weighco and Weight
Watchers of Oregon............................ $ 3,709 -- -- --
Liabilities incurred in connection with the
public equity offering........................ $ 1,950 -- -- --
Liability incurred in connection with a
noncompete agreement.......................... $ 1,200 -- -- --
|
15. COMMITMENTS AND CONTINGENCIES
LEGAL:
Due to the nature of its activities, the Company is, at times, subject to
pending and threatened legal actions which arise during the normal course of
business. In the opinion of management, based in part upon advice of legal
counsel, the disposition of such matters is not expected to have a material
effect on the Company's results of operations and consolidated financial
condition.
LEASE COMMITMENTS:
Minimum rental commitments under non-cancelable operating leases, primarily
for office and rental facilities at December 29, 2001, consist of the following:
2002........................................................ $13,000
2003........................................................ 9,056
2004........................................................ 5,913
2005........................................................ 3,891
2006........................................................ 2,424
2007 and thereafter......................................... 15,882
-------
Total....................................................... $50,166
=======
|
F-27
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Total rent expense charged to operations under these leases for the fiscal
year ended December 29, 2001, the eight months ended December 30, 2000, and the
fiscal years ended April 29, 2000 and April 24, 1999 was $14,818, $8,155,
$12,300 and $11,000, respectively.
REPURCHASE AGREEMENTS:
The Company is a party to a repurchase agreement related to the 10% minority
interest in the classroom operation of Finland. Pursuant to this agreement, the
Company may elect or be required to repurchase the minority shareholders'
interest in this operation. If the Company repurchases the minority interest
within five years of the original sale, the repurchase price is based on the
original sales price times the increase in the consumer price index since the
date of the sale. If the Company repurchases the minority interest after five
years from the original sale, the repurchase price is based on a multiple of the
average operating income during the last three years.
FRANCHISE PROFIT SHARING FUND:
In October 2000, the Company reached an agreement with certain franchisees
regarding the sharing of profits of prior and future product sales. The
settlement provided for a payment of approximately $3,836, to be paid out
through 2001, and releases the Company from any future obligations to the
franchisees under profit sharing arrangements dating back to 1969.
The Company's franchise agreement with certain North American franchisees
provides for an annual franchise profit sharing distribution based upon
specified formulas. Profit sharing expense under this arrangement for the fiscal
years ended December 29, 2001, April 29, 2000 and April 24, 1999 was $40, $400
and $750, respectively.
F-28
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. SEGMENT AND GEOGRAPHIC DATA
The Company is engaged principally in one line of business, weight control.
The following table presents information about the Company by geographic area.
There were no material amounts of sales or transfers among geographic areas and
no material amounts of United States export sales.
EXTERNAL SALES
------------------------
EIGHT MONTHS
ENDED
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
United States................................... $397,434 $150,199 $207,256 $189,366
United Kingdom.................................. 97,594 55,945 90,778 76,143
Continental Europe.............................. 97,421 48,306 66,524 65,119
Australia and New Zealand....................... 31,421 18,725 35,016 33,980
-------- -------- -------- --------
$623,870 $273,175 $399,574 $364,608
======== ======== ======== ========
|
LONG-LIVED ASSETS
------------------------
DECEMBER 29, DECEMBER 30, APRIL 29, APRIL 24,
2001 2000 2000 1999
------------ ------------ --------- ---------
United States................................... $230,696 $142,641 $142,675 $149,054
United Kingdom.................................. 2,909 2,737 949 1,198
Continental Europe.............................. 2,025 1,914 1,973 2,422
Australia and New Zealand....................... 16,260 18,402 21,132 7,878
-------- -------- -------- --------
$251,890 $165,694 $166,729 $160,552
======== ======== ======== ========
|
17. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's significant financial instruments include cash and cash
equivalents, short and long-term debt, current and noncurrent notes receivable,
currency exchange agreements and guarantees.
In evaluating the fair value of significant financial instruments, the
Company generally uses quoted market prices of the same or similar instruments
or calculates an estimated fair value on a discounted cash flow basis using the
rates available for instruments with the same remaining maturities. As of
December 29, 2001, the fair value of financial instruments held by the Company
approximated the recorded value. Based on the current interest rates, management
believes that the carrying amount of the Company's debt approximates fair market
value.
DERIVATIVE INSTRUMENTS AND HEDGING:
The Company enters into forward and swap contracts to hedge transactions
denominated in foreign currencies to reduce currency risk associated with
fluctuating exchange rates. These contracts are used primarily to hedge certain
intercompany cash flows and for payments arising from some of the Company's
foreign currency denominated obligations. In addition, the Company enters into
interest rate swaps to hedge a substantial portion of its variable rate debt. As
of December 29, 2001,
F-29
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
17. FINANCIAL INSTRUMENTS (CONTINUED)
December 30, 2000 and April 29, 2000, the Company held currency and interest
rate swap contracts to purchase certain foreign currencies totaling $204,276,
$158,090 and $139,428, respectively. The Company also held separate currency and
interest rate swap contracts to sell foreign currencies of $207,730, $163,454
and $138,942, respectively.
As of December 29, 2001, losses of $1,137 ($716 net of taxes) for qualifying
hedges, were reported as a component of accumulated other comprehensive loss.
For the fiscal year ended December 29, 2001, the ineffective portion of changes
in fair values of cash flow hedges was not material. In addition, fair value
adjustments for non-qualifying hedges resulted in a reduction of net income of
$697 ($1,125 before taxes) for the fiscal year ended December 29, 2001. The
Company does not anticipate any reclassification to earnings from accumulated
other comprehensive loss within the next twelve months.
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The change in the Company's fiscal year end resulted in the elimination of
the one month lag for certain foreign subsidiaries and is effective retroactive
to April 30, 2000 which results in the quarterly data presented herein to differ
from that previously reported on the July 29, 2000 and October 28, 2000
Form 10-Q's. The change from the previous Form 10-Q's for revenue is an increase
of $469 and a decrease of $6,469 for the quarters ended July 29, 2000 and
October 28, 2000, respectively. The change for operating income is an increase
of $2,374 and an increase of $2,443 for the quarters ended July 29, 2000 and
October 28, 2000, respectively. The change for net income is an increase of
$1,736 and an increase of $1,816 for the quarters ended July 29, 2000 and
October 28, 2000, respectively.
F-30
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
In addition, the Company reclassified certain expenses from other expense,
net to selling, general and administrative expenses in the fourth quarter of the
fiscal year ended December 29, 2001 which resulted in the quarterly data
presented herein to differ from that reported previously on Form 10-Q's.
FOR THE FISCAL QUARTERS ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 29, DECEMBER 29,
2001 2001 2001 2001
--------- -------- ------------- ------------
FISCAL YEAR ENDED DECEMBER 29, 2001
Revenues........................................ $171,951 $162,325 $144,064 $145,530
Operating income................................ $ 48,245 $ 57,496 $ 49,148 $ 39,800
Net income...................................... $ 23,238 $ 26,078 $ 16,118 $ 81,753
Basic EPS:
Income before extraordinary item.............. $ 0.20 $ 0.23 $ 0.15 $ 0.80
Extraordinary item, net of taxes.............. $ -- $ -- $ -- $ (0.03)
Net income.................................. $ 0.20 $ 0.23 $ 0.15 $ 0.77
Diluted EPS:
Income before extraordinary item.............. $ 0.20 $ 0.23 $ 0.14 $ 0.78
Extraordinary item, net of taxes.............. $ -- $ -- $ -- $ (0.03)
Net income.................................. $ 0.20 $ 0.23 $ 0.14 $ 0.75
|
FOR THE FISCAL
QUARTERS ENDED TWO MONTHS
---------------------- ENDED
JULY 29, OCTOBER 28, DECEMBER 30,
2000 2000 2000
-------- ----------- ------------
EIGHT MONTHS ENDED DECEMBER 30, 2000
Revenues................................................... $103,073 $107,582 $62,520
Operating income........................................... $ 35,803 $ 26,830 $ 9,849
Net income (loss).......................................... $ 13,705 $ 10,908 $(9,594)
Basic EPS.................................................. $ 0.12 $ 0.09 $ (0.09)
Diluted EPS................................................ $ 0.12 $ 0.09 $ (0.09)
|
FOR THE FISCAL QUARTERS ENDED
------------------------------------------------
JULY 24, OCTOBER 23, JANUARY 22, APRIL 29,
1999 1999 2000 2000
-------- ----------- ----------- ---------
FISCAL YEAR ENDED APRIL 29, 2000
Revenues............................................ $92,174 $84,031 $90,507 $132,862
Operating income.................................... $27,669 $ 9,775 $13,922 $ 33,262
Net income.......................................... $17,095 $ 2,239 $ 912 $ 17,513
Basic EPS........................................... $ 0.06 $ 0.01 $ 0.00 $ 0.15
Diluted EPS......................................... $ 0.06 $ 0.01 $ 0.00 $ 0.15
|
Basic and diluted EPS are computed independently for each of the periods
presented. Accordingly, the sum of the quarterly EPS amounts may not agree to
the total for the year.
F-31
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
19. SUBSEQUENT EVENTS
ACQUISITION:
On January 18, 2002, the Company completed the acquisition of one of its
franchisees, Weight Watchers of North Jersey, Inc. pursuant to the terms of the
Asset Purchase Agreement executed on December 31, 2001 among Weight Watchers of
North Jersey, Inc., the Company and Weight Watchers North America, Inc. a
wholly-owned subsidiary of the Company. The Transaction will be accounted for by
the purchase method of accounting. Substantially all of the purchase price in
excess of the net assets acquired will be recorded as goodwill. The purchase
price for the acquisition was $46,500. The acquisition was financed through
additional borrowings pursuant to the Company's Amended and Restated Credit
Agreement, dated December 21, 2001.
REDEMPTION OF PREFERRED STOCK:
On March 1, 2002, the Company redeemed all of the Company's Series A
Preferred Stock for $25,000, plus accrued and unpaid dividends. The redemption
was financed through additional borrowings of $12,000 obtained from the
Company's Amended and Restated Credit Agreement, and cash from operations.
20. GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Senior Subordinated Notes are
fully and unconditionally guaranteed on a joint and several basis by the
following wholly-owned subsidiaries: 58 WW Food Corp.; Waist Watchers, Inc.;
Weight Watchers Camps, Inc.; W.W. Camps and Spas, Inc.; Weight Watchers
Direct, Inc.; W/W Twentyfirst Corporation; W.W. Weight Reduction
Services, Inc.; W.W.I. European Services Ltd.; W.W. Inventory Service Corp.;
Weight Watchers North America, Inc.; Weight Watchers 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;
BLTC Pty Ltd.; LLTC Pty Ltd.; Weight Watchers Asia Pacific Finance Limited
Partnership (APF); 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-32
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 29, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............. $ 6,230 $ 8,804 $ 8,304 $ -- $ 23,338
Receivables, net....................... 2,638 9,229 1,752 -- 13,619
Inventories............................ -- 21,902 4,303 -- 26,205
Prepaid expenses....................... 1,263 11,970 2,711 -- 15,944
Deferred income taxes.................. -- 4,773 -- -- 4,773
Intercompany (payables) receivables.... (157,902) 147,317 10,585 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS................. (147,771) 203,995 27,655 -- 83,879
Investment in consolidated
subsidiaries........................... 416,812 -- -- (416,812) --
Property and equipment, net.............. 1,221 8,132 1,372 -- 10,725
Notes and other receivables,
noncurrent............................. 325 -- -- -- 325
Goodwill, net............................ 26,769 206,881 652 -- 234,302
Trademarks and other intangible assets,
net.................................... 874 5,962 27 -- 6,863
Deferred income taxes.................... 35,253 101,028 -- -- 136,281
Deferred financing costs................. 9,164 -- -- -- 9,164
Other noncurrent assets.................. 462 (537) 1,384 -- 1,309
--------- -------- ------- --------- ---------
TOTAL ASSETS......................... $ 343,109 $525,461 $31,090 $(416,812) $ 482,848
========= ======== ======= ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Short-term borrowings due to related
party................................ $ 2,924 $ (36) $ -- $ -- $ 2,888
Portion of long-term debt due within
one year............................. 15,219 480 -- -- 15,699
Accounts payable....................... 1,287 14,077 2,334 -- 17,698
Salaries and wages..................... 6,951 4,611 3,571 -- 15,133
Accrued interest....................... 7,739 71 -- -- 7,810
Accrued restructuring costs............ -- 283 -- -- 283
Foreign currency contract payable...... 2,811 -- -- -- 2,811
Other accrued liabilities.............. 8,112 11,561 3,856 -- 23,529
Income taxes........................... (11,694) 18,544 2,289 -- 9,139
Deferred revenue....................... -- 11,121 1,899 -- 13,020
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES............ 33,349 60,712 13,949 -- 108,010
Long-term debt........................... 394,800 63,520 -- -- 458,320
Deferred income taxes.................... 2,481 109 579 -- 3,169
Other.................................... -- 624 246 -- 870
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES........................ 397,281 64,253 825 -- 462,359
Redeemable preferred stock............... 25,996 -- -- -- 25,996
Shareholders' (deficit) equity........... (113,517) 400,496 16,316 (416,812) (113,517)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE
PREFERRED STOCK AND SHAREHOLDERS'
(DEFICIT) EQUITY................... $ 343,109 $525,461 $31,090 $(416,812) $ 482,848
========= ======== ======= ========= =========
|
F-33
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................... $ 26,699 $ 11,191 $ 6,611 $ -- $ 44,501
Receivables, net............................. 7,390 5,941 1,347 -- 14,678
Notes receivable, current.................... 2,104 -- 2 -- 2,106
Foreign currency contract receivable......... 5,364 -- -- -- 5,364
Inventories.................................. -- 11,867 3,177 -- 15,044
Prepaid expenses............................. 961 7,809 2,329 -- 11,099
Deferred income taxes........................ 2,846 (2,198) -- -- 648
Intercompany (payables) receivables.......... (10,921) 3,147 7,774 -- --
-------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS....................... 34,443 37,757 21,240 -- 93,440
Investment in consolidated subsidiaries........ 175,876 -- -- (175,876) --
Property and equipment, net.................... 1,272 5,679 1,194 -- 8,145
Notes and other receivables, noncurrent........ 5,601 -- -- -- 5,601
Goodwill, net.................................. 28,367 121,814 720 -- 150,901
Trademarks and other intangible assets, net.... 1,876 4,761 11 -- 6,648
Deferred income taxes.......................... (44,713) 111,920 -- -- 67,207
Deferred financing costs....................... 13,513 -- -- -- 13,513
Other noncurrent assets........................ 163 271 328 -- 762
-------- -------- ------- --------- ---------
TOTAL ASSETS............................... $216,398 $282,202 $23,493 $(175,876) $ 346,217
======== ======== ======= ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Short-term borrowings due to related party... $ 1,730 $ -- $ -- $ -- $ 1,730
Portion of long-term debt due within one
year....................................... 13,250 870 -- -- 14,120
Accounts payable............................. 932 8,379 2,678 -- 11,989
Salaries and wages........................... 3,568 3,533 3,443 -- 10,544
Accrued interest............................. 9,069 593 -- -- 9,662
Accrued restructuring costs.................. -- 2,485 -- -- 2,485
Other accrued liabilities.................... 9,420 10,540 3,255 -- 23,215
Income taxes................................. 1,677 (414) 2,397 -- 3,660
Deferred revenue............................. -- 4,843 993 -- 5,836
-------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES.................. 39,646 30,829 12,766 -- 83,241
Long-term debt................................. 371,053 85,477 -- -- 456,530
Deferred income taxes.......................... 2,481 -- 626 -- 3,107
Other.......................................... -- -- 121 -- 121
-------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES.............................. 373,534 85,477 747 -- 459,758
Redeemable preferred stock..................... 25,996 -- -- -- 25,996
Shareholders' (deficit) equity................. (222,778) 165,896 9,980 (175,876) (222,778)
-------- -------- ------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS' (DEFICIT)
EQUITY................................... $216,398 $282,202 $23,493 $(175,876) $ 346,217
======== ======== ======= ========= =========
|
F-34
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
AS OF APRIL 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents................. $ 10,984 $ 22,465 $10,594 $ -- $ 44,043
Receivables, net.......................... 6,006 5,606 1,265 -- 12,877
Notes receivable, current................. 2,791 -- -- -- 2,791
Inventories............................... -- 7,827 1,501 -- 9,328
Prepaid expenses.......................... 748 6,240 1,372 -- 8,360
Deferred income taxes..................... 2,846 (2,752) -- -- 94
Intercompany (payables) receivables....... (32,114) 27,742 4,372 -- --
--------- -------- ------- --------- ---------
TOTAL CURRENT ASSETS.................... (8,739) 67,128 19,104 -- 77,493
Investment in consolidated subsidiaries..... 162,320 -- -- (162,320) --
Property and equipment, net................. 1,809 3,974 1,218 -- 7,001
Notes and other receivables, noncurrent..... 7,045 -- -- -- 7,045
Goodwill, net............................... 25,833 125,977 755 -- 152,565
Trademarks and other intangible assets,
net....................................... 1,960 5,193 10 -- 7,163
Deferred income taxes....................... (9,854) 77,428 -- -- 67,574
Deferred financing costs.................... 14,749 (83) -- -- 14,666
Other noncurrent assets..................... 163 365 172 -- 700
--------- -------- ------- --------- ---------
TOTAL ASSETS............................ $ 195,286 $279,982 $21,259 $(162,320) $ 334,207
========= ======== ======= ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Short-term borrowings due to related
party................................... $ 1,489 $ -- $ -- $ -- $ 1,489
Portion of long-term debt due within one
year.................................... 13,250 870 -- -- 14,120
Accounts payable.......................... 1,438 9,084 1,840 -- 12,362
Salaries and wages........................ 2,301 4,256 3,568 -- 10,125
Accrued interest.......................... 3,521 561 -- -- 4,082
Accrued restructuring costs............... -- 4,786 -- -- 4,786
Foreign currency contract payable......... 486 -- -- -- 486
Other accrued liabilities................. 6,387 9,049 4,147 -- 19,583
Income taxes.............................. (1,846) 5,965 2,667 -- 6,786
Deferred revenue.......................... -- 3,824 808 -- 4,632
--------- -------- ------- --------- ---------
TOTAL CURRENT LIABILITIES............... 27,026 38,395 13,030 -- 78,451
Long-term debt.............................. 374,598 85,912 -- -- 460,510
Deferred income taxes....................... 1,903 390 648 -- 2,941
Other....................................... -- -- 546 -- 546
--------- -------- ------- --------- ---------
TOTAL LONG-TERM DEBT AND OTHER
LIABILITIES........................... 376,501 86,302 1,194 -- 463,997
Redeemable preferred stock.................. 25,875 2,507 254 (2,761) 25,875
Shareholders' (deficit) equity.............. (234,116) 152,778 6,781 (159,559) (234,116)
--------- -------- ------- --------- ---------
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND SHAREHOLDERS' (DEFICIT)
EQUITY................................ $ 195,286 $279,982 $21,259 $(162,320) $ 334,207
========= ======== ======= ========= =========
|
F-35
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED DECEMBER 29, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net........................ $ 4,194 $522,255 $97,421 $ -- $623,870
