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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CghZK8l5lZLCL+8SV4DYIxKq5BvENpg1uLgFY6+kIWkyrL7TKXcQs0DHGbP+N6p7 2e5ANDeU1vh1z/WrB2lTCw== 0001193125-08-227856.txt : 20081106 0001193125-08-227856.hdr.sgml : 20081106 20081106154500 ACCESSION NUMBER: 0001193125-08-227856 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080927 FILED AS OF DATE: 20081106 DATE AS OF CHANGE: 20081106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEIGHT WATCHERS INTERNATIONAL INC CENTRAL INDEX KEY: 0000105319 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 116040273 STATE OF INCORPORATION: VA FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16769 FILM NUMBER: 081167066 BUSINESS ADDRESS: STREET 1: 11 MADISON AVENUE STREET 2: 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2125892700 MAIL ADDRESS: STREET 1: 11 MADISON AVENUE STREET 2: 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10010 10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 27, 2008

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

For the transition period from to

Commission File No. 001-16769

WEIGHT WATCHERS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Virginia

11-6040273

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

11 Madison Avenue, 17^th Floor, New York, New York 10010

(Address of principal executive offices) (Zip code)

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

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock outstanding as of October 31, 2008 was 76,890,252.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX


		Page No.
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets at September 27, 2008 and December 29, 2007	2

	Unaudited Consolidated Statements of Operations for the three months ended September 27, 2008 and September 29, 2007	3

	Unaudited Consolidated Statements of Operations for the nine months ended September 27, 2008 and September 29, 2007	4

	Unaudited Consolidated Statement of Changes in Shareholders’ Deficit for the nine months ended September 27, 2008 and for the fiscal year ended December 29, 2007	5

	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 27, 2008 and September 29, 2007	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Submission of Matters to a Vote of Security Holders	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

Signatures		38

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS AT

(IN THOUSANDS)


	September 27, 2008			December 29, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	57,805		$	39,823
Receivables, net		49,002			42,368
Inventories, net		32,121			44,607
Deferred income taxes		23,810			20,104
Prepaid expenses and other current assets		59,253			39,434

TOTAL CURRENT ASSETS		221,991			186,336

Property and equipment, net		38,994			36,156
Franchise rights acquired		758,048			724,188
Goodwill		51,346			51,364
Trademarks and other intangible assets, net		32,047			29,035
Deferred income taxes		—			9,917
Deferred financing costs and other noncurrent assets		7,973			9,225

TOTAL ASSETS	$	1,110,399		$	1,046,221


LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
Portion of long-term debt due within one year	$	141,875		$	45,625
Accounts payable		32,932			42,678
Dividend payable		13,841			14,233
Derivative payable		31,138			23,546
VAT liability		60,903			23,428
Accrued liabilities		124,477			130,236
Income taxes payable		3,273			19,296
Deferred revenue		83,301			59,389

TOTAL CURRENT LIABILITIES		491,740			358,431

Long-term debt		1,500,625			1,602,500
Deferred income taxes		6,515			1,786
Other		12,347			9,834

TOTAL LIABILITIES		2,011,227			1,972,551

SHAREHOLDERS’ DEFICIT
Dividend to Artal Luxembourg S.A.		(304,835	)		(304,835	)
Common stock, $0 par value; 1,000,000 shares authorized; 111,988 shares issued		—			—
Treasury stock, at cost, 35,110 shares at September 27, 2008 and 32,578 shares at December 29, 2007		(1,685,004	)		(1,570,054	)
Retained earnings		1,094,072			950,213
Accumulated other comprehensive loss		(5,061	)		(1,654	)

TOTAL SHAREHOLDERS’ DEFICIT		(900,828	)		(926,330	)

TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	1,110,399		$	1,046,221

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Three Months Ended
	September 27, 2008		September 29, 2007
Meeting fees, net	$	213,206	$	204,489
Product sales and other, net		91,748		94,407
Internet revenues		47,664		38,554

Revenues, net		352,618		337,450

Cost of meetings, products and other		149,395		140,873
Cost of Internet revenues		8,798		8,650

Cost of revenues		158,193		149,523

Gross profit		194,425		187,927

Marketing expenses		39,958		39,220
Selling, general and administrative expenses		46,631		42,208

Operating income		107,836		106,499

Interest expense		21,342		28,309
Other expense/(income), net		1,191		(2,315	)

Income before income taxes and minority interest		85,303		80,505

Provision for income taxes		33,151		30,994

Income before minority interest		52,152		49,511
Minority interest		518		—

Net income	$	52,670	$	49,511


Earnings per share:
Basic	$	0.68	$	0.63

Diluted	$	0.67	$	0.62

Weighted average common shares outstanding:
Basic		77,897		79,159

Diluted		78,123		79,608

Dividends declared per common share	$	0.18	$	0.18

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Nine Months Ended
	September 27, 2008			September 29, 2007
Meeting fees, net	$	693,572		$	672,063
Product sales and other, net		353,523			338,431
Internet revenues		142,564			112,634

Revenues, net		1,189,659			1,123,128

Cost of meetings, products and other		512,699			465,929
Cost of Internet revenues		26,579			23,549

Cost of revenues		539,278			489,478

Gross profit		650,381			633,650

Marketing expenses		186,583			163,591
Selling, general and administrative expenses		138,677