Cost of revenues..................... 821 231,402 54,213 -- 286,436
-------- -------- ------- --------- --------
Gross profit....................... 3,373 290,853 43,208 -- 337,434
Marketing expenses................... -- 57,117 12,599 -- 69,716
Selling, general and administrative
expenses........................... 17,780 39,735 15,514 -- 73,029
-------- -------- ------- --------- --------
Operating (loss) income............ (14,407) 194,001 15,095 -- 194,689
Interest expense (income)............ 40,714 14,692 (869) -- 54,537
Other expense (income), net.......... 14,983 3,592 (5,394) -- 13,181
Equity in income of consolidated
subsidiaries....................... 109,285 -- -- (109,285) --
Franchise commission income (loss)... 47,823 (42,084) (5,739) -- --
-------- -------- ------- --------- --------
Income before income taxes and
minority interest and
extraordinary item............... 87,004 133,633 15,619 (109,285) 126,971
(Benefit from) provision for income
taxes.............................. (63,058) 34,431 5,429 -- (23,198)
-------- -------- ------- --------- --------
Income before minority interest.... 150,062 99,202 10,190 (109,285) 150,169
Minority interest.................... -- -- 107 -- 107
-------- -------- ------- --------- --------
Income before extraordinary item... 150,062 99,202 10,083 (109,285) 150,062
Extraordinary charge on early
extinguishment of debt, net of
taxes.............................. 2,875 -- -- -- 2,875
-------- -------- ------- --------- --------
Net income......................... $147,187 $ 99,202 $10,083 $(109,285) $147,187
======== ======== ======= ========= ========
|
F-36
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net........................ $ 20,794 $204,074 $48,307 $ -- $273,175
Cost of revenues..................... 4,571 105,444 29,268 -- 139,283
-------- -------- ------- -------- --------
Gross profit....................... 16,223 98,630 19,039 -- 133,892
Marketing expenses................... 2,784 18,994 5,208 -- 26,986
Selling, general and administrative
expenses........................... 15,844 12,877 5,703 -- 34,424
-------- -------- ------- -------- --------
Operating (loss) income............ (2,405) 66,759 8,128 -- 72,482
Interest expense (income)............ 24,696 12,640 (211) -- 37,125
Other expense (income), net.......... 15,527 (1,171) (22) -- 14,334
Equity in income of consolidated
subsidiaries....................... 26,621 -- -- (26,621) --
Franchise commission income (loss)... 20,144 (17,647) (2,497) -- --
-------- -------- ------- -------- --------
Income before income taxes and
minority interest................ 4,137 37,643 5,864 (26,621) 21,023
(Benefit from) provision for income
taxes.............................. (10,882) 14,558 2,181 -- 5,857
-------- -------- ------- -------- --------
Income before minority interest.... 15,019 23,085 3,683 (26,621) 15,166
Minority interest.................... -- -- 147 -- 147
-------- -------- ------- -------- --------
Net income......................... $ 15,019 $ 23,085 $ 3,536 $(26,621) $ 15,019
======== ======== ======= ======== ========
|
F-37
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net........................ $ 32,836 $300,215 $66,523 $ -- $399,574
Cost of revenues..................... 4,911 155,251 41,227 -- 201,389
-------- -------- ------- -------- --------
Gross profit....................... 27,925 144,964 25,296 -- 198,185
Marketing expenses................... 7,417 35,707 8,329 -- 51,453
Selling, general and administrative
expenses........................... 24,487 21,926 7,346 -- 53,759
Transaction costs.................... 8,247 98 -- -- 8,345
-------- -------- ------- -------- --------
Operating (loss) income............ (12,226) 87,233 9,621 -- 84,628
Interest expense (income)............ 27,642 4,607 (1,170) -- 31,079
Other (income) expense, net.......... (12,418) (1,418) 469 -- (13,367)
Equity in income of consolidated
subsidiaries....................... 44,441 -- -- (44,441) --
Franchise commission income (loss)... 21,686 (18,500) (3,186) -- --
-------- -------- ------- -------- --------
Income before income taxes and
minority interest................ 38,677 65,544 7,136 (44,441) 66,916
Provision for income taxes........... 918 24,090 3,315 -- 28,323
-------- -------- ------- -------- --------
Income before minority interest.... 37,759 41,454 3,821 (44,441) 38,593
Minority interest.................... -- 834 -- -- 834
-------- -------- ------- -------- --------
Net income......................... $ 37,759 $ 40,620 $ 3,821 $(44,441) $ 37,759
======== ======== ======= ======== ========
|
F-38
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 24, 1999
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Revenues, net......................... $42,288 $257,202 $65,118 $ -- $364,608
Cost of revenues...................... 3,685 135,095 40,145 -- 178,925
------- -------- ------- -------- --------
Gross profit........................ 38,603 122,107 24,973 -- 185,683
Marketing expenses.................... 8,815 35,381 8,660 -- 52,856
Selling, general and administrative
expenses............................ 23,720 20,353 7,428 -- 51,501
------- -------- ------- -------- --------
Operating income.................... 6,068 66,373 8,885 -- 81,326
Interest expense (income)............. 2,922 (4,739) (5,351) -- (7,168)
Other expense, (income) net........... 1,925 802 (68) -- 2,659
Equity in income of consolidated
subsidiaries........................ 37,310 -- -- (37,310) --
Franchise commission income (loss).... 8,697 (6,072) (2,625) -- --
------- -------- ------- -------- --------
Income before income taxes and
minority interest................. 47,228 64,238 11,679 (37,310) 85,835
Provision for income taxes............ 7,944 22,860 5,556 -- 36,360
------- -------- ------- -------- --------
Income before minority interest..... 39,284 41,378 6,123 (37,310) 49,475
Minority interest..................... -- 1,108 385 -- 1,493
------- -------- ------- -------- --------
Net income.......................... $39,284 $ 40,270 $ 5,738 $(37,310) $ 47,982
======= ======== ======= ======== ========
|
F-39
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
Operating activities:
Net income....................................... $ 147,187 $ 99,202 $10,083 $(109,285) $ 147,187
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization.................... 2,311 10,346 586 -- 13,243
Amortization of deferred financing costs......... 2,097 -- -- -- 2,097
Deferred tax (benefit) provision................. (77,663) 6,594 -- -- (71,069)
Unrealized loss on derivative instruments........ 1,125 -- -- -- 1,125
Accounting for equity investment................. 17,344 -- -- -- 17,344
Allowance for doubtful accounts.................. 6,123 207 -- -- 6,330
Reserve for inventory obsolescence, other........ -- 2,718 -- -- 2,718
Foreign currency exchange rate (gain) loss....... (6,501) 29 (24) -- (6,496)
Extraordinary charges from early extinguisment of
debt........................................... 2,875 -- -- -- 2,875
Other items, net................................. -- 46 145 -- 191
Changes in cash due to:
Receivables.................................... 4,279 (3,539) (509) -- 231
Inventories.................................... -- (10,531) (1,364) -- (11,895)
Prepaid expense................................ (301) (4,740) (564) -- (5,605)
Intercompany receivables/payables.............. 151,062 (146,455) (4,607) -- --
Due from related parties....................... 1,194 (36) -- -- 1,158
Accounts payable............................... 180 5,173 (152) -- 5,201
Accrued liabilities............................ 1,352 (609) 1,242 -- 1,985
Deferred revenue............................... -- 6,295 995 -- 7,290
Income taxes................................... (11,493) 19,057 90 -- 7,654
--------- --------- ------- --------- ---------
Cash provided by (used for) operating
activities................................... 241,171 (16,243) 5,921 (109,285) 121,564
--------- --------- ------- --------- ---------
Investing activities:
Capital expenditures............................. (269) (2,724) (841) -- (3,834)
Advances and interest to equity investment....... (17,344) -- -- -- (17,344)
Acquisitions..................................... -- (97,877) -- -- (97,877)
Other items, net................................. 310 (1,276) (97) -- (1,063)
--------- --------- ------- --------- ---------
Cash used for investing activities............. (17,303) (101,877) (938) -- (120,118)
--------- --------- ------- --------- ---------
Financing activities:
Net increase in short-term borrowings............ $ 175 $ 573 $ -- $ -- $ 748
Proceeds from borrowings......................... 60,042 -- -- -- 60,042
Parent company investment in subsidiaries........ (240,936) -- -- 240,936 --
Payment of dividends............................. (1,500) (4,893) (3,732) 8,625 (1,500)
Payments on long-term debt....................... (28,466) (22,347) -- -- (50,813)
Deferred financing costs......................... (2,406) -- -- -- (2,406)
Net Parent (settlements) advances................ -- 142,449 995 (143,444) --
Purchase of treasury stock....................... (27,132) -- -- -- (27,132)
Cost of public equity offering................... (1,017) -- -- -- (1,017)
Proceeds from sale of common stock............... 525 -- -- -- 525
Proceeds from stock options exercised............ 198 -- -- -- 198
--------- --------- ------- --------- ---------
Cash (used for) provided by financing
activities................................... (240,517) 115,782 (2,737) 106,117 (21,355)
--------- --------- ------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents...................................... (3,820) (49) (553) (3,168) (1,254)
Net (decrease) increase in cash and cash
equivalents...................................... (20,469) (2,387) 1,693 -- (21,163)
Cash and cash equivalents, beginning of fiscal
year............................................. 26,699 11,191 6,611 -- 44,501
--------- --------- ------- --------- ---------
Cash and cash equivalents, end of fiscal year...... $ 6,230 $ 8,804 $ 8,304 $ -- $ 23,338
========= ========= ======= ========= =========
|
F-40
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE EIGHT MONTHS ENDED DECEMBER 30, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
Operating activities:
Net income........................................... $ 15,019 $ 23,085 $ 3,536 $(26,621) $ 15,019
Adjustments to reconcile net income to cash provided
by (used for) operating activities:
Depreciation and amortization........................ 1,930 4,266 411 -- 6,607
Bond issuance costs.................................. 1,282 -- -- -- 1,282
Deferred tax provision............................... -- 104 -- -- 104
Unrealized gain on derivative instruments............ (5,815) -- -- -- (5,815)
Accounting for equity investment..................... 17,604 -- -- -- 17,604
Elimination of foreign subsidiaries one month
reporting lag...................................... 1,137 86 1,120 (1,137) 1,206
Allowance for doubtful accounts...................... -- 198 -- -- 198
Reserve for inventory obsolescence, other............ -- 3,981 12 -- 3,993
Other items, net..................................... (532) (422) -- (954)
Changes in cash due to:.............................. --
Receivables........................................ (2,096) (566) (84) -- (2,746)
Inventories........................................ -- (7,214) (1,688) -- (8,902)
Prepaid expense.................................... (213) (2,422) (957) -- (3,592)
Intercompany receivables/payables.................. (21,193) 24,595 (3,402) -- --
Due from related parties........................... 241 -- -- -- 241
Accounts payable................................... (1,072) (69) 838 -- (303)
Accrued liabilities................................ 9,327 (1,450) (1,015) -- 6,862
Deferred revenue................................... -- 858 185 -- 1,043
Income taxes....................................... 38,960 (41,643) (292) -- (2,975)
-------- -------- ------- -------- --------
Cash provided by (used for) operating activities... 55,111 3,277 (1,758) (27,758) 28,872
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures................................. (100) (3,017) (509) -- (3,626)
Advances and interest to equity investment........... (15,604) -- -- -- (15,604)
Acquisitions of minority interest.................... (2,400) -- -- -- (2,400)
Other items, net..................................... (148) 147 4 -- 3
-------- -------- ------- -------- --------
Cash used for investing activities................. (18,252) (2,870) (505) -- (21,627)
-------- -------- ------- -------- --------
Financing activities:
Net increase (decrease) in short-term borrowings..... 566 (600) -- -- (34)
Parent company investment in subsidiaries............ (13,556) -- -- 13,556 --
Payment of dividends................................. (879) (8,834) (1,968) 10,802 (879)
Payments on long-term debt........................... (6,625) (435) -- -- (7,060)
Net Parent advances.................................. -- -- 421 (421) --
-------- -------- ------- -------- --------
Cash used for financing activities................. (20,494) (9,869) (1,547) 23,937 (7,973)
-------- -------- ------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents..................................... (650) (1,812) (173) 3,821 1,186
Net increase (decrease) in cash and cash equivalents... 15,715 (11,274) (3,983) -- 458
Cash and cash equivalents, beginning of period......... 10,984 22,465 10,594 -- 44,043
-------- -------- ------- -------- --------
Cash and cash equivalents, end of period............... $ 26,699 $ 11,191 $ 6,611 $ -- $ 44,501
======== ======== ======= ======== ========
|
F-41
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE FISCAL YEAR ENDED APRIL 29, 2000
(IN THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
Operating activities:
Net income............................. $ 37,759 $ 40,620 $ 3,821 $(44,441) $ 37,759
Adjustments to reconcile net income to
cash provided by (used for) operating
activities:
Depreciation and amortization.......... 2,326 6,028 932 -- 9,286
Bond issuance costs.................... 1,112 -- -- -- 1,112
Deferred tax provision................. 3,785 4,685 71 -- 8,541
Unrealized loss on derivative
instruments.......................... 499 -- -- -- 499
Allowance for doubtful accounts........ (352) (29) (4) -- (385)
Reserve for inventory obsolescence,
other................................ -- 3,332 28 -- 3,360
Other items, net....................... -- (2,492) -- -- (2,492)
Changes in cash due to:
Receivables.......................... 5,205 (1,295) 9,514 -- 13,424
Inventories.......................... -- (5,453) 276 -- (5,177)
Prepaid expense...................... 108 (1,691) 782 -- (801)
Due from related parties............. (15,149) 384 -- -- (14,765)
Accounts payable..................... 807 (1,272) (1,047) -- (1,512)
Accrued liabilities.................. 4,039 (1,845) 3,087 -- 5,281
Deferred revenue..................... (1,827) 74 -- (1,753)
Income taxes......................... 90,650 (97,918) 4,776 -- (2,492)
--------- -------- -------- -------- ---------
Cash provided by (used for) operating
activities......................... 130,789 (58,773) 22,310 (44,441) 49,885
--------- -------- -------- -------- ---------
Investing activities:
Capital expenditures................... (299) (1,004) (571) -- (1,874)
Acquisitions of minority interest...... -- (15,900) -- -- (15,900)
Other items, net....................... (2,067) 116 84 -- (1,867)
--------- -------- -------- -------- ---------
Cash used for investing activities... (2,366) (16,788) (487) -- (19,641)
--------- -------- -------- -------- ---------
Financing activities:
Net increase (decrease) in short-term
borrowings........................... -- 1,235 (6,690) -- (5,455)
Parent company investment in
subsidiaries......................... (34,693) -- -- 34,693 --
Proceeds from borrowings............... 404,260 87,000 -- -- 491,260
Repurchase of common stock............. (324,476) -- -- -- (324,476)
Payment of dividends................... (2,797) (3,120) (4,494) 7,615 (2,796)
Payments on long-term debt............. (3,312) (218) -- -- (3,530)
Deferred financing costs............... (15,861) -- -- -- (15,861)
Net Parent (settlements) advances...... (138,998) 14,552 (7,175) 591 (131,030)
--------- -------- -------- -------- ---------
Cash (used for) provided by financing
activities......................... (115,877) 99,449 (18,359) 42,899 8,112
--------- -------- -------- -------- ---------
Effect of exchange rate changes on cash
and cash equivalents..................... (1,488) (13,799) (83) 1,542 (13,828)
Net increase in cash and cash
equivalents.............................. 11,058 10,089 3,381 -- 24,528
Cash and cash equivalents, beginning of
fiscal year.............................. (74) 12,376 7,213 -- 19,515
--------- -------- -------- -------- ---------
Cash and cash equivalents, end of fiscal
year..................................... $ 10,984 $ 22,465 $ 10,594 $ -- $ 44,043
========= ======== ======== ======== =========
|
F-42
WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOW
FOR THE FISCAL YEAR ENDED APRIL 24, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
Operating activities:
Net income.............................. $39,284 $ 40,270 $ 5,738 $(37,310) $ 47,982
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization........... 2,378 6,609 599 -- 9,586
Deferred tax provision.................. 1,735 4,345 3,199 -- 9,279
Allowance for doubtful accounts......... 84 30 4 -- 118
Reserve for inventory obsolescence,
other................................. -- 1,824 99 1,923
Other items, net........................ -- 153 (115) -- 38
Changes in cash due to:
Receivables........................... (7,387) 1,318 (1,208) -- (7,277)
Inventories........................... -- (1,772) (77) -- (1,849)
Prepaid expense....................... (20) (1,141) (293) -- (1,454)
Intercompany receivables/payables..... 38,494 (35,474) (3,020) -- --
Due from related parties.............. (177) 80 3,790 -- 3,693
Accounts payable...................... (288) 3,698 (327) -- 3,083
Accrued liabilities................... 1,003 (2,572) (8,507) -- (10,076)
Deferred revenue...................... -- (1,450) 734 -- (716)
Income taxes.......................... (36,393) 38,362 1,602 -- 3,571
-------- -------- ------- -------- --------
Cash provided by operating
activities........................ 38,713 54,280 2,218 (37,310) 57,901
-------- -------- ------- -------- --------
Investing activities:
Capital expenditures.................... (271) (1,612) (591) -- (2,474)
Other items, net........................ (278) (286) (1) -- (565)
-------- -------- ------- -------- --------
Cash used for investing
activities........................ (549) (1,898) (592) -- (3,039)
-------- -------- ------- -------- --------
Financing activities:
Net increase (decrease) in short-term
borrowings............................ -- 1,262 (406) -- 856
Payment of dividends.................... (5,435) (14,446) (3,670) 13,183 (10,368)
Payments on long-term debt.............. (1,081) -- -- -- (1,081)
Net Parent (settlements) advances....... (31,483) (32,903) 3,316 23,994 (37,076)
-------- -------- ------- -------- --------
Cash used for financing
activities........................ (37,999) (46,087) (760) 37,177 (47,669)
-------- -------- ------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents.................... (135) 281 214 133 493
Net increase in cash and cash
equivalents............................. 30 6,576 1,080 -- 7,686
Cash and cash equivalents, beginning of
fiscal year............................. (104) 5,800 6,133 -- 11,829
-------- -------- ------- -------- --------
Cash and cash equivalents, end of fiscal
year.................................... $ (74) $ 12,376 $ 7,213 $ -- $ 19,515
======== ======== ======= ======== ========
|
F-43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Weight Watchers International, Inc.:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) (1) on page F-1 present fairly, in all material
respects, the consolidated financial position of Weight Watchers
International, Inc. and its subsidiaries at December 29, 2001, December 30, 2000
and April 29, 2000, and the results of their operations and their cash flows for
the fiscal year ended December 29, 2001, the eight months ended December 30,
2000, and for each of the two years in the period ended April 29, 2000, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 14(a)(2) on page F-1, presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 19, 2002, except as to the last paragraph
of Note 19, which is as of March 1, 2002
F-44
WEIGHT WATCHERS INTERNATIONAL, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END OF
OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
---------- -------- ------------- ----------
FISCAL YEAR ENDED DECEMBER 29, 2001
Allowance for doubtful accounts................. $ 797 $6,330 $(6,401) $ 726
Inventory reserves, other....................... 2,532 2,718 (2,541) 2,709
EIGHT MONTHS ENDED DECEMBER 30, 2000
Allowance for doubtful accounts................. $ 609 $ 198 $ (10) $ 797
Inventory reserves, other....................... 1,557 3,993 (3,018) 2,532
FISCAL YEAR ENDED APRIL 29, 2000
Allowance for doubtful accounts................. $ 994 $ (385) $ -- $ 609
Inventory reserves, other....................... 1,436 3,360 (3,239) 1,557
FISCAL YEAR ENDED APRIL 24, 1999
Allowance for doubtful accounts................. $ 876 $ 118 $ -- $ 994
Inventory reserves, other....................... 3,961 1,923 (4,448) 1,436
|
(1) Primarily represents the utilization of established reserves, net of
recoveries.
F-45
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
his behalf by the undersigned, thereunto duly authorized.
WEIGHT WATCHERS INTERNATIONAL, INC.
Date: March 27, 2002
By: /s/ LINDA HUETT
-----------------------------------------
Linda Huett
President and Director
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ LINDA HUETT
-----------------------------------------
Linda Huett
President and Director
Date: March 27, 2002 (Principal Executive Officer)
By: /s/ THOMAS S. KIRITSIS
-----------------------------------------
Thomas S. Kiritsis
Vice President and Chief Financial Officer
(Principal Financial and Accounting
Date: March 27, 2002 Officer)
By: /s/ RAYMOND DEBBANE
-----------------------------------------
Raymond Debbane
Date: March 27, 2002 Director
By: /s/ JONAS M. FAJGENBAUM
-----------------------------------------
Jonas M. Fajgenbaum
Date: March 27, 2002 Director
|
II-1
By: /s/ SACHA LAINOVIC
-----------------------------------------
Sacha Lainovic
Date: March 27, 2002 Director
By: /s/ CHRISTOPHER J. SOBECKI
-----------------------------------------
Christopher J. Sobecki
Date: March 27, 2002 Director
By: /s/ SAM K. REED
-----------------------------------------
Sam K. Reed
Date: March 27, 2002 Director
By: /s/ MARSHA JOHNSON EVANS
-----------------------------------------
Marsha Johnson Evans
Date: March 27, 2002 Director
|
II-2
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
**2. -- Recapitalization and Stock Purchase Agreement, dated
July 22, 1999, among Weight Watchers International, Inc.,
H.J. Heinz Company and Artal International S.A. is
incorporated herein by reference to Exhibit 2 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
*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 -- Articles of Amendment to the Articles of Incorporation, as
Amended and Restated, of Weight Watchers International,
Inc., to Create a New Series of Preferred Stock Designated
as Series B Junior Participating Preferred Stock, adopted as
of November 14, 2001.
**4.1 -- Senior Subordinated Dollar Notes Indenture, dated as of
September 29, 1999, between Weight Watchers International,
Inc. and Norwest Bank Minnesota, National Association is
incorporated herein by reference to Exhibit 4.1 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
**4.2 -- Guarantee Agreement, dated as of March 3, 2000, given by 58
WW Food Corp., Waist Watchers, Inc., Weight Watchers Camps
and Spas, Inc., Weight Watchers Direct, Inc., W/
W Twentyfirst Corporation, W.W. Weight Reductions Services,
Inc., W.W.I. European Services, Ltd., W.W. Inventory
Service Corp., Weight Watchers North America, Inc., Weight
Watchers UK Holdings Ltd., Weight Watchers International
Holdings, Ltd., Weight Watchers U.K. Limited, Weight
Watchers (Accessories & Publications) Ltd., Weight Watchers
(Food Products) Limited, Weight Watchers New Zealand
Limited, Weight Watchers International Pty Limited, Fortuity
Pty Ltd. and Gutbusters Ltd. is incorporated herein by
reference to Exhibit 4.2 with Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 (File
No. 333-92005) as filed on March 2, 2000.
**4.3 -- Senior Subordinated Euro Notes Indenture, dated as of
September 29, 1999, between Weight Watchers International
Inc. and Norwest Bank Minnesota, National Association is
incorporated herein by reference to Exhibit 4.3 with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
**4.4 -- Guarantee Agreement, dated as of March 3, 2000, given by 58
WW Food Corp., Waist Watchers, Inc., Weight Watchers Camps
and Spas, Inc., Weight Watchers Direct, Inc., W/
W Twentyfirst Corporation, W.W. Weight Reductions Services,
Inc., W.W.I. European Services, Ltd., W.W. Inventory
Service Corp., Weight Watchers North America, Inc., Weight
Watchers UK Holdings Ltd., Weight Watchers International
Holdings, Ltd., Weight Watchers U.K. Limited, Weight
Watchers (Accessories & Publications) Ltd., Weight Watchers
(Food Products) Limited, Weight Watchers New Zealand
Limited, Weight Watchers International Pty Limited, Fortuity
Pty Ltd. and Gutbusters Ltd. is incorporated herein by
reference to Exhibit 4.4 with Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 (File
No. 333-92005) as filed on March 2, 2000.
**4.5 -- Form of Rights Agreement between Weight Watchers
International Inc. and Equiserve Trust Company, N.A. is
incorporated herein by reference to Exhibit 4.5 with
Amendment No. 2 to the Registrant's Registration Statement
on Form S-1 (File No. 333-69362) as filed on November 9,
2001.
|
EXHIBIT
NUMBER DESCRIPTION
------- -----------
**4.6 -- Specimen of stock certificate representing Weight Watchers
International Inc.'s common stock, no par value is
incorporated herein by reference to Exhibit 4.6 with
Amendment No. 2 to the Registrant's Registration Statement
on Form S-1 (File No. 333-69362) as filed on November 9,
2001.
*10.1 -- Second Amended and Restated Credit Agreement, dated as of
December 21, 2001, among Weight Watchers International,
Inc., WW Funding Corp., Credit Suisse First Boston, BHF
(USA) Capital Corporation and Fortis (USA) Finance LLC, The
Bank of Nova Scotia and various financial institutions.
**10.2 -- Preferred Stock Stockholders's Agreement, dated as of
September 29, 1999, among Weight Watchers International,
Inc., Artal Luxembourg S.A. and H.J. Heinz Company is
incorporated herein by reference to Exhibit 10.2 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
**10.3 -- Stockholders' Agreement, dated as of September 29, 1999,
among Weight Watchers International, Inc., Artal Luxembourg
S.A. and H.J. Heinz Company is incorporated herein by
reference to Exhibit 10.3 filed with Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 (File
No. 333-92005) as filed on March 2, 2000.
**10.4 -- License Agreement, dated as of September 29, 1999, between
WW Foods, LLC and Weight Watchers International, Inc. is
incorporated herein by reference to Exhibit 10.4 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
**10.5 -- License Agreement, dated as of September 29, 1999, between
Weight Watchers International, Inc. and H.J. Heinz Company
is incorporated herein by reference to Exhibit 10.5 filed
with Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-92005) as filed on
March 2, 2000.
**10.6 -- License Agreement, dated as of September 29, 1999, between
WW Foods, LLC and H.J. Heinz Company is incorporated herein
by reference to Exhibit 10.6 filed with Amendment No. 1 to
the Registrant's Registration Statement on Form S-4 (File
No. 333-92005) as filed on March 2, 2000.
**10.7 -- LLC Agreement, dated as of September 29, 1999, between
H.J. Heinz Company and Weight Watchers International, Inc.
is incorporated herein by reference to Exhibit 10.7 filed
with Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-92005) as filed on
March 2, 2000.
**10.8 -- Operating Agreement, dated as of September 29, 1999, between
Weight Watchers International, Inc. and H.J. Heinz Company
is incorporated herein by reference to Exhibit 10.8 filed
with Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-92005) as filed on
March 2, 2000.
**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 is incorporated herein by reference to Exhibit 10.9
filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-92005) as filed on
March 2, 2000.
**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. is
incorporated herein by reference to Exhibit 10.10 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
|
EXHIBIT
NUMBER DESCRIPTION
------- -----------
**10.11 -- Stockholders' Agreement, dated September 29, 1999, among
WeightWatchers.com, Weight Watchers International, Inc.,
Artal Luxembourg S.A., H.J. Heinz Company is incorporated
herein by reference to Exhibit 10.11 filed with Amendment
No. 1 to the Registrant's Registration Statement on
Form S-4 (File No. 333-92005) as filed on March 2, 2000.
**10.12 -- Letter Agreement, dated as of September 29, 1999, between
Weight Watchers International, Inc. and The Invus Group,
Ltd. is incorporated herein by reference to Exhibit 10.12
filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 333-92005) as filed on
March 2, 2000.
*10.13 -- Amendment to Letter Agreement, dated as of October 19, 2001,
between Weight Watchers International, Inc. and The Invus
Group, Ltd.
**10.14 -- Agreement of Lease, dated as of August 1, 1995, between
Industrial & Research Associates Co. and Weight Watchers
International, Inc. is incorporated herein by reference to
Exhibit 10.13 filed with Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 (File No. 333-92005) as
filed on March 2, 2000.
**10.15 -- Lease Agreement, dated as of April 1, 1997, between Junto
Investments and Weight Watchers North America, Inc. is
incorporated herein by reference to Exhibit 10.14 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (File No. 333-92005) as filed on March 2, 2000.
**10.16 -- Lease Agreement, dated as of August 31, 1995, between 89
State Line Limited Partnership and Weight Watchers North
America, Inc. is incorporated herein by reference to
Exhibit 10.15 filed with Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 (File No. 333-92005) as
filed on March 2, 2000.
*10.17 -- Weight Watchers Savings Plan, dated as of October 3, 1999,
as amended.
**10.18 -- Weight Watchers Executive Profit Sharing Plan, dated as of
October 4, 1999 is incorporated herein by reference to
Exhibit 10.18 filed with Registrant's Annual Report on
Form 10-K for the fiscal year ended April 29, 2000.
**10.19 -- 1999 Stock Purchase and Option Plan of Weight Watchers
International, Inc. and Subsidiaries is incorporated herein
by reference to Exhibit 10.19 filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended April 29,
2000.
**10.20 -- Weight Watchers.com Stock Incentive Plan of Weight Watchers
International, Inc. and Subsidiaries is incorporated herein
by reference to Exhibit 10.20 filed with Registrant's Annual
Report on Form 10-K for the fiscal year ended April 29,
2000.
**10.21 -- Warrant Agreement, dated as of November 24, 1999, between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc. is incorporated herein by reference to Exhibit 10.20
filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-1 (File No. 333-69362) as filed on
October 29, 2001.
**10.22 -- Warrant Certificate of WeightWatchers.com No. 1, dated as of
November 24, 1999 is incorporated herein by reference to
Exhibit 10.22 filed with Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (File No. 333-69362) as
filed on October 29, 2001.
**10.23 -- Warrant Agreement, dated as of October 1, 2000, between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc. is incorporated herein by reference to Exhibit 10.2
filed with Weight Watchers International, Inc.'s Quarterly
Report on Form 10-Q for the quarterly period ended
October 28, 2000.
|
EXHIBIT
NUMBER DESCRIPTION
------- -----------
**10.24 -- Warrant Certificate of WeightWatchers.com, Inc. No. 2, dated
as of October 1, 2000 is incorporated herein by reference to
Exhibit 10.2 filed with Weight Watchers International,
Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended October 28, 2000.
**10.25 -- Warrant Agreement, dated as of May 3, 2001, between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc. is incorporated herein by reference to Exhibit 10.2
filed with Weight Watchers International, Inc.'s Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
2001.
**10.26 -- Warrant Certificate of WeightWatchers.com, Inc., No. 3,
dated as of May 3, 2001 is incorporated herein by reference
to Exhibit 10.3 filed with Weight Watchers International,
Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2001.
**10.27 -- Warrant Agreement, dated as of September 10, 2001 between
WeightWatchers.com, Inc. and Weight Watchers International,
Inc. is incorporated herein by reference to Exhibit 10.29
filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-1 (File No. 333-69362) as filed on
October 29, 2001.
**10.28 -- Warrant Certificate Weightwatchers.com, Inc. No. 4, dated as
of September 10, 2001 is incorporated herein by reference to
Exhibit 10.30 filed with Amendment No. 1 to the Registrant's
Registration Statement of Form S-1 (File No. 333-69362) as
filed on October 29, 2001.
**10.29 -- Second and Amended Restated Note, dated as of September 10,
2001, by WeightWatchers.com, Inc. to Weight Watchers
International, Inc. is incorporated herein by reference to
Exhibit 10.24 filed with Amendment No. 1 to Registrant's
Registration Statement on Form S-1 (File No. 333-69362) as
filed on October 29, 2001.
**10.30 -- Put/Call Agreement, dated April 18, 2001, between Weight
Watchers International, Inc. and H.J. Heinz Company is
incorporated herein by reference to Exhibit 10.4 filed with
Weight Watchers International, Inc.'s Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2001.
**10.31 -- Second Amended and Restated Collateral Assignment and
Security Agreement, dated as of September 10, 2001, by
WeightWatchers.com, Inc. in favor of Weight Watchers
International, Inc. is incorporated herein by reference to
Exhibit No. 10.31 filed with Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 (File
No. 333-69362) as filed on October 29, 2001.
**10.32 -- Termination Agreement, dated as of November 5, 2001, between
Weight Watchers International, Inc. and Artal Luxembourg
S.A. is incorporated herein by reference to
Exhibit No. 10.32 filed with Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 (File
No. 333-69362) as filed on November 9, 2001.
**10.33 -- Amended and Restated Co-Pack Agreement, dated as of
September 13, 2001, between Weight Watchers International,
Inc. and Nellson Nutraceutical, Inc. is incorporated herein
by reference to Exhibit No. 10.33 filed with Amendment
No. 1 to the Registrant's Registration Statement on
Form S-1 (File No. 333-69362) as filed on October 29, 2001.
**10.34 -- Amended and Restated Intellectual Property License
Agreement, dated as of September 10, 2001, between Weight
Watchers International, Inc. and WeightWatchers.com, Inc. is
incorporated herein by reference to Exhibit No. 10.34 filed
with Amendment No. 2 to the Registrant's Registration
Statement on Form S-1 (File No. 333-69362) as filed on
November 9, 2001.
|
EXHIBIT
NUMBER DESCRIPTION
------- -----------
**10.35 -- Service Agreement, dated as of September 10, 2001, between
Weight Watchers International, Inc. and WeightWatchers.com,
Inc. is incorporated herein by reference to
Exhibit No. 10.35 filed with Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 (File
No. 333-69362) as filed on November 9, 2001.
**10.36 -- Corporate Agreement, dated as of September 10, 2001, between
Weight Watchers International, Inc. and WeightWatchers.com,
Inc. and Artal Luxembourg S.A. is incorporated herein by
reference to Exhibit No. 10.36 filed with Amendment No. 2 to
the Registrant's Registration Statement on Form S-1 (File
No. 333-69362) as filed on November 9, 2001.
**10.37 -- Guaranty of Sublease, dated as of September 12, 2000, by
Weight Watchers International, Inc. of the Agreement of
Sublease between RDR Associates, Inc. and
WeightWatchers.com, Inc. is incorporated herein by reference
to Exhibit No. 10.37 filed with Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 (File
No. 333-69362) as filed on November 9, 2001.
**10.38 -- Registration Rights Agreement, dated as of September 29,
1999, among Weight Watchers International, Inc., H.J. Heinz
Company and Artal Luxembourg S.A. is incorporated herein by
reference to Exhibit No. 10.38 filed with Amendment No. 2 to
the Registrant's Registration Statement on Form S-1 (File
No. 333-69362) as filed on November 9, 2001.
**21 -- Subsidiaries of Weight Watchers International, Inc. is
incorporated herein by reference to Exhibit 21 filed with
Amendment No. 1 to the Registrant's Registration Statement
on Form S-1 (File No. 333-69362) as filed on October 29,
2001.
|
* Filed herewith.
** Previously filed.
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
ARTICLE I
The name of the Corporation shall be Weight Watchers International,
Inc.
ARTICLE II
The purpose for which the Corporation is formed is to transact any or
all lawful business, not required to be specifically stated in these Articles of
Incorporation, for which corporations may be incorporated under the Virginia
Stock Corporation Act, as amended from time to time, and any legislation
succeeding thereto (the "VSCA").
All references herein to "Articles of Incorporation" shall mean these
Amended and Restated Articles of Incorporation, as subsequently amended or
restated in accordance herewith and with the VSCA.
ARTICLE III
The aggregate number of shares that the Corporation shall have
authority to issue shall be 250,000,000 shares of Preferred Stock, no par value
per share (hereinafter called "Preferred Stock"), and 1,000,000,000 shares of
Common Stock, no par value per share (hereinafter called "Common Stock").
The following is a description of each of such classes of stock, and a
statement of the preferences, limitations, voting rights and relative rights in
respect of the shares of each such class:
A. PREFERRED STOCK
1. AUTHORITY TO FIX RIGHTS OF PREFERRED STOCK. The Board of
Directors shall have authority, by resolution or resolutions, at any
time and from time to time to divide and establish any or all of the
unissued shares of Preferred Stock not then allocated to any series of
Preferred Stock into one or more series, and, without limiting the
generality of the foregoing, to fix and determine the designation of
each such series, the number of shares that shall constitute such
series and the following relative rights and preferences of the shares
of each series so established:
(a) the annual or other periodic dividend, if any,
payable on shares of such series, the time of payment thereof,
whether any such dividends shall be cumulative or
non-cumulative, the relative rights of priority, if any, of
payment of dividends on the shares of that series and the date
or dates from which any cumulative dividends shall commence to
accrue;
(b) the rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series;
(c) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different
conditions and at different redemption prices;
(d) whether that series shall have a sinking fund for
the redemption or purchase of shares of that series, and if
so, the amount of such sinking fund;
(e) whether that series shall have voting rights
(including multiple or fractional votes per share) in addition
to the voting rights provided by law, and, if so, the terms of
such voting rights;
(f) the terms and conditions, if any, on which shares
of such series may be converted into shares of stock of the
Corporation of any other class or classes or into shares of
any other series of the same or any other class or classes,
including provision for adjustment of the conversion rate in
such events as the Board of Directors shall determine;
(g) whether, and if so the extent to which, shares of
such series may participate with the Common Stock in any
dividends in excess of the preferential dividend fixed for
shares of such series or in any distribution of the assets of
the Corporation, upon a liquidation, dissolution or winding-up
thereof, in excess of the preferential amount fixed for shares
of such series; and
(h) any other preferences and relative, optional or
other special rights, and qualifications, limitations or
restrictions of such preferences or rights, of shares of such
series not fixed and determined by law or in this Article III.
2. DISTINCTIVE DESIGNATIONS OF SERIES. Each series of
Preferred Stock shall be so designated as to distinguish the shares
thereof from the shares of all other series. Different series of
Preferred Stock shall not be considered to constitute different voting
groups of shares for the purpose of voting by voting groups except as
required by the VSCA or as otherwise specified by the Board of
Directors, as reflected in articles of
2
amendment to the Articles of Incorporation, with respect to any series
at the time of the creation thereof.
3. RESTRICTIONS ON CERTAIN DISTRIBUTIONS. So long as any
shares of Preferred Stock are outstanding, the Corporation shall not
declare and pay or set apart for payment any dividends (other than
dividends payable in Common Stock or other stock of the Corporation
ranking junior to the Preferred Stock as to dividends) or make any
other distribution on such junior stock if, at the time of making such
declaration, payment or distribution, the Corporation shall be in
default with respect to any dividend payable on, or any obligation to
redeem, any shares of Preferred Stock.
B. COMMON STOCK
1. VOTING RIGHTS. Subject to the provisions of the VSCA or of
the Bylaws of the Corporation as from time to time in effect with
respect to the closing of the transfer books or the fixing of a record
date for the determination of shareholders entitled to vote, and except
as otherwise provided by the VSCA or in articles of amendment to the
Articles of Incorporation establishing any series of Preferred Stock
pursuant to the provisions of Section 1 of Part A of this Article III,
the holders of outstanding shares of Common Stock of the Corporation
shall possess exclusive voting power for the election of directors and
for all other purposes, with each holder of record of shares of Common
Stock of the Corporation being entitled to one vote for each share of
such stock standing in his name on the books of the Corporation.
2. DIVIDENDS. Subject to the rights of the holders of
Preferred Stock, holders of Common Stock shall be entitled to receive
such dividends and other distributions in cash, stock of any
corporation or property of the Corporation as may be declared thereon
by the Board of Directors from time to time out of assets or funds of
the Corporation legally available therefor and shall share equally on a
per share basis in all such dividends and other distributions.
3. RIGHTS UPON DISSOLUTION. Except as required by the VSCA or
the Articles of Incorporation with respect to any rights upon
dissolution of the Preferred Stock or any one or more series thereof,
the holders of the Common Stock shall have the exclusive right to
receive, pro rata according to the number of shares of Common Stock
owned of record by each of them, the net assets of the Corporation upon
dissolution and the full amount of any dividends or other distributions
paid by the Corporation.
C. GENERAL PROVISIONS
1. REDEEMED OR REACQUIRED SHARES. Shares of any series of
Preferred Stock that have been redeemed or otherwise reacquired by the
Corporation (whether through the operation of a sinking fund, upon
conversion or otherwise) shall have the status of authorized and
unissued shares of Preferred Stock and may be redesignated and reissued
as a part of such series (except as otherwise provided in Part D of
this Article III with respect to the Series A Preferred Stock or unless
prohibited by the articles of amendment
3
creating any other series) or of any other series of Preferred Stock.
Shares of Common Stock that have been reacquired by the Corporation
shall have the status of authorized and unissued shares of Common Stock
and may be reissued.
2. NO PREEMPTIVE RIGHTS. No holder of shares of stock of any
class of the Corporation shall, as such holder, have any right to
subscribe for or purchase (a) any shares of stock of any class of the
Corporation, or any warrants, options or other instruments that shall
confer upon the holder thereof the right to subscribe for or purchase
or receive from the Corporation any shares of stock of any class,
whether or not such shares of stock, warrants, options or other
instruments are issued for cash or services or property or by way of
dividend or otherwise, or (b) any other security of the Corporation
that shall be convertible into, or exchangeable for, any shares of
stock of the Corporation of any class or classes, or to which shall be
attached or appurtenant any warrant, option or other instrument that
shall confer upon the holder of such security the right to subscribe
for or purchase or receive from the Corporation any shares of its stock
of any class or classes, whether or not such securities are issued for
cash or services or property or by way of dividend or otherwise, other
than such right, if any, as the Board of Directors, in its sole
discretion, may from time to time determine. If the Board of Directors
shall offer to the holders of shares of stock of any class of the
Corporation, or any of them, any such shares of stock, options,
warrants, instruments or other securities of the Corporation, such
offer shall not, in any way, constitute a waiver or release of the
right of the Board of Directors subsequently to dispose of other
securities of the Corporation without offering the same to such
holders.
3. AFFILIATED TRANSACTIONS STATUTE. Effective May 8, 2003, the
Corporation shall not be governed by Article 14 of the VSCA.
4. CONTROL SHARE ACQUISITION STATUTE. The provisions of
Article 14.1 of the VSCA shall not apply to acquisitions of shares of
any class of capital stock of the Corporation.
D. SERIES A PREFERRED STOCK. There is hereby established a series of
the Corporation's authorized Preferred Stock, to be designated as the
"Series A Preferred Stock, no par value per share." The designation and
number, and relative rights, preferences and limitations of the Series
A Preferred Stock, insofar as not already fixed by any other provision
of these Articles of Incorporation, shall be as follows:
1. DESIGNATION AND AMOUNT. The number of shares constituting
the Series A Preferred Stock shall be 1,000,000, and the liquidation
preference of the Series A Preferred Stock shall be $25.00 per share
(the "Liquidation Value").
2. RANK. The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution,
rank (a) senior to the Corporation's Common Stock and to all other
classes and series of stock of the Corporation now or hereafter
authorized, issued or outstanding which by their terms expressly
provide that
4
they are junior to the Series A Preferred Stock with respect to such
matters (collectively with the Common Stock, the "Junior Securities");
(b) on a parity with each other class of capital stock or series of
preferred stock issued by the Corporation after the date hereof, the
terms of which specifically provide that such class or series will rank
on a parity with the Series A Preferred Stock with respect to such
matters or which do not specify their rank (collectively referred to as
"Parity Securities"); and (c) junior to each other class of capital
stock or other series of Preferred Stock issued by the Corporation
after the date hereof, the terms of which specifically provide that
such class or series will rank senior to the Series A Preferred Stock
with respect to such matters (collectively referred to as "Senior
Securities").
3. DIVIDENDS.
(a) The holders of shares of the Series A Preferred
Stock shall be entitled to receive, as and when declared and out of
funds legally available therefor, dividends in cash on each share of
Series A Preferred Stock at an annual rate equal to 6% of the
Liquidation Value. Such dividends shall be cumulative and shall accrue
and be payable annually on July 31 of each year (each such date being a
"Dividend Payment Date"), to holders of record at the close of business
on the date specified by the Board of Directors of the Corporation at
the time such dividend is declared (the "Record Date"), in preference
to dividends on the Junior Securities, commencing on the Dividend
Payment Date next succeeding the Issue Date. Any such Record Date shall
be 15 days prior to the relevant Dividend Payment Date. With respect to
any dividend that has been declared, if on the applicable Dividend
Payment Date the Corporation is in default under its Senior Credit
Agreement or any of its other Debt Agreements or if the payment of such
dividend in cash would result in such a default, the payment of such
declared dividend with respect to shares of Series A Preferred Stock on
such date shall be deferred to the next Dividend Payment Date or other
payment date provided pursuant to Section 3(d) below on which no
default exists or would occur. Such unpaid dividends shall accrue
interest at a rate of 6% per annum until paid in full. All dividends
paid with respect to shares of Series A Preferred Stock pursuant to
this Section 3 shall be paid pro rata to the holders entitled thereto.
(b) In the case of dividend payments made on the
first Dividend Payment Date with respect to shares of Series A
Preferred Stock issued on the Issue Date, dividends shall accrue and be
cumulative from the Issue Date.
(c) Each fractional share of Series A Preferred Stock
outstanding shall be entitled to a ratably proportionate amount of all
dividends accruing with respect to each outstanding share of Series A
Preferred Stock pursuant to Section 3(a) of this Part D, and all such
dividends with respect to such outstanding fractional shares shall be
cumulative and shall accrue (whether or not declared), and shall be
payable in the same manner and at such times as provided for in Section
3(a) of this Part D with respect to dividends on each outstanding share
of Series A Preferred Stock. Each fractional share of Series A
Preferred Stock outstanding shall also be entitled to a ratably
proportionate
5
amount of any other distributions made with respect to each outstanding
share of Series A Preferred Stock, and all such distributions shall be
payable in the same manner and at the same time as distributions on
each outstanding share of Series A Preferred Stock.
(d) Accrued but unpaid dividends for any past
dividend periods may be declared by the Board of Directors and paid on
any date fixed by the Board of Directors, whether or not a regular
Dividend Payment Date, to holders of record on the books of the
Corporation on such record date as may be fixed by the Board of
Directors, which record date shall be not less than 10 days and not
more than 30 days prior to the payment date thereof. Holders of Series
A Preferred Stock will not be entitled to any dividends, whether
payable in cash, property or stock, in excess of the full cumulative
dividends provided for herein.
(e)(i) So long as any shares of the Series A
Preferred Stock are outstanding, the Corporation shall not make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or retirement of, any
Junior Securities or any warrants, rights, calls or options exercisable
for or convertible into any Junior Securities, whether directly or
indirectly, and whether in cash, obligations or shares of the
Corporation or other property (other than dividends or distributions
payable in additional shares of Junior Securities to holders of Junior
Securities), and shall not permit any Person directly or indirectly
controlled by the Corporation to purchase or redeem any Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities. Notwithstanding the foregoing,
the Corporation may purchase, redeem or otherwise acquire, cancel or
retire for value Junior Securities or options, warrants, equity
appreciation rights or other rights to purchase or acquire Junior
Securities (A) held by any existing or former employees or management
of the Corporation or any Subsidiary of the Corporation or their
assigns, estates or heirs, in each case in connection with the
repurchase provisions under employee stock option or stock purchase
agreements or other agreements to compensate management employees or
(B) issued in connection with the incurrence of debt under a Debt
Agreement or the issuance of Senior Securities (other than securities
issued to any Permitted Holder).
(ii) No full dividends shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation on any Parity Securities for any period unless full
cumulative dividends have been or contemporaneously are declared and
paid (in cash) or declared and a sum set apart sufficient for such
payment (in cash) on the Series A Preferred Stock for all dividend
payment periods terminating on or prior to the date of payment of such
full dividends on such Parity Securities. If any dividends are not paid
in full, as aforesaid, upon the shares of Series A Preferred Stock and
any other Parity Securities, all dividends declared upon shares of
Series A Preferred Stock and any other Parity Securities shall be
declared pro rata so that the amount of dividends declared per share of
the Series A Preferred Stock and such Parity Securities shall in all
cases bear to each other the same ratio that accrued dividends per
share on the Series A Preferred Stock and such Parity Securities bear
to each other.
6
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders an amount in
cash equal to 100% of the Liquidation Value for each share outstanding,
plus an amount in cash equal to all accrued but unpaid dividends
thereon to the date of liquidation, dissolution or winding up, before
any payment shall be made or any assets distributed to the holders of
any of the Junior Securities. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the
holders of outstanding shares of the Series A Preferred Stock and any
Parity Securities, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount
which would be payable on such distribution if the amounts to which the
holders of outstanding shares of Series A Preferred Stock and the
holders of outstanding shares of such Parity Securities are entitled
were paid in full.
(b) For the purposes of this Section 4, neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all
of the property or assets of the Corporation nor the consolidation or
merger of the Corporation with any one or more other Person shall be
deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of liquidation,
dissolution or winding up of the Corporation.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Corporation may redeem,
in whole or in part, the Series A Preferred Stock, at any time or from
time to time, in the manner provided in Section 6(a) of this Part D (an
"Optional Redemption"). Any Optional Redemption shall be at a price per
share equal to 100% of the Liquidation Value thereof plus 100% of the
sum of accrued and unpaid dividends thereon (including an amount equal
to a prorated dividend from the last Dividend Payment Date immediately
prior to the redemption date).
(b) REDEMPTION UPON CHANGE IN CONTROL OR A PERMITTED
HOLDER PUBLIC SALE. Upon the occurrence of a Change in Control or a
Permitted Holder Public Sale (each a "Trigger Event"), the Series A
Preferred Stock shall be redeemable at the option of the holders
thereof, in whole or in part and in the manner provided in Section 6(b)
of this Part D, at a redemption price per share payable in cash equal
to 100% of the Liquidation Value plus accrued and unpaid dividends to
the date of redemption (including an amount equal to a prorated
dividend from the last Dividend Payment Date immediately prior to the
redemption date). After the occurrence of the Trigger Event, the
Corporation shall redeem the number of shares specified in the holders'
notices of election to redeem pursuant to Section 6(b) of this Part D
on the date fixed for
7
redemption. The Corporation's obligations pursuant to Section 5(b) of
this Part D shall be suspended during any period when such redemption
would be prohibited by the Corporation's Senior Credit Agreement or any
of its other Debt Agreements.
6. PROCEDURE FOR REDEMPTION.
(a) If the Corporation elects to redeem Series A
Preferred Stock pursuant to Section 5(a) of this Part D, the
Corporation shall give written notice (an "Optional Redemption Notice")
thereof by overnight courier or by facsimile transmission to each
holder of Series A Preferred Stock at its address or facsimile number,
as the case may be, as it appears in the records of the Corporation.
Such notice shall set forth: (i) the redemption price; (ii) the
redemption date (which date shall be no earlier than five days and no
later than 60 days from the date the Optional Redemption Notice is
sent); (iii) the procedures to be followed by such holder, including
the place or places where certificates for such shares are to be
surrendered for payment of the redemption price and (iv) that dividends
on the shares to be redeemed will cease to accrue on the redemption
date. If less than all shares of Series A Preferred Stock are to be
redeemed at any time, selection of such shares for redemption shall be
made on a pro rata basis.
(b) At any time prior to and in any event no later
than five days after the occurrence of a Change in Control and no later
than 25 days prior to the occurrence of a Permitted Holder Public Sale,
the Corporation shall give written notice of such Trigger Event by
overnight courier or by facsimile transmission to each holder of Series
A Preferred Stock at its address or facsimile number, as the case may
be, as it appears in the records of the Corporation, which notice shall
describe such Trigger Event. Such notice shall also set forth: (i) each
holder's right to require the Corporation to redeem shares of Series A
Preferred Stock held by such holder as a result of such Trigger Event;
(ii) the redemption price; (iii) the redemption date (which date shall
be no later than 45 days from the date of the occurrence of such
Trigger Event); (iv) the procedures to be followed by such holder in
exercising its right of redemption, including the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price and (v) that dividends on the shares to be redeemed
will cease to accrue on the redemption date. In the event a holder of
shares of Series A Preferred Stock shall elect to require the
Corporation to redeem any or all of such shares of Series A Preferred
Stock, such holder shall deliver, within 15 days of the sending to it
of the Corporation's notice described in this Section 6(b), a written
notice (the "Holder's Election Notice') stating such holder's election
and specifying the number of shares to be redeemed pursuant to Section
5(b) of this Part D.
(c) If an Optional Redemption Notice has been sent by
the Corporation as provided in Section 6(a) of this Part D, or notice
of election has been delivered by the holders as provided in Section
6(b) of this Part D, and provided that on or before the applicable
redemption date funds necessary for such redemption shall have been set
aside by the Corporation, separate and apart from its other funds, in
trust for the pro rata benefit of the holders of the shares entitled to
redemption, so as to be and to
8
continue to be available therefor, then, from and after the redemption
date (unless the Corporation defaults in the payment of the redemption
price, in which case such rights shall continue until the redemption
price is paid), dividends on the shares of Series A Preferred Stock so
called for or entitled to redemption shall cease to accrue, and said
shares shall no longer be deemed to be outstanding and shall not have
the status of shares of Series A Preferred Stock, and all rights of the
holders thereof as shareholders of the Corporation (except the right to
receive the applicable redemption price and any accrued and unpaid
dividends from the Corporation to the date of redemption) shall cease.
Upon surrender of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and a notice by the Corporation shall so
state), such shares shall be redeemed by the Corporation at the
applicable redemption price as aforesaid. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the unredeemed
shares without cost to the holder thereof.
7. REACQUIRED SHARES. Shares of Series A Preferred Stock that
have been issued and reacquired in any manner shall (upon compliance
with any applicable provisions of the laws of the Commonwealth of
Virginia) have the status of authorized and unissued shares of the
class of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock
other than the Series A Preferred Stock.
8. VOTING RIGHTS. Except as required by law or set forth
below, the holders of the Series A Preferred Stock will have no voting
rights with respect to their shares of Series A Preferred Stock. The
approval of holders of a majority of the outstanding shares of Series A
Preferred Stock, voting as a class, shall be required to amend, repeal
or change any of the provisions of the Articles of Incorporation of the
Corporation in any manner that would alter or change the powers,
preferences or special rights of the shares of Series A Preferred Stock
so as to affect them adversely; provided that without the consent of
each holder of Series A Preferred Stock, no amendment may reduce the
dividend payable on or the Liquidation Value of the Series A Preferred
Stock.
9. CERTAIN COVENANTS. Any holder of Series A Preferred Stock
may proceed to protect and enforce its rights and the rights of such
holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific
enforcement of any provision in this Part D or in aid of the exercise
of any power granted herein, or to enforce any other proper remedy.
10. DEFINITIONS. For the purposes of this Part D, the
following terms shall have the meanings indicated:
"affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act
or any successor provision. The terms "affiliated" and "non-affiliated"
shall have meanings correlative to the foregoing.
9
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
"Change in Control" shall mean
(a) any "person" or "group" of related persons (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act), other than
one or more Permitted Holders, is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the total voting power of the Voting
Stock of the Corporation (unless the Permitted Holders shall hold a
higher percentage thereof or have the ability to elect or designate for
election a majority of the Board of Directors of the Corporation);
(b) the adoption by the shareholders of the Corporation of a
plan or proposal for the liquidation or dissolution of the Corporation;
or
(c) the merger or consolidation of the Corporation with
another Person that is not an affiliate of the Corporation prior
thereto or the sale or other disposition of all or substantially all
the assets or property of the Corporation in one transaction or series
of related transactions to a Person who is not an affiliate of the
Corporation prior thereto.
"Debt Agreement" shall mean any instrument or agreement
governing indebtedness (whether now outstanding or hereinafter
incurred) of the Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Issue Date" shall mean the first date on which shares of
Series A Preferred Stock are issued.
"Junior Securities" shall have the meaning set forth in
Section 2 of this Part D.
"Parity Securities" shall have the meaning set forth in
Section 2 of this Part D.
"Permitted Holder" shall mean Artal Luxembourg S.A. and any of
its affiliates, but in the case of any affiliate, only for so long as
it continues to be an affiliate of Artal Luxembourg S.A.
"Permitted Holder Public Sale" shall mean a sale for cash by a
Permitted Holder of all or part of the Common Stock in a registered,
secondary public offering.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, limited
liability company or other entity.
"Senior Credit Agreement" shall mean the Amended and Restated
Credit Agreement, dated as of January 16, 2001, among the Corporation,
WW Funding Corp.,
10
various financial institutions, The Bank of Nova Scotia, as
Administrative Agent, BHF (USA) Capital Corporation, as Documentation
Agent, and Credit Suisse First Boston, as Syndication Agent, as amended
by Amendment No. 1 to Credit Agreement, dated as of April 26, 2001, and
the term "Senior Credit Agreement" shall also include any further
amendments, extensions, renewals, restatements or refundings thereof
and any credit facilities that replace, refund or refinance any part of
the loans or commitments thereunder, including any such replacement,
refunding or refinancing facility that increases the amount borrowable
thereunder.
"Senior Securities" shall have the meaning set forth in
Section 2 of this Part D.
"Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
"Trigger Event" shall have the meaning set forth in Section
5(b) of this Part D.
"Voting Stock" of a corporation means all classes of capital
stock of such corporation then outstanding and normally entitled to
vote in the election of directors.
ARTICLE IV
1. The number of directors shall be as specified in the Bylaws
of the Corporation but such number may be increased or decreased from
time to time in such manner as may be prescribed in the Bylaws,
provided that in no event shall the number of directors exceed 15. The
directors shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting
the entire Board of Directors. Class I directors shall be elected
initially for a one-year term, Class II directors initially for a
two-year term and Class III directors initially for a three-year term.
At each annual meeting of shareholders, beginning in 2002, successors
to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as
nearly equal as possible, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. The foregoing
provisions of this Section 1 shall not apply to those directors who may
be elected by the holders of any series of Preferred Stock.
2. Subject to the rights of the holders of any Preferred Stock
then outstanding, at any time that Artal Luxembourg S.A. ("Artal") or a
Majority Transferee owns a majority of the then outstanding shares of
Common Stock, directors may be removed, with or without cause, by the
affirmative vote of a majority of the votes entitled to be cast by the
then outstanding shares of capital stock of the Corporation that are
entitled to vote generally in the election of directors (the "Voting
Shares"), voting together as a single voting group. At all other times,
directors may be removed only for
11
cause and only by the affirmative vote of a majority of the votes
entitled to be cast by the then outstanding Voting Shares, voting
together as a single voting group. For purposes of the Articles of
Incorporation, "Majority Transferee" shall mean a transferee from Artal
or any other Majority Transferee of a majority of the then outstanding
shares of Common Stock that pursuant to an instrument of transfer or
related agreement has been granted rights under such provision of the
Articles of Incorporation by Artal or such transferring Majority
Transferee.
3. Subject to the rights of the holders of any Preferred Stock
then outstanding and to any limitations set forth in the VSCA,
newly-created directorships resulting from any increase in the number
of directors and any vacancies in the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be
filled solely (a) by the Board of Directors or (b) at a meeting of
shareholders by the shareholders entitled to vote on the election of
directors. If the directors remaining in office constitute fewer than a
quorum of the Board, they may fill the vacancy by the affirmative vote
of a majority of the directors remaining in office. Any director
elected by the Board of Directors to fill any vacancy shall hold office
until the next annual meeting of shareholders. In such event, the
director elected by the shareholders at the annual meeting shall hold
office for a term that shall coincide with the remaining term of the
class of directors to which such person has been elected.
4. No provision of any agreement, plan or related document
contemplated by Section 13.1-646 of the VSCA and approved by the Board
of Directors shall be considered to be a limitation on the authority or
power of the Board of Directors but, if so considered, is hereby
authorized by these Articles of Incorporation.
ARTICLE V
1. Except as expressly otherwise required in the Articles of
Incorporation, to be approved, action on a matter involving (a) an
amendment or restatement of the Articles of Incorporation for which the
VSCA requires shareholder approval, (b) a plan of merger or share
exchange for which the VSCA requires shareholder approval, (c) a sale
of assets other than in regular course of business or (d) the
dissolution of the Corporation shall be approved by the affirmative
vote of a majority of the votes entitled to be cast by the then
outstanding Voting Shares, voting together as a single group, unless in
submitting any such matter to the shareholders the Board of Directors
shall require a greater vote; provided that directors shall be elected
by a plurality of the votes cast by shares entitled to vote in the
election at a meeting at which a quorum is present.
2. At any time that Artal or a Majority Transferee owns a
majority of the then outstanding shares of Common Stock, the
affirmative vote of a majority of the votes entitled to be cast by the
then outstanding Voting Shares, voting together as a single voting
group, shall be required to amend, alter, change or repeal any
provision of Article IV, Section 2 or 3 of this Article V or Section 1
of Article VII. At all other times, the affirmative vote of at least 80
percent of the votes entitled to be cast by the then
12
outstanding Voting Shares, voting together as a single voting group,
shall be required to amend, alter, change or repeal any provision of
Article IV, Section 2 or 3 of this Article V or Section 1 of Article
VII.
3. In furtherance of, and not in limitation of, the powers
conferred by the VSCA, the Board of Directors is expressly authorized
and empowered to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that the Bylaws adopted by the Board of Directors
under the powers hereby conferred may be altered, amended or repealed
by the Board of Directors or by the shareholders having the requisite
voting power with respect thereto, provided further that, in the case
of any such action by shareholders, the affirmative vote of at least 80
percent of the votes entitled to be cast by the then outstanding Voting
Shares, voting together as a single voting group, shall be required in
order for the shareholders to amend, alter, change or repeal any
provision of the Bylaws or to adopt any additional Bylaw.
ARTICLE VI
1. Every person who is or was a director, officer or employee
of the Corporation, or who, at the request of the Corporation, serves
or has served in any such capacity with another corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise shall be indemnified by the Corporation against any and all
liability and reasonable expense that may be incurred by him in
connection with or resulting from any claim, action or proceeding
(whether brought in the right of the Corporation or any such other
corporation, entity, plan or otherwise), in which he may become
involved, as a party or otherwise, by reason of his being or having
been a director, officer or employee of the Corporation, or such other
corporation, entity or plan while serving at the request of the
Corporation, whether or not he continues to be such at the time such
liability or expense is incurred, unless such person engaged in willful
misconduct or a knowing violation of the criminal law.
As used in this Article VI: (a) the terms "liability" and
"expense" shall include, but shall not be limited to, counsel fees and
disbursements and amounts of judgments, fines or penalties against, and
amounts paid in settlement by, a director, officer or employee; (b) the
terms "director," "officer" and employee," unless the context otherwise
requires, include the estate or personal representative of any such
person; (c) a person is considered to be serving an employee benefit
plan as a director, officer or employee of the plan at the
Corporation's request if his duties to the Corporation also impose
duties on, or otherwise involve services by, him to the plan or, in
connection with the plan, to participants in or beneficiaries of the
plan; (d) the term "occurrence" means any act or failure to act, actual
or alleged, giving rise to a claim, action or proceeding; and (e)
service as a trustee or as a member of a management or similar
committee of a partnership, joint venture or limited liability company
shall be considered service as a director, officer or employee of the
trust, partnership, joint venture or limited liability company.
13
The termination of any claim, action or proceeding, civil or
criminal, by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that a
director, officer or employee did not meet the standards of conduct set
forth in this Section 1. The burden of proof shall be on the
Corporation to establish, by a preponderance of the evidence, that the
relevant standards of conduct set forth in this Section 1 have not been
met.
2. Any indemnification under Section 1 of this Article VI
shall be made unless (a) the Board of Directors, acting by a majority
vote of those directors who were directors at the time of the
occurrence giving rise to the claim, action or proceeding involved and
who are not at the time parties to such claim, action or proceeding
(provided there are at least two such directors), finds that the
director, officer or employee has not met the relevant standards of
conduct set forth in such Section 1, or (b) if there are not at least
two such directors, the Corporation's principal Virginia legal counsel,
as last designated by the Board of Directors as such prior to the time
of the occurrence giving rise to the claim, action or proceeding
involved, or in the event for any reason such Virginia counsel is
unwilling to so serve, then Virginia legal counsel mutually acceptable
to the Corporation and the person seeking indemnification, deliver to
the Corporation their written advice that, in their opinion, such
standards have not been met.
3. Expenses incurred with respect to any claim, action or
proceeding of the character described in Section 1 of this Article VI
shall, except as otherwise set forth in this Section 3, be advanced by
the Corporation prior to the final disposition thereof upon receipt of
an undertaking by or on behalf of the recipient to repay such amount if
it is ultimately determined that he is not entitled to indemnification
under this Article VI. No security shall be required for such
undertaking and such undertaking shall be accepted without reference to
the recipient's final ability to make repayment. Notwithstanding the
foregoing, the Corporation may refrain from, or suspend, payment of
expenses in advance if at any time before delivery of the final finding
described in Section 2 of this Article VI, the Board of Directors or
Virginia legal counsel, as the case may be, acting in accordance with
the procedures set forth in Section 2 of this Article VI, finds by a
preponderance of the evidence then available that the officer, director
or employee has not met the relevant standards of conduct set forth in
Section 1 of this Article VI.
4. No amendment or repeal of this Article VI shall adversely
affect or deny to any director, officer or employee the rights of
indemnification provided in this Article VI with respect to any
liability or expense arising out of a claim, action or proceeding based
in whole or substantial part on an occurrence the inception of which
takes place before or while this Article VI, as set forth in these
Articles of Incorporation, is in effect. The provisions of this Section
4 shall apply to any such claim, action or proceeding whenever
commenced, including any such claim, action or proceeding commenced
after any amendment or repeal of this Article VI.
5. The rights of indemnification provided in this Article VI
shall be in addition to any rights to which any such director, officer
or employee may otherwise be
14
entitled by contract or as a matter of law.
6. In any proceeding brought by or in the right of the
Corporation or brought by or on behalf of shareholders of the
Corporation, no director or officer of the Corporation shall be liable
to the Corporation or its shareholders for monetary damages with
respect to any transaction, occurrence or course of conduct, whether
prior or subsequent to the effective date of this Article VI, except
for liability resulting from such person's having engaged in willful
misconduct or a knowing violation of the criminal law or any federal or
state securities law.
ARTICLE VII
1. A special meeting of the shareholders for any purpose or
purposes, unless otherwise provided by law, may be called by order of
the Chairman of the Board, the President, the Board of Directors or, at
any time that Artal or any Artal Transferee owns at least 20 percent of
the then outstanding shares of Common Stock, by Artal or any such Artal
Transferee. For purposes of this Section 1, "Artal Transferee" shall
mean a transferee from Artal or any other Artal Transferee of at least
20 percent of the then outstanding shares of Common Stock that pursuant
to an instrument of transfer or related agreement has been granted
rights under this Section 1 by Artal or any Artal Transferee.
2. For such periods as the Corporation shall have fewer than
300 shareholders of record, any action required or permitted by the
VSCA to be taken at a shareholders' meeting may be taken without a
meeting and without prior notice, if the action is taken by the written
consent of shareholders who would be entitled to vote at a meeting of
holders of outstanding shares and who have voting power to cast not
less than the minimum number (or the applicable minimum numbers, in the
case of voting by groups) of votes that would be necessary to authorize
or take the action at a meeting at which all shareholders entitled to
vote thereon were present and voted.
3. As used in the Articles of Incorporation, the word "own"
shall mean "beneficially own" as determined pursuant to Rule 13d-3 (or
any successor provision thereto) under the Securities Exchange Act of
1934, as amended.
15
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
AMENDED AND RESTATED
BYLAWS
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1. PLACE OF MEETINGS.
Except as otherwise provided in the Articles of Incorporation
(hereinafter called the "Articles") of Weight Watchers International, Inc.
(hereinafter called the "Corporation"), all meetings of the shareholders of the
Corporation shall be held at such place, either within or without the
Commonwealth of Virginia, as may from time to time be fixed by the Board of
Directors of the Corporation (hereinafter called the "Board").
Section 1.2. ANNUAL MEETINGS.
The annual meeting of the shareholders of the Corporation for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held in each year on such day as may
be fixed by the Board, at such hour as may be specified in the notice thereof.
Section 1.3. NOTICE OF MEETINGS.
Except as otherwise provided by law or the Articles, not less than 10
nor more than 60 days' notice in writing of the place, day, hour and purpose or
purposes of each meeting of the shareholders, whether annual or special, shall
be given to each shareholder of record of the Corporation entitled to vote at
such meeting, either by the delivery thereof to such shareholder personally or
by the mailing thereof to such shareholder in a postage prepaid envelope
addressed to such shareholder at his address as it appears on the stock transfer
books of the Corporation. Notice of a shareholders' meeting to act on an
amendment of the Articles, a plan of merger or share exchange, a proposed sale
of all, or substantially all of the Corporation's assets, otherwise than in the
usual and regular course of business, or the dissolution of the Corporation
shall be given not less than 25 nor more than 60 days before the date of the
meeting and shall be accompanied, as appropriate, by a copy of the proposed
amendment, plan of merger or share exchange or sale agreement. Notice of any
meeting of shareholders shall not be required to be given to any shareholder who
shall attend the meeting in person or by proxy, unless attendance is for the
express purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened, or who shall waive notice thereof
in a writing signed by the
shareholder before, at or after such meeting. Notice of any adjourned meeting
need not be given, except when expressly required by law.
Section 1.4. QUORUM.
Shares representing a majority of the votes entitled to be cast on a
matter by all classes or series that are entitled to vote thereon and be counted
together collectively, represented in person or by proxy at any meeting of the
shareholders, shall constitute a quorum for the transaction of business thereat
with respect to such matter, unless otherwise provided by law or the Articles.
In the absence of a quorum at any such meeting or any adjournment or
adjournments thereof, the chairman of such meeting or the holder of shares
representing a majority of the votes cast on the matter of adjournment, either
in person or by proxy, may adjourn such meeting from time to time until a quorum
is obtained. At any such adjourned meeting at which a quorum has been obtained,
any business may be transacted that might have been transacted at the meeting as
originally called.
Section 1.5. ORGANIZATION AND ORDER OF BUSINESS.
At all meetings of the shareholders, the Chairman of the Board of
Directors or, in the chairman's absence, such director of the Corporation as
designated in writing by the Chairman of the Board of Directors shall act as
chairman. In the absence of all of the foregoing persons, or, if present, with
their consent, a majority of the shares entitled to vote at such meeting, may
appoint any person to act as chairman. The Secretary of the Corporation shall
act as secretary at all meetings of the shareholders. In the absence of the
Secretary, the chairman may appoint any person to act as secretary of the
meeting.
The chairman shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts and things as are
necessary or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the dismissal of business not
properly presented, the maintenance of order and safety, limitations on the time
allotted to questions or comments on the affairs of the Corporation,
restrictions on entry to such meeting after the time prescribed for the
commencement thereof and the opening and closing of the voting polls.
At each annual meeting of shareholders, only such business shall be
conducted as shall have been properly brought before the meeting (a) by or at
the direction of the Board or (b) by any shareholder of the Corporation who
shall be entitled to vote at such meeting and who complies with the notice
procedures set forth in this Section 1.5. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States certified mail, postage
prepaid, and received at the principal executive offices of the Corporation (i)
with respect to the Corporation's first annual meeting following the initial
public offering of shares of its common stock, not later than the close of
business on the tenth business day following the date on which notice of such
meeting is first given to shareholders, (ii) not less than 120 days nor more
than 150 days before the first anniversary of the date of the Corporation's
proxy statement in connection with the last annual meeting of shareholders or
(iii)
-2-
if no annual meeting was held in the previous year or the date of the applicable
annual meeting has been changed by more than 30 days from the date of the
previous year's annual meeting, not less than 60 days before the date of the
applicable annual meeting. A shareholder's notice to the Secretary shall set
forth as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting, including the complete text of any resolutions to be presented
at the annual meeting, and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
stock transfer books, of such shareholder proposing such business, (c) a
representation that such shareholder is a shareholder of record and intends to
appear in person or by proxy at such meeting to bring the business before the
meeting specified in the notice, (d) the class, series and number of shares of
stock of the Corporation beneficially owned by the shareholder and (e) any
material interest of the shareholder in such business. The Secretary of the
Corporation shall deliver each such shareholder's notice that has been timely
received to the Board or a committee designated by the Board for review.
Notwithstanding the foregoing, at any time that Artal Luxembourg S.A. ("Artal")
or a Majority Transferee owns a majority of the then outstanding shares of
common stock, no par value (the "Common Stock"), of the Corporation, notice by
Artal or a Majority Transferee shall be timely and complete if delivered in
writing or orally at any time prior to the annual meeting. Notwithstanding
anything in the Bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 1.5. The chairman of an annual meeting shall, if the facts warrant,
determine that the business was not brought before the meeting in accordance
with the procedures prescribed by this Section 1.5. If the chairman should so
determine, he shall so declare to the meeting and the business not properly
brought before the meeting shall not be transacted. Notwithstanding the
foregoing provisions of this Section 1.5, a shareholder seeking to have a
proposal included in the Corporation's proxy statement shall comply with the
requirements of Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including, but not limited to, Rule 14a-8 or its
successor provision. For purposes of these Bylaws, "Majority Transferee" shall
mean a transferee from Artal or any other Majority Transferee of a majority of
the then outstanding shares of Common Stock that pursuant to an instrument of
transfer or related agreement has been granted rights under such provision by
Artal or such transferring Majority Transferee. For purposes of these Bylaws,
the word "own" shall mean "beneficially own" as determined pursuant to Rule
13d-3 (or any successor provision thereto) under the Exchange Act.
Section 1.6. VOTING.
Unless otherwise provided by law or the Articles, at each meeting of
the shareholders each shareholder entitled to vote at such meeting may vote
either in person or by proxy in writing. Unless demanded by a shareholder
present in person or represented by proxy at any meeting of the shareholders and
entitled to vote thereon or so directed by the chairman of the meeting, the vote
on any matter need not be by ballot. On a vote by ballot, each ballot shall be
signed by the shareholder voting or his proxy, and it shall show the number of
shares voted.
Section 1.7. WRITTEN AUTHORIZATION.
A shareholder or a shareholder's duly authorized attorney-in-fact may
execute a writing authorizing another person or persons to act for him as proxy.
Execution may be accomplished
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by the shareholder or such shareholder's duly authorized attorney-in-fact or
authorized officer, director, employee or agent signing such writing or causing
such shareholder's signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile signature.
Section 1.8. ELECTRONIC AUTHORIZATION.
The Secretary may approve procedures to enable a shareholder or a
shareholder's duly authorized attorney-in-fact to authorize another person or
persons to act for him as proxy by transmitting or authorizing the transmission
of a telegram, cablegram, internet transmission, telephone transmission or other
means of electronic transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such transmission must either set
forth or be submitted with information from which the judges or inspectors of
election can determine that the transmission was authorized by the shareholder
or the shareholder's duly authorized attorney-in-fact. If it is determined that
such transmissions are valid, the judges or inspectors shall specify the
information upon which they relied. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission created pursuant to
this Section 1.8 may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
Section 1.9. JUDGES.
One or more judges or inspectors of election for any meeting of
shareholders may be appointed by the chairman of such meeting, for the purpose
of receiving and taking charge of proxies and ballots and deciding all questions
as to the qualification of voters, the validity of proxies and ballots and the
number of votes properly cast.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. GENERAL POWERS AND NUMBER.
The property, business and affairs of the Corporation shall be managed
under the direction of the Board as from time to time constituted. The Board
shall consist of seven directors, but the number of directors may be increased
to any number, not more than 15 directors as set forth in the Articles, or
decreased to any number, not fewer than three directors, by amendment of these
Bylaws, provided that no decrease in the number of directors shall shorten or
terminate the term of any incumbent director. No director need be a shareholder.
Section 2.2. NOMINATION AND ELECTION OF DIRECTORS.
At each annual meeting of shareholders, the shareholders entitled to
vote shall elect the directors. No person shall be eligible for election as a
director unless nominated in accordance with the procedures set forth in this
Section 2.2. Nominations of persons for election to the
-4-
Board may be made by the Board or any committee designated by the Board or by
any shareholder entitled to vote for the election of directors at the applicable
meeting of shareholders who complies with the notice procedures set forth in
this Section 2.2. Such nominations, other than those made by the Board or any
committee designated by the Board, may be made only if written notice of a
shareholder's intent to nominate one or more persons for election as directors
at the applicable meeting of shareholders has been given, either by personal
delivery or by United States certified mail, postage prepaid, to the secretary
of the Corporation and received (i) with respect to the Corporation's first
annual meeting following the initial public offering of shares of its common
stock, not later than the close of business on the tenth business day following
the date on which notice of such meeting is first given to shareholders, (ii)
not less than 120 days nor more than 150 days before the first anniversary of
the date of the Corporation's proxy statement in connection with the last annual
meeting of shareholders, (iii) if no annual meeting was held in the previous
year or the date of the applicable annual meeting has been changed by more than
30 days from the date of the previous year's annual meeting, not less than 60
days before the date of the applicable annual meeting, or (iv) with respect to
any special meeting of shareholders called for the election of directors, not
later than the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each such shareholder's
notice shall set forth (a) as to the shareholder giving the notice, (i) the name
and address, as they appear on the Corporation's stock transfer books, of such
shareholder, (ii) a representation that such shareholder is a shareholder of
record and intends to appear in person or by proxy at such meeting to nominate
the person or persons specified in the notice, (iii) the class and number of
shares of stock of the Corporation beneficially owned by such shareholder and
(iv) a description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such shareholder; and (b) as to each person whom the shareholder proposes to
nominate for election as a director, (i) the name, age, business address and, if
known, residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of stock of the
Corporation that are beneficially owned by such person, (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required by
the rules and regulations of the Securities and Exchange Commission promulgated
under the Exchange Act and (v) the written consent of such person to be named in
the proxy statement as a nominee and to serve as a director if elected. The
Secretary of the Corporation shall deliver each such shareholder's notice that
has been timely received to the Board or a committee designated by the Board for
review. Notwithstanding the foregoing, at any time that Artal or any Artal
Transferee owns a majority of the then outstanding Common Stock, notice by Artal
or any Artal Transferee shall be timely and complete if delivered in writing or
orally at least five business days prior to the date the Corporation mails its
proxy statement in connection with such meeting of shareholders. Any person
nominated for election as director by the Board or any committee designated by
the Board shall, upon the request of the Board or such committee, furnish to the
Secretary of the Corporation all such information pertaining to such person that
is required to be set forth in a shareholder's notice of nomination. The
chairman of the meeting of shareholders shall, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed by
this Section 2.2. If the chairman should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded. For purposes of
these Bylaws, "Artal Transferee" shall mean a transferee from Artal or any other
-5-
Artal Transferee that pursuant to a negotiated instrument of transfer or related
agreement has been granted rights by Artal or such transferring Artal Transferee
under the provisions of Article II of the Corporate Agreement, dated as of
November 5, 2001, between the Corporation and Artal.
Section 2.3. COMPENSATION.
Each director, in consideration of such director's serving as such,
shall be entitled to receive from the Corporation such amount per annum or such
fees for attendance at Board and Committee meetings, or both, in cash or other
property, including securities of the Corporation, as the Board shall from time
to time determine, together with reimbursements for the reasonable expenses
incurred by such director in connection with the performance of such director's
duties. Nothing contained herein shall preclude any director from serving the
Corporation, or any subsidiary or affiliated corporation, in any other capacity
and receiving proper compensation therefor. If the Board adopts a resolution to
that effect, any director may elect to defer all or any part of the annual and
other fees hereinabove referred to for such period and on such terms and
conditions as shall be permitted by such resolution.
Section 2.4. PLACE OF MEETINGS.
The Board may hold its meetings at such place or places within or
without the Commonwealth of Virginia as it may from time to time by resolution
determine or as shall be specified or fixed in the respective notices or waivers
of notice thereof.
Section 2.5. ORGANIZATIONAL MEETING.
As soon as practicable after each annual election of directors, the
newly constituted Board shall meet for the purposes of organization. At such
organizational meeting, the newly constituted Board shall elect officers of the
Corporation and transact such other business as shall come before the meeting.
Any organizational meeting may be held at any time or place designated by the
Board from time to time.
Section 2.6. REGULAR MEETINGS.
Regular meetings of the Board may be held at such time and place as may
from time to time be specified in a resolution adopted by the Board then in
effect, and, unless otherwise required by such resolution, or by law, notice of
any such regular meeting need not be given.
Section 2.7. SPECIAL MEETINGS.
Special meetings of the Board shall be held whenever called by the
Chairman of the Board of Directors or by the Secretary at the request of any two
or more of the directors then in office. Notice of a special meeting shall be
mailed to each director, addressed to him at his residence or usual place of
business, not later than the third day before the day on which such meeting is
to be held, or shall be sent addressed to him at such place by facsimile,
telegraph, cable or wireless, or be delivered personally or by telephone, not
later than the day before the day on which such meeting is to be held. Neither
the business to be transacted at, nor the
-6-
purpose of, any regular or special meeting of the Board need be specified in the
notice of such meeting, unless required by the Articles.
Section 2.8. QUORUM.
At each meeting of the Board the presence of a majority of the number
of directors fixed by these Bylaws shall be necessary to constitute a quorum.
The act of a majority of the directors present at a meeting at which a quorum
shall be present shall be the act of the Board, except as may be otherwise
provided by law or by these Bylaws. Any meeting of the Board may be adjourned by
a majority vote of the directors present at such meeting. Notice of any
adjourned meeting need not be given.
Section 2.9. WAIVERS OF NOTICE OF MEETINGS.
Notwithstanding anything in these Bylaws or in any resolution adopted
by the Board to the contrary, notice of any meeting of the Board need not be
given to any director if such notice shall be waived in writing signed by such
director before, at or after the meeting, or if such director shall be present
at the meeting. Any meeting of the Board shall be a legal meeting without any
notice having been given or regardless of the giving of any notice or the
adoption of any resolution in reference thereto, if every member of the Board
shall be present thereat. Except as otherwise provided by law or these Bylaws,
waivers of notice of any meeting of the Board need not contain any statement of
the purpose of the meeting.
Section 2.10. TELEPHONE MEETINGS.
Members of the Board or any committee may participate in a meeting of
the Board or such committee by means of a conference telephone or other means of
communication whereby all directors participating may simultaneously hear each
other during the meeting, and participation by such means shall constitute
presence in person at such meeting.
Section 2.11. ACTIONS WITHOUT MEETINGS.
Any action that may be taken at a meeting of the Board or of a
committee may be taken without a meeting if a consent in writing, setting forth
the action, shall be signed, either before or after such action, by all of the
directors or all of the members of the committee, as the case may be. Such
consent shall have the same force and effect as a unanimous vote.
Section 2.12. CREATION OF COMMITTEES.
In addition to the executive committee authorized by Article III of
these Bylaws, to the extent permitted by law, the Board may from time to time by
resolution adopted by a majority of the number of directors then in office
create such other committees of directors as the Board shall deem advisable and
with such limited authority, functions and duties as the Board shall by
resolution prescribe. The Board shall have the power to change the members of
any such committee at any time, to fill vacancies, and to discharge any such
committee, either with or without cause, at any time.
-7-
ARTICLE III
EXECUTIVE COMMITTEE
Section 3.1. HOW CONSTITUTED AND POWERS.
The Board, by resolution adopted pursuant to Article II, Section 2.12
hereof, may designate one or more directors to constitute an executive
committee, who shall serve at the pleasure of the Board. The executive
committee, to the extent provided in such resolution and permitted by law, shall
have and may exercise all of the authority of the Board.
Section 3.2. ORGANIZATION, ETC.
The executive committee may choose a chairman and secretary. The
executive committee shall keep a record of its acts and proceedings and report
the same from time to time to the Board.
Section 3.3. MEETINGS.
Meetings of the executive committee may be called by any member of the
committee. Notice of each such meeting, which need not specify the business to
be transacted thereat, shall be mailed to each member of the committee,
addressed to his or her residence or usual place of business, at least two days
before the day on which the meeting is to be held or shall be sent to such place
by telegraph, telex or telecopy or be delivered personally or by telephone, not
later than the day before the day on which the meeting is to be held.
Section 3.4. QUORUM AND MANNER OF ACTING.
A majority of the executive committee shall constitute a quorum for
transaction of business, and the act of a majority of those present at a meeting
at which a quorum is present shall be the act of the executive committee. The
members of the executive committee shall act only as a committee, and the
individual members shall have no powers as such.
Section 3.5. REMOVAL.
Any member of the executive committee may be removed, with or without
cause, at any time, by the Board.
Section 3.6. VACANCIES.
Any vacancy in the executive committee shall be filled by the Board.
ARTICLE IV
OFFICERS
Section 4.1. NUMBER, TERM, ELECTION.
The officers of the Corporation shall be a Chairman of the Board of
Directors, a President, a Secretary and a Treasurer. The Board may appoint such
other officers and such
-8-
assistant officers and agents with such powers and duties as the Board may find
necessary or convenient to carry on the business of the Corporation. Such
officers and assistant officers shall serve until their successors shall be
elected and qualify, or as otherwise provided in these Bylaws. Any two or more
offices may be held by the same person.
Section 4.2. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors shall, subject to the control of
the Board, have full authority and responsibility for directing the conduct of
the business, affairs and operations of the Corporation and shall preside at all
meetings of the Board and of the shareholders. The Chairman of the Board of
Directors shall perform such other duties and exercise such other powers as may
from time to time be prescribed by the Board.
Section 4.3. PRESIDENT.
The President shall be the chief operating officer of the Corporation
and shall have such powers and perform such duties as may from time to time be
prescribed by the Board or by the Chairman of the Board of Directors. The
President may sign and execute in the name of the Corporation deeds, contracts
and other instruments, except in cases where the signing and the execution
thereof shall be expressly delegated by the Board or by these Bylaws to some
other officer or agent of the Corporation or shall be required by law otherwise
to be signed or executed.
Section 4.4. VICE PRESIDENTS.
Each Vice President, if any, shall have such powers and perform such
duties as may from time to time be prescribed by the Board, the Chairman of the
Board of Directors, the President or any officer to whom the Chairman of the
Board of Directors or the President may have delegated such authority. Any Vice
President of the Corporation may sign and execute in the name of the Corporation
deeds, contracts and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by these Bylaws
to some other officer or agent of the Corporation or shall be required by law
otherwise to be signed or executed.
Section 4.5. TREASURER.
The Treasurer shall have such powers and perform such duties as may
from time to time be prescribed by the Board, the Chairman of the Board of
Directors, the President or any officer to whom the Chairman of the Board of
Directors or the President may have delegated such authority. If the Board shall
so determine, the Treasurer shall give a bond for the faithful performance of
the duties of the office of the Treasurer, in such sum as the Board may
determine to be proper, the expense of which shall be borne by the Corporation.
To such extent as the Board shall deem proper, the duties of the Treasurer may
be performed by one or more assistants, to be appointed by the Board.
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Section 4.6. SECRETARY.
The Secretary shall keep the minutes of meetings of shareholders, of
the Board, and, when requested, of committees of the Board, and shall attend to
the giving and serving of notices of all meetings thereof. The Secretary shall
keep or cause to be kept such stock transfer and other books, showing the names
of the shareholders of the Corporation, and all other particulars regarding
them, as may be required by law. The Secretary shall also perform such other
duties and exercise such other powers as may from time to time be prescribed by
the Board, the Chairman of the Board of Directors, the President or any officer
to whom the Chairman of the Board of Directors or the President may have
delegated such authority. To such extent as the Board shall deem proper, the
duties of the Secretary may be performed by one or more assistants, to be
appointed by the Board.
ARTICLE V
REMOVALS AND RESIGNATIONS
Section 5.1. REMOVAL OF OFFICERS.
Any officer, assistant officer or agent of the Corporation may be
removed at any time, either with or without cause, by the Board in its absolute
discretion. Any officer or agent appointed otherwise than by the Board of
Directors may be removed at any time, either with or without cause, by any
officer having authority to appoint such an officer or agent, except as may be
otherwise provided in these Bylaws. Any such removal shall be without prejudice
to the recovery of damages for breach of the contract rights, if any, of the
officer, assistant officer or agent removed. Election or appointment of an
officer, assistant officer or agent shall not of itself create contract rights.
Section 5.2. RESIGNATION.
Any director, officer or assistant officer of the Corporation may
resign as such at any time by giving written notice of his resignation to the
Board, the Chairman of the Board of Directors or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, at the time of delivery thereof, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5.3. VACANCIES.
Any vacancy in the office of any officer or assistant officer caused by
death, resignation, removal or any other cause, may be filled by the Board for
the unexpired portion of the term.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC.
Section 6.1. EXECUTION OF CONTRACTS.
Except as otherwise provided by law or by these Bylaws, the Board (i)
may authorize any officer, employee or agent of the Corporation to execute and
deliver any contract, agreement or
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other instrument in writing in the name and on behalf of the Corporation, and
(ii) may authorize any officer, employee or agent of the Corporation so
authorized by the Board to delegate such authority by written instrument to
other officers, employees or agents of the Corporation. Any such authorization
by the Board may be general or specific and shall be subject to such limitations
and restrictions as may be imposed by the Board. Any such delegation of
authority by an officer, employee or agent may be general or specific, may
authorize re-delegation, and shall be subject to such limitations and
restrictions as may be imposed in the written instrument of delegation by the
person making such delegation.
Section 6.2. LOANS.
No loans shall be contracted on behalf of the Corporation and no
negotiable paper shall be issued in its name unless authorized by the Board.
When authorized by the Board, any officer, employee or agent of the Corporation
may effect loans and advances at any time for the Corporation from any bank,
trust company or other institution, or from any firm, corporation or individual,
and for such loans and advances may make, execute and deliver promissory notes,
bonds or other certificates or evidences of indebtedness of the Corporation and
when so authorized may pledge, hypothecate or transfer any securities or other
property of the Corporation as security for any such loans or advances. Such
authority may be general or confined to specific instances.
Section 6.3. CHECKS, DRAFTS, ETC..
All checks, drafts and other orders for the payment of money out of the
funds of the Corporation and all notes or other evidences of indebtedness of the
Corporation shall be signed on behalf of the Corporation in such manner as shall
from time to time be determined by the Board.
Section 6.4. DEPOSITS.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board may select or as may be selected by
the Treasurer or any other officer, employee or agent of the Corporation to whom
such power may from time to time be delegated by the Board.
Section 6.5. VOTING OF SECURITIES.
Unless otherwise provided by the Board, the President may from time to
time appoint an attorney or attorneys, or agent or agents of the Corporation, in
the name and on behalf of the Corporation, to cast the votes that the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation or other entity, any of whose stock or other securities
may be held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation or other entity, or to consent in writing,
in the name of the Corporation as such holder, to any action by such other
corporation or other entity, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and may execute
or cause to be executed in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, all such written proxies or other instruments
as such officer may deem necessary or proper in the premises.
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ARTICLE VII
CAPITAL STOCK
Section 7.1. SHARES.
Shares of the Corporation may but need not be represented by
certificates.
When shares are represented by certificates, the Corporation shall
issue such certificates in such form as shall be required by the Virginia Stock
Corporation Act (the "VSCA") and as determined by the Board, to every
shareholder for the fully paid shares owned by such shareholder. Each
certificate shall be signed by, or shall bear the facsimile signature of, the
Chairman of the Board of Directors or the President and the Secretary or an
Assistant Secretary of the Corporation and may bear the corporate seal of the
Corporation or its facsimile. All certificates for the Corporation's shares
shall be consecutively numbered or otherwise identified.
The name and address of the person to whom shares (whether or not
represented by a certificate) are issued, with the number of shares and date of
issue, shall be entered on the share transfer books of the Corporation. Such
information may be stored or retained on discs, tapes, cards or any other
approved storage device relating to data processing equipment; provided that
such device is capable of reproducing all information contained therein in
legible and understandable form, for inspection by shareholders or for any other
corporate purpose.
When shares are not represented by certificates, then within a
reasonable time after the issuance or transfer of such shares, the Corporation
shall send the shareholder to whom such shares have been issued or transferred a
written statement of the information required by the VSCA to be included on
certificates.
Section 7.2. STOCK TRANSFER BOOKS AND TRANSFER OF SHARES.
The Corporation, or its designated transfer agent or other agent, shall
keep a book or set of books to be known as the stock transfer books of the
Corporation, containing the name of each shareholder of record, together with
such shareholder's address and the number and class or series of shares held by
such shareholder. Shares of stock of the Corporation shall be transferable on
the stock books of the Corporation by the holder in person or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary or the transfer agent, but, except as hereinafter provided in the case
of loss, destruction or mutilation of certificates, no transfer of stock shall
be entered until the previous certificate, if any, given for the same shall have
been surrendered and canceled. Transfer of shares of the Corporation represented
by certificates shall be made on the stock transfer books of the Corporation
only upon surrender of the certificates for the shares sought to be transferred
by the holder of record thereof or by such holder's duly authorized agent,
transferee or legal representative, who shall furnish proper evidence of
authority to transfer with the Secretary of the Corporation or its designated
transfer agent or other agent. All certificates surrendered for transfer shall
be canceled before new certificates for the transferred shares shall be issued.
Except as otherwise provided by law, no transfer of shares shall be valid as
against the Corporation, its shareholders or creditors, for any purpose, until
it shall have been entered in the stock records of the Corporation by an entry
showing from and to whom transferred.
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Section 7.3. HOLDER OF RECORD.
Except as otherwise required by the VSCA, the Corporation may treat the
person in whose name shares of stock of the Corporation (whether or not
represented by a certificate) stand of record on its books or the books of any
transfer agent or other agent designated by the Board as the absolute owner of
the shares and the person exclusively entitled to receive notification and
distributions, to vote, and to otherwise exercise the rights, powers and
privileges of ownership of such shares.
Section 7.4. RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board may fix in advance a date
as the record date for any such determination of shareholders, such date in any
case to be not more than 70 days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof unless the Board fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
Section 7.5. LOST, DESTROYED OR MUTILATED CERTIFICATES.
In case of loss, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, destruction or
mutilation and upon the giving of a bond of indemnity to the Corporation in such
form and in such sum as the Board may direct; provided that a new certificate
may be issued without requiring any bond when, in the judgment of the Board, it
is proper so to do.
Section 7.6. TRANSFER AGENT AND REGISTRAR; REGULATIONS.
The Corporation may, if and whenever the Board so determines, maintain
in the Commonwealth of Virginia or any other state of the United States, one or
more transfer offices or agencies and also one or more registry offices which
offices and agencies may establish rules and regulations for the issue, transfer
and registration of certificates. No certificates for shares of stock of the
Corporation in respect of which a transfer agent and registrar shall have been
designated shall be valid unless countersigned by such transfer agent and
registered by such registrar. The Board may also make such additional rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of shares represented by certificates and shares without
certificates.
ARTICLE VIII
SEAL
The seal of the Corporation shall be a flat-face circular die, of which
there may be any number of counterparts of facsimiles, in such form as the Board
of Directors shall from time to time adopt as the corporate seal of the
Corporation.
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EMERGENCY BYLAWS
Section 1. DEFINITIONS.
As used in these Emergency Bylaws, (a) the term "period of emergency"
shall mean any period during which a quorum of the Board cannot readily be
assembled because of some catastrophic event.
(b) the term "incapacitated" shall mean that the individual to whom
such term is applied shall not have been determined to be dead but shall be
missing or unable to discharge the responsibilities of his office; and
(c) the term "senior officer" shall mean the Chairman of the Board of
Directors, the President, any Vice President, the Treasurer and the Secretary,
and any other person who may have been so designated by the Board before the
emergency.
Section 2. APPLICABILITY.
These Emergency Bylaws, as from time to time amended, shall be
operative only during any period of emergency. To the extent not inconsistent
with these Emergency Bylaws, all provisions of the regular Bylaws of the
Corporation shall remain in effect during any period of emergency.
No officer, director or employee shall be liable for actions taken in
good faith in accordance with these Emergency Bylaws.
Section 3. BOARD OF DIRECTORS.
(a) A meeting of the Board may be called by any director or senior
officer of the Corporation. Notice of any meeting of the Board need be given
only to such of the directors as it may be feasible to reach at the time and by
such means as may be feasible at the time, including publication or radio, and
at a time less than twenty-four hours before the meeting if deemed necessary by
the person giving notice.
(b) At any meeting of the Board, three directors in attendance shall
constitute a quorum. Any act of a majority of the directors present at a meeting
at which a quorum shall be present shall be the act of the Board. If less than
three directors should be present at a meeting of the Board, any senior officer
of the Corporation in attendance at such meeting shall serve as a director for
such meeting, selected in order of rank and within the same rank in order of
seniority.
(c) In addition to the Board's powers under the regular Bylaws of the
Corporation to fill vacancies on the Board, the Board may elect any individual
as a director to replace any director who may be incapacitated to serve until
the latter ceases to be incapacitated or until the termination of the period of
emergency, whichever first occurs. In considering officers of the Corporation
for election to the Board, the rank and seniority of individual officers shall
not be pertinent.
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(d) The Board, during as well as before any such emergency, may change
the principal office or designate several alternative offices or authorize the
officers to do so.
Section 4. APPOINTMENT OF OFFICERS.
In addition to the Board's powers under the regular Bylaws of the
Corporation with respect to the election of officers, the Board may elect any
individual as an officer to replace any officer who may be incapacitated to
serve until the latter ceases to be incapacitated.
Section 5. AMENDMENTS.
These Emergency Bylaws shall be subject to repeal or change by further
action of the Board or by action of the shareholders, except that no such repeal
or change shall modify the provisions of the second paragraph of Section 2 with
regard to action or inaction prior to the time of such repeal or change. Any
such amendment of these Emergency Bylaws may make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.
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Exhibit 3.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION, AS AMENDED AND RESTATED,
OF
WEIGHT WATCHERS INTERNATIONAL, INC.
TO CREATE A NEW SERIES OF PREFERRED STOCK
DESIGNATED AS
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
PURSUANT TO SECTION 13.1-639 OF THE VIRGINIA STOCK CORPORATION ACT
I.
The name of the corporation is Weight Watchers International, Inc. (the
"Corporation").
II.
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act and
the authority conferred upon the Board of Directors by the Articles of
Incorporation of the Corporation, as amended and restated (the "Articles of
Incorporation"), the Articles of Incorporation are hereby amended to create a
new series of shares of Preferred Stock, no par value, designated as "Series B
Junior Participating Preferred Stock," by adding the following additional Part E
after the last paragraph of Article III:
E. SERIES B JUNIOR PARTICIPATING PREFERRED STOCK. There is hereby established a
series of the Corporation's authorized Preferred Stock, to be designated and to
have the relative rights, preferences and limitations, insofar as not already
fixed by any other provision of the Articles of Incorporation, as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series B Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 10,000,000.
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series B Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series B Junior Participating Preferred Stock shall be
entitled to receive, in preference to the holders of Common Stock and any other
stock of the Company ranking junior to the Series B Junior Participating
Preferred Stock, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
fifteenth day of January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series B Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $0.01
or (b) subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash
dividends plus 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Junior Participating Preferred Stock. In the
event the Corporation shall at any time after November 19, 2001 (the "Rights
Declaration Date"), (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series B Junior Participating
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) The Corporation shall declare a dividend or distribution on the
Series B Junior Participating Preferred Stock immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $0.01 per share on the Series B Junior Participating
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
B Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series B Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events, such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series B Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series B Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series B Junior
Participating Preferred Stock shall have the following voting rights:
2
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series B Junior Participating Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (x) declare any dividend on Common Stock
payable in shares of Common Stock, (y) subdivide the outstanding Common Stock or
(z) combine the outstanding Common Stock into a smaller number of shares, then
in each such case the number of votes per share to which holders of shares of
Series B Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series B Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(i) If at any time dividends on any Series B Junior
Participating Preferred Stock shall be in arrears in an amount equal to
six quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "Default Period") that
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series B Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each Default Period, all holders of Preferred Stock (including
holders of the Series B Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right
to elect two directors.
(ii) During any Default Period, such voting right of the holders
of Series B Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to Section 3(b)(iii) of
this Part E or at any annual meeting of shareholders, and thereafter at
annual meetings of shareholders, provided that neither such voting right
nor the right of the holders of any other series of Preferred Stock, if
any, to increase, in certain cases, the authorized number of directors
shall be exercised unless the holders of ten percent in number of shares
of Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall exercise such voting
right initially during an existing Default Period, they shall have the
right, voting as a class, to elect directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two directors or,
if such right is exercised at an annual meeting, to elect two directors.
If the number that may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of directors as shall
be necessary to permit the election by them of the required number. After
the holders of the Preferred Stock shall have exercised their right to
elect directors in any Default
3
Period and during the continuance of such period, the number of directors
shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or PARI PASSU with the Series B Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing Default Period, have previously exercised their right to elect
directors, the Board of Directors may order, or any shareholder or
shareholders owning in the aggregate not less than ten percent of the
total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the President,
a Vice President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this Section 3(b)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to
him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20
days and not later than 60 days after such order or request or in default
of the calling of such meeting within 60 days after such order or request.
Such meeting may be called on similar notice by any shareholder or
shareholders owning in the aggregate not less than ten percent of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Section 3(b)(iii), no such special meeting shall be
called during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the shareholders.
(iv) In any Default Period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to
be entitled to elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect two directors
voting as a class, after the exercise of which right (X) the directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the Default Period, and (Y) any vacancy in the Board of
Directors may (except as provided in Section 3(b)(iii) of this Part E
above) be filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class of stock that elected the
director whose office shall have become vacant. References in Section 3 of
this Part E to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies
as provided in clause (Y) of the foregoing sentence.
(v) Immediately upon the expiration of a Default Period, (X) the
right of the holders of Preferred Stock as a class to elect directors
shall cease, (Y) the term of any directors elected by the holders of
Preferred Stock as a class shall terminate and (Z) the number of directors
shall be such number as may be provided for in the Articles of
Incorporation or the Bylaws, as amended and restated, irrespective of any
increase made pursuant to the provisions of Section 3(b)(i) of this Part E
(such number being subject, however, to change thereafter in any manner
provided by law or in the Articles of Incorporation or the Bylaws, as
4
amended and restated). Any vacancies in the Board of Directors effected by
the provisions of clauses (Y) and (Z) in the preceding sentence may be
filled by a majority of the remaining directors.
(c) Except as set forth herein or as otherwise provided by law,
holders of Series B Junior Participating Preferred Stock shall have no special
voting rights, and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Junior Participating Preferred Stock as provided in
Section 2 of this Part E above are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of
Series B Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B Junior
Participating Preferred Stock, except dividends paid ratably on the
Series B Junior Participating Preferred Stock and all such parity stock
on which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series B Junior Participating Preferred Stock or
rights, warrants or options to acquire such junior stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series B Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series B Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
5
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Section 4(a) of
this Part E, purchase or otherwise acquire such shares at such time and in such
manner.
5. REACQUIRED SHARES. Any shares of Series B Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued by the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and in applicable law.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series B Junior Participating
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series B Liquidation Preference"). Following
the payment of the full amount of the Series B Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series B
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series B
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
Section 6(c) of this Part E below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock) (such number
in clause (ii), the "Adjustment Number"). Following the payment of the full
amount of the Series B Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series B Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series B Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to one with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series B Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of the Series
B Junior Participating Preferred Stock and such parity shares in proportion to
their respective liquidation preferences. In the event, however, that there are
not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a
6
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, statutory share exchange or other transaction in
which the shares of Common Stock are converted into, exchanged for or changed
into other stock or securities, cash and/or any other property, then in any such
case the shares of Series B Junior Participating Preferred Stock shall at the
same time be similarly converted into, exchanged for or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the conversion, exchange or change of shares of Series
B Junior Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
8. NO REDEMPTION. The shares of Series B Junior Participating Preferred
Stock shall not be redeemable.
9. RANKING. The Series B Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such other series shall provide otherwise.
10. AMENDMENT. At any time when any shares of Series B Junior
Participating Preferred Stock are outstanding, the Articles of Incorporation, as
amended and restated, and as amended hereby, shall not be amended in any manner
that would materially alter or change the powers, preferences or special rights
of the Series B Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Series B Junior Participating Preferred Stock,
voting separately as a class.
11. FRACTIONAL SHARES. Series B Junior Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series B Junior Participating Preferred Stock.
7
III.
The foregoing amendment was duly adopted by the Corporation's Board of
Directors on November 14, 2001. No shareholder action was required.
[Signature page follows.]
8
WEIGHT WATCHERS INTERNATIONAL, INC.
Dated: January __, 2002 By:
---------------------------------------
Robert W. Hollweg
Vice President, General Counsel and
Secretary
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9
Exhibit 10.1
[EXECUTION COPY]
SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of December 21, 2001
(amending and restating the Amended and Restated
Credit Agreement, dated as of January 16, 2001)
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, and
FORTIS (USA) FINANCE LLC,
as the Documentation Agents, and
THE BANK OF NOVA SCOTIA,
as the Administrative Agent,
a Lead Arranger and a Book Manager.
TABLE OF CONTENTS
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PAGE
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ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...........................................................3
SECTION 1.1. Defined Terms................................................................3
SECTION 1.2. Use of Defined Terms........................................................33
SECTION 1.3. Cross-References............................................................33
SECTION 1.4. Accounting and Financial Determinations.....................................33
SECTION 1.5. Currency Conversions........................................................33
ARTICLE II CONTINUATION OF CERTAIN EXISTING LOANS,
COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES, LETTERS OF CREDIT AND
ADDITIONAL TLC PROVISIONS.................................................................34
SECTION 2.1. Loan Commitments............................................................34
SECTION 2.1.1. Continuation of Existing Term Loans; Term Loan Commitments..........34
SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment............34
SECTION 2.1.3. Letter of Credit Commitment.........................................35
SECTION 2.1.4. Lenders Not Permitted or Required to Make Loans.....................35
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit.........36
SECTION 2.1.6. Designated Additional Loans.........................................36
SECTION 2.2. Reduction of the Commitment Amounts.........................................37
SECTION 2.2.1. Optional............................................................37
SECTION 2.2.2. Mandatory...........................................................37
SECTION 2.3. Borrowing Procedures and Funding Maintenance................................37
SECTION 2.3.1. Term Loans and Revolving Loans......................................37
SECTION 2.3.2. Swing Line Loans....................................................38
SECTION 2.4. Continuation and Conversion Elections.......................................39
SECTION 2.5. Funding.....................................................................40
SECTION 2.6. Issuance Procedures.........................................................40
SECTION 2.6.1. Other Lenders' Participation........................................41
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans........................41
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SECTION 2.6.3. Reimbursement.......................................................42
SECTION 2.6.4. Deemed Disbursements................................................42
SECTION 2.6.5. Nature of Reimbursement Obligations.................................43
SECTION 2.7. Notes.......................................................................43
SECTION 2.8. Registered Notes............................................................44
SECTION 2.9. Additional TLC Facility.....................................................44
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES................................................44
SECTION 3.1. Repayments and Prepayments; Application.....................................44
SECTION 3.1.1. Repayments and Prepayments..........................................44
SECTION 3.1.2. Application.........................................................48
SECTION 3.2. Interest Provisions.........................................................48
SECTION 3.2.1. Rates...............................................................48
SECTION 3.2.2. Post-Maturity Rates.................................................49
SECTION 3.2.3. Payment Dates.......................................................49
SECTION 3.3. Fees........................................................................50
SECTION 3.3.1. Commitment Fee......................................................50
SECTION 3.3.2. Administrative Agent's Fee..........................................50
SECTION 3.3.3. Letter of Credit Fee................................................50
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS....................................................51
SECTION 4.1. LIBO Rate Lending Unlawful..................................................51
SECTION 4.2. Deposits Unavailable........................................................51
SECTION 4.3. Increased LIBO Rate Loan Costs, etc.........................................51
SECTION 4.4. Funding Losses..............................................................52
SECTION 4.5. Increased Capital Costs.....................................................52
SECTION 4.6. Taxes.......................................................................53
SECTION 4.7. Payments, Computations, etc.................................................55
SECTION 4.8. Sharing of Payments.........................................................55
SECTION 4.9. Setoff......................................................................56
SECTION 4.10. Mitigation..................................................................56
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ARTICLE V CONDITIONS TO EFFECTIVENESS AND TO FUTURE CREDIT EXTENSIONS...............................57
SECTION 5.1. Conditions Precedent to the Effectiveness of This Agreement and
Making of Credit Extensions.................................................57
SECTION 5.2. All Credit Extensions.......................................................57
SECTION 5.2.1. Compliance with Warranties, No Default, etc.........................57
SECTION 5.2.2. Credit Extension Request............................................57
SECTION 5.2.3. Satisfactory Legal Form.............................................57
ARTICLE VI REPRESENTATIONS AND WARRANTIES............................................................58
SECTION 6.1. Organization, etc...........................................................58
SECTION 6.2. Due Authorization, Non-Contravention, etc...................................58
SECTION 6.3. Government Approval, Regulation, etc........................................58
SECTION 6.4. Validity, etc...............................................................59
SECTION 6.5. Financial Information.......................................................59
SECTION 6.6. No Material Adverse Change..................................................59
SECTION 6.7. Litigation, Labor Controversies, etc........................................59
SECTION 6.8. Subsidiaries................................................................59
SECTION 6.9. Ownership of Properties.....................................................60
SECTION 6.10. Taxes.......................................................................60
SECTION 6.11. Pension and Welfare Plans...................................................60
SECTION 6.12. Environmental Warranties....................................................60
SECTION 6.13. Regulations U and X.........................................................61
SECTION 6.14. Accuracy of Information.....................................................61
SECTION 6.15. Seniority of Obligations, etc...............................................62
SECTION 6.16. Solvency....................................................................62
ARTICLE VII COVENANTS.................................................................................63
SECTION 7.1. Affirmative Covenants.......................................................63
SECTION 7.1.1. Financial Information, Reports, Notices, etc........................63
SECTION 7.1.2. Compliance with Laws, etc...........................................64
SECTION 7.1.3. Maintenance of Properties...........................................65
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SECTION 7.1.4. Insurance...........................................................65
SECTION 7.1.5. Books and Records...................................................65
SECTION 7.1.6. Environmental Covenant..............................................66
SECTION 7.1.7. Future Subsidiaries.................................................66
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property............................................................67
SECTION 7.1.9. Use of Proceeds, etc................................................68
SECTION 7.2. Negative Covenants..........................................................68
SECTION 7.2.1. Business Activities.................................................68
SECTION 7.2.2. Indebtedness........................................................68
SECTION 7.2.3. Liens...............................................................70
SECTION 7.2.4. Financial Condition.................................................71
SECTION 7.2.5. Investments.........................................................71
SECTION 7.2.6. Restricted Payments, etc............................................73
SECTION 7.2.7. Capital Expenditures, etc...........................................74
SECTION 7.2.8. Consolidation, Merger, etc..........................................75
SECTION 7.2.9. Asset Dispositions, etc.............................................75
SECTION 7.2.10. Modification of Certain Agreements..................................76
SECTION 7.2.11. Transactions with Affiliates........................................77
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc.......................77
SECTION 7.2.13. Stock of Subsidiaries...............................................78
SECTION 7.2.14. Sale and Leaseback..................................................78
SECTION 7.2.15. Fiscal Year.........................................................78
SECTION 7.2.16. Designation of Senior Indebtedness..................................78
SECTION 7.3. Maintenance of Separate Existence...........................................78
ARTICLE VIII GUARANTY..................................................................................81
SECTION 8.1. The Guaranty................................................................81
SECTION 8.2. Guaranty Unconditional......................................................81
SECTION 8.3. Reinstatement in Certain Circumstances......................................82
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SECTION 8.4. Waiver......................................................................82
SECTION 8.5. Postponement of Subrogation, etc............................................82
SECTION 8.6. Stay of Acceleration........................................................83
ARTICLE IX EVENTS OF DEFAULT.........................................................................83
SECTION 9.1. Listing of Events of Default................................................83
SECTION 9.1.1. Non-Payment of Obligations..........................................83
SECTION 9.1.2. Breach of Warranty..................................................83
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations................84
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations..................84
SECTION 9.1.5. Default on Other Indebtedness.......................................84
SECTION 9.1.6. Judgments...........................................................84
SECTION 9.1.7. Pension Plans.......................................................84
SECTION 9.1.8. Change in Control...................................................84
SECTION 9.1.9. Bankruptcy, Insolvency, etc.........................................85
SECTION 9.1.10. Impairment of Security, etc.........................................85
SECTION 9.1.11. Senior Subordinated Notes...........................................86
SECTION 9.1.12. Redemption..........................................................86
SECTION 9.2. Action if Bankruptcy, etc...................................................86
SECTION 9.3. Action if Other Event of Default............................................86
ARTICLE X THE AGENTS................................................................................87
SECTION 10.1. Actions.....................................................................87
SECTION 10.2. Funding Reliance, etc.......................................................87
SECTION 10.3. Exculpation.................................................................88
SECTION 10.4. Successor...................................................................88
SECTION 10.5. Credit Extensions by each Agent.............................................89
SECTION 10.6. Credit Decisions............................................................89
SECTION 10.7. Copies, etc.................................................................89
SECTION 10.8. Reliance by the Administrative Agent........................................89
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SECTION 10.9. Defaults....................................................................90
ARTICLE XI MISCELLANEOUS PROVISIONS..................................................................90
SECTION 11.1. Waivers, Amendments, etc....................................................90
SECTION 11.2. Notices.....................................................................91
SECTION 11.3. Payment of Costs and Expenses...............................................91
SECTION 11.4. Indemnification.............................................................92
SECTION 11.5. Survival....................................................................93
SECTION 11.6. Severability................................................................94
SECTION 11.7. Headings....................................................................94
SECTION 11.8. Execution in Counterparts...................................................94
SECTION 11.9. Governing Law; Entire Agreement.............................................94
SECTION 11.10. Successors and Assigns......................................................94
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in Loans, Notes
and Additional TLCs.........................................................95
SECTION 11.11.1. Assignments.........................................................95
SECTION 11.11.2. Participations......................................................97
SECTION 11.11.3. Register............................................................99
SECTION 11.12. Other Transactions..........................................................99
SECTION 11.13. Forum Selection and Consent to Jurisdiction................................100
SECTION 11.14. Waiver of Jury Trial.......................................................100
SECTION 11.15. Confidentiality............................................................101
SECTION 11.16. Judgment Currency..........................................................101
SECTION 11.17. Release of Security Interests..............................................101
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SCHEDULE I - Disclosure Schedule
SCHEDULE II - Commitments and Percentages
SCHEDULE III - Notice Information, Domestic Offices and LIBOR Offices
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Swing Line Note
EXHIBIT A-3 - Form of Term A Note
EXHIBIT A-4 - Form of Additional TLC
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EXHIBIT A-5 - Form of Additional Term B 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 Additional TLC Purchase Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Lender Assignment Agreement
EXHIBIT E - Form of Compliance Certificate
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December
21, 2001 (amending and restating the Credit Agreement dated as of January 16,
2001), 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 and FORTIS (USA) FINANCE LLC, as the documentation
agents (in such capacity, the "DOCUMENTATION AGENTS") and THE BANK OF NOVA
SCOTIA ("SCOTIABANK"), as (x) the administrative agent, paying agent and
registration agent for the Additional TLCs (as defined below) and (y) a lead
arranger (in such capacities, the "ADMINISTRATIVE AGENT" and a "LEAD ARRANGER",
respectively) and as Issuer (as defined below) for the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Amended and Restated Credit Agreement, dated
as of January 16, 2001 (as amended prior to the date hereof, the "EXISTING
CREDIT AGREEMENT"), among the Borrowers, certain financial institutions and
other Persons from time to time party thereto (the "EXISTING LENDERS") and the
Agents, the Existing Lenders committed to make extensions of credit to the
Borrowers on the terms and conditions set forth therein and
(a) made term A loans (the "EXISTING TERM A LOANS"), term B
loans (the "EXISTING TERM B Loans"), term D loans (the "EXISTING TERM D
LOANS", together with the Existing Term A Loans and the Existing Term B
Loans, the "EXISTING TERM LOANS"), TLC facilities (the "EXISTING
TLCS"), revolving loans (the "EXISTING REVOLVING LOANS"), swing line
loans (the "EXISTING SWING LINE LOANS", and collectively with the
Existing Term Loans, the Existing TLCs and the Existing Revolving
Loans, the "EXISTING LOANS") to the Borrowers and
(b) issued or participated in letters of credit (the "EXISTING
LETTERS OF CREDIT") for the account of WWI;
WHEREAS, in connection with the ongoing working capital and general
corporate needs of the Borrowers, the Borrowers desire to, among other things,
continue the Existing Loans (other than the Existing Term B Loans, Existing TLCs
and Existing Term D Loans) as Loans under this Agreement, to continue the
Existing Letters of Credit as Letters of Credit under this Agreement and
maintain and obtain the Commitments to make Credit Extensions set forth herein;
WHEREAS, the Borrowers have requested that the Existing Credit
Agreement be amended and restated in its entirety to become effective and
binding on the Borrowers pursuant to the terms of this Agreement and Amendment
No.3 (the "AMENDMENT AGREEMENT") to the Existing Credit Agreement of even date
herewith, and the Lenders (including the Existing Lenders) have agreed (subject
to the terms of this Agreement) to amend and restate the Existing
Credit Agreement in its entirety to read as set forth in this Agreement, and it
has been agreed by the parties to the Existing Credit Agreement that (a) the
commitments which the Existing Lenders have agreed to extend to the Borrowers
under the Existing Credit Agreement shall be extended or advanced upon the
amended and restated terms and conditions contained in this Agreement, and (b)
the Existing Revolving Loans, the Existing Letters of Credit, Existing Swing
Line Loans, Existing Term A Loans and other Obligations (as defined in the
Existing Credit Agreement) outstanding under the Existing Credit Agreement
(other than the Existing Term B Loans, Existing TLCs and Existing Term D Loans)
shall be governed by and deemed to be outstanding under the amended and restated
terms and conditions contained in this Agreement, with the intent that the terms
of this Agreement shall supersede the terms of the Existing Credit Agreement
(each of which shall hereafter have no further effect upon the parties thereto,
other than as referenced herein and other than for accrued fees and expenses,
and indemnification provisions, accrued and owing under the terms of the
Existing Credit Agreement on or prior to the date hereof or arising (in the case
of an indemnification) under the terms of the Existing Credit Agreement, in each
case to the extent provided for in the Existing Credit Agreement); PROVIDED,
that any Rate Protection Agreements with any one or more Existing Lenders (or
their respective Affiliates) shall continue unamended and in full force and
effect;
WHEREAS, the Borrowers desire to obtain or continue the following
financing facilities from the Lenders as set forth below:
(a) the Existing Term A Loans shall continue to remain outstanding as
Term A Loans hereunder in an aggregate principal amount of $63,638,390.86;
(b) the Existing Term B Loans, Existing Term D Loans and Existing TLCs,
shall be refinanced (the "REFINANCING") with a new term B facility consisting of
(i) a tranche of additional term B loans (the "ADDITIONAL TERM B LOANS")
hereunder in an aggregate principal amount of $108,000,000 and (ii) additional
Additional TLCs (the "ADDITIONAL TLCS") in an aggregate principal amount of
$64,000,000;
(c) a revolving loan commitment (to include availability for revolving
loans, swing line loans and letters of credit) pursuant to which Borrowings of
revolving loans are and will continue to be made to the Borrowers from time to
time as set forth herein;
(d) a letter of credit commitment pursuant to which the Issuer has
Existing Letters of Credit and will continue to issue letters of credit for the
account of the Borrowers or any of their Subsidiaries (as defined below) from
time to time;
WHEREAS, all Loans, Reimbursement Obligations and other Obligations
shall continue to be and shall be guaranteed pursuant to the Subsidiary Guaranty
executed and delivered by each Subsidiary party thereto required to do so under
the Existing Credit Agreement and secured pursuant to the Security Agreements
executed and delivered by the Borrowers and the applicable Subsidiaries pursuant
to the Existing Credit Agreement; and
WHEREAS, the Lenders and the Issuer are willing, on the terms and
subject to the conditions set forth in the Amendment Agreement and hereinafter
set forth, to so amend and restate the Existing Credit Agreement and to maintain
or extend such Commitments and make
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such Loans to the Borrowers and issue or maintain (or participate in) Letters of
Credit for the account of the Borrowers;
NOW, THEREFORE, the parties hereto hereby agree to amend and restate
the Existing Credit Agreement, and the Existing Credit Agreement is amended and
restated in its entirety as set forth herein:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ADDITIONAL TERM B LOAN" is defined in the FOURTH RECITAL.
"ADDITIONAL TERM B LOAN COMMITMENT" is defined in CLAUSE (B) of
SECTION 2.1.1.
"ADDITIONAL TERM B LOAN COMMITMENT AMOUNT" means $108,000,000.
"ADDITIONAL TERM B LOAN COMMITMENT TERMINATION DATE" means the earliest
of:
(a) January 31, 2002, if the Additional Term B Loans have not
been made on or prior to such date;
(b) the date of the making of the Additional Term B Loans
(immediately after the making of such Additional 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 Additional
Term B Loan Commitments shall terminate automatically and without any further
action.
"ADDITIONAL TERM B LOAN LENDER" means any Lender which has a Percentage
of the Additional Term B Loan Commitment Amount.
"ADDITIONAL TLC" is defined in the FOURTH RECITAL.
"ADDITIONAL TLC COMMITMENT" is defined in CLAUSE (B) of SECTION 2.9.
"ADDITIONAL TLC COMMITMENT AMOUNT" means $64,000,000.
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"ADDITIONAL TLC COMMITMENT TERMINATION DATE" means the earliest of:
(a) January 31, 2002, if the Additional TLCs have not been
made on or prior to such date;
(b) the date of the making of the Additional TLCs (immediately
after the making of such Additional TLCs on such date); and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in CLAUSES (B) or (C), the Additional
TLC Commitments shall terminate automatically and without any further action.
"ADDITIONAL TLC LENDER" means any Lender which has a Percentage of the
Additional TLC Commitment Amount.
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to SECTION 10.4.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 15% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"AGENTS" means, collectively, the Administrative Agent, the Syndication
Agent and the Documentation Agents.
"AGREEMENT" means, on any date, this Credit Agreement, as amended and
restated hereby and as further amended, supplemented, amended and restated, or
otherwise modified from time to time and in effect on such date.
"ALTERNATE BASE RATE" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently established by the
Administrative Agent at its Domestic Office as its base rate for U.S. Dollar
loans in the United States; and
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2 of 1%.
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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.
"AMENDMENT AGREEMENT" is defined in the THIRD RECITAL.
"APPLICABLE MARGIN" means at all times,
(a) with respect to the unpaid principal amount of Existing
Loans and Existing TLCs, the applicable percentage set forth in the
Existing Credit Agreement;
(b) with respect to the unpaid principal amount of Additional
Term B Loans and Additional TLCs maintained as a
(i) Base Rate Loan, 1.50% per annum; and
(ii) LIBO Rate Loan, 2.50% per annum;
(c) with respect to the unpaid principal amount of each
Revolving Loan and Swing Line Loans and each Term A Loan maintained as
a Base Rate Loan at the applicable percentage per annum set forth below
under the column entitled "Applicable Margin for Base Rate Loans"; and
(d) with respect to the unpaid principal amount of each
Revolving Loan, and Swing Line Loan and each Term A Loan maintained as
a LIBO Rate Loan, at the applicable percentage per annum set forth
below under the column entitled "Applicable Margin for LIBO Rate
Loans":
APPLICABLE MARGIN FOR REVOLVING LOANS, SWING LINE LOANS AND TERM A
LOANS:
Applicable Margin Applicable Margin
Debt to EBITDA Ratio for Base Rate Loans for Libo Rate Loans
-------------------- ------------------- -------------------
Greater than or equal to 4.75 to 1.00 2.250% 3.250%
Less than 4.75 to 1.00 and greater than or equal 1.875% 2.875%
to 4.25 to 1.00
Less than 4.25 to 1.00 and greater than or equal 1.500% 2.500%
to 3.75 to 1.00
Less than 3.75 to 1.00 and greater than or equal 1.125% 2.125%
to 3.25 to 1.00
Less than 3.25 to 1.00 0.750% 1.750%
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The Debt to EBITDA Ratio used to compute the Applicable Margin for
Revolving Loans, Swing Line Loans and Term A Loans shall be the Debt to EBITDA
Ratio set forth in the Compliance Certificate most recently delivered by WWI to
the Administrative Agent pursuant to CLAUSE (c) of SECTION 7.1.1; changes in the
Applicable Margin for Revolving Loans, Swing Line
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Loans, and Term A Loans resulting from a change in the Debt to EBITDA Ratio
shall become effective upon delivery by WWI to the Administrative Agent of a new
Compliance Certificate pursuant to CLAUSE (c) of SECTION 7.1.1. If WWI shall
fail to deliver a Compliance Certificate within the number of days after the end
of any Fiscal Quarter as required pursuant to CLAUSE (c) of SECTION 7.1.1
(without giving effect to any grace period), the Applicable Margin for Revolving
Loans, Swing Line Loans, and Term A Loans from and including the first day after
the date on which such Compliance Certificate was required to be delivered to
but not including the date WWI delivers to the Administrative Agent a Compliance
Certificate shall conclusively equal the highest Applicable Margin for Revolving
Loans, Swing Line Loans, and Term A Loans set forth above.
The Applicable Margin for Designated New Term Loans shall be determined
pursuant to SECTION 2.1.6.
"ASSIGNEE LENDER" is defined in SECTION 11.11.1.
"AUSTRALIAN DOLLAR" or "A$" means the lawful money of Australia.
"AUSTRALIAN GUARANTY" means the Guaranty, dated September 29, 1999, by
WW Australia, FPL and GB in favor of the Administrative Agent, as amended,
amended and restated, supplemented or otherwise modified from time to time in
accordance with its terms.
"AUSTRALIAN PLEDGE AGREEMENT" means the Australian Share Mortgage
Agreement, dated September 29, 1999, by WW Australia and FPL in favor of the
Administrative Agent, together with each Supplement thereto delivered pursuant
to CLAUSE (B) of SECTION 7.1.7, as amended, amended and restated, supplemented
or otherwise modified from time to time pursuant to the terms thereof.
"AUSTRALIAN SECURITY AGREEMENT" means the Security Agreement, dated
September 29, 1999, by WW Australia, FPL and GB in favor of the Administrative
Agent, together with each Supplement thereto delivered pursuant to CLAUSE (A) of
SECTION 7.1.7, as amended, amended and restated, supplemented or otherwise
modified from time to time pursuant to the terms thereof.
"AUSTRALIAN SUBSIDIARY" means any Subsidiary that is organized under
the laws of Australia or any territory thereof.
"AUTHORIZED OFFICER" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders in writing from time to time.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness, the quotient obtained by dividing:
(x) the sum of the products of numbers of years from the date
of determination to the dates of each successive scheduled principal
payment of or redemption or similar payment with respect to such
Indebtedness multiplied by the amount of such payment
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by
(y) the sum of all such payments.
"BASE AMOUNT" is defined in SECTION 7.2.7.
"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"BORROWERS" is defined in the PREAMBLE.
"BORROWING" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by the relevant Lenders on the
same Business Day and pursuant to the same Borrowing Request in accordance with
SECTION 2.1.
"BORROWING REQUEST" means a loan request and certificate duly executed
by an Authorized Officer of the applicable Borrower, substantially in the form
of EXHIBIT B-1 hereto.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York City; and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, any day on which dealings in U.S. Dollars are
carried on in the London interbank market.
"CAPITAL EXPENDITURES" means for any period, the sum, without
duplication, of
(a) the aggregate amount of all expenditures of WWI and its
Subsidiaries for fixed or capital assets made during such period which,
in accordance with GAAP, would be classified as capital expenditures;
and
(b) the aggregate amount of all Capitalized Lease Liabilities
incurred during such period.
"CAPITAL SECURITIES" means, (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including 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
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of the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by
(i) a corporation (other than an Affiliate of any
Obligor) organized under the laws of any state of the United
States or of the District of Columbia and rated at least A-l
by S&P or P-l by Moody's, or
(ii) any Lender which is an Eligible Institution (or
its holding company);
(c) any certificate of deposit or bankers acceptance, maturing
not more than one year after such time, which is issued by either
(i) a commercial banking institution that is a member
of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000,
or
(ii) any Lender;
(d) short-term tax-exempt securities rated not lower than
MIG-1/1+ by either Moody's or S&P with provisions for liquidity or
maturity accommodations of 183 days or less;
(e) any money market or similar fund the assets of which are
comprised exclusively of any of the items specified in CLAUSES (A)
through (D) above and as to which withdrawals are permitted at least
every 90 days; or
(f) in the case of any Subsidiary of WWI organized in a
jurisdiction outside the United States: (i) direct obligations of the
sovereign nation (or any agency thereof) in which such Subsidiary is
organized and is conducting business or in obligations fully and
unconditionally guaranteed by such sovereign nation (or any agency
thereof), (ii) investments of the type and maturity described in
CLAUSES (a) through (e) above of foreign obligors, which investments or
obligors (or the parents of such obligors) have ratings described in
such clauses or equivalent ratings from comparable foreign ratings
agencies or (iii) investments of the type and maturity described in
CLAUSES (a) through (e) above of foreign obligors (or the parents of
such obligors), which investments or obligors (or the parents of such
obligors) are not rated as provided above but which are, in the
reasonable judgment of WWI, comparable in investment quality to such
investments and obligors (or the parents of such obligors); PROVIDED
that the aggregate face amount
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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) 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;
(b) at all times, as applicable, individuals who on September
29, 1999 constituted the Board of Directors of WWI (together with any
new directors whose election to such Board or whose nomination for
election by the stockholders of WWI was approved by a member of the
Permitted ARTAL Investor Group or a vote of 66.67% 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;
(c) 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
(d) any other event constituting a Change of Control (as
defined in the Senior Subordinated Note Indenture).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means, as the context may require, a Lender's Letter of
Credit Commitment, Revolving Loan Commitment, Swing Line Loan Commitment,
Additional Term B Loan Commitment or Additional TLC Commitment.
"COMMITMENT AMOUNT" means, as the context may require, the Letter of
Credit Commitment Amount, the Revolving Loan Commitment Amount, the Swing Line
Loan Commitment Amount, the Additional Term B Loan Commitment Amount or the
Additional TLC Commitment Amount.
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"COMMITMENT TERMINATION DATE" means, as the context may require, the
Revolving Loan Commitment Termination Date, the Additional Term B Loan
Commitment Termination Date or the Additional TLC 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 Additional
TLCs to be due and payable pursuant to SECTION 9.3, or
(ii) in the absence of such declaration, the giving
of notice by the Administrative Agent, acting at the direction
of the Required Lenders, to WWI that the Commitments have been
terminated.
"COMPLIANCE CERTIFICATE" means a certificate duly completed and
executed by the chief financial Authorized Officer of WWI, substantially in the
form of EXHIBIT E hereto.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the debt,
obligation or other liability guaranteed thereby.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
applicable Borrower, substantially in the form of EXHIBIT C hereto.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with WWI, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"COPYRIGHT SECURITY AGREEMENT" means the Copyright Security Agreement,
dated September 29, 1999, delivered by WWI and each of its U.S. Subsidiaries
party thereto in favor of the Administrative Agent, as amended, supplemented,
amended and restated or otherwise modified.
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"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 an Additional TLC by an Additional TLC
Lender.
"CREDIT EXTENSION REQUEST" means, as the context may require, any
Borrowing Request or Issuance Request.
"CURRENT ASSETS" means, on any date, without duplication, all assets
(other than cash) which, in accordance with GAAP, would be included as current
assets on a consolidated balance sheet of WWI and its Subsidiaries at such date
as current assets (excluding, however, amounts due and to become due from
Affiliates of WWI which have arisen from transactions which are other than
arm's-length and in the ordinary course of its business).
"CURRENT LIABILITIES" means, on any date, without duplication, all
amounts which, in accordance with GAAP, would be included as current liabilities
on a consolidated balance sheet of WWI and its Subsidiaries at such date,
excluding current maturities of Indebtedness.
"DEBT" means the outstanding principal amount of all Indebtedness of
WWI and its Subsidiaries of the type referred to in CLAUSES (a), (b), (c) and
(e) of the definition of "Indebtedness" or any Contingent Liability in respect
thereof.
"DEBT TO EBITDA RATIO" means, as of the last day of any Fiscal Quarter,
the ratio of
(a) Debt outstanding on the last day of such Fiscal Quarter
TO
(b) EBITDA computed for the period consisting of such Fiscal
Quarter and each of the three immediately preceding Fiscal Quarters.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DESIGNATED ADDITIONAL REVOLVING LOAN COMMITMENTS" is defined in
SECTION 2.1.6.
"DESIGNATED ADDITIONAL TERM A LOANS" is defined in SECTION 2.1.6.
"DESIGNATED ADDITIONAL TERM B LOANS" is defined in SECTION 2.1.6.
"DESIGNATED NEW TERM LOANS" is defined in SECTION 2.1.6.
"DESIGNATED SUBSIDIARY" means The Weight Watchers Foundation, Inc., a
New York not-for-profit corporation.
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"DISBURSEMENT" is defined in SECTION 2.6.2.
"DISBURSEMENT DATE" is defined in SECTION 2.6.2.
"DISBURSEMENT DUE DATE" is defined in SECTION 2.6.2.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as
SCHEDULE I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrowers with the written consent of the Required Lenders.
"DISPOSITION" (or correlative words such as "Dispose") means any sale,
transfer, lease contribution or other conveyance (including by way of merger)
of, or the granting of options, warrants or other rights to, any of WWI's or its
Subsidiaries', assets (including accounts receivable and Capital Securities of
Subsidiaries) to any other Person (other than to another Obligor) in a single
transaction or series of transactions.
"DOCUMENTATION AGENTS" is defined in the PREAMBLE.
"DOMESTIC OFFICE" means, relative to any Lender, the office of such
Lender designated as such on SCHEDULE III hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"EBITDA" means, for any applicable period, the sum (without
duplication) of
(a) Net Income,
PLUS
(b) the amount deducted, in determining Net Income,
representing amortization of assets (including amortization with
respect to goodwill, deferred financing costs, other non-cash interest
and all other intangible assets),
PLUS
(c) the amount deducted, in determining Net Income, of all
income taxes (whether paid or deferred) of WWI and its Subsidia |
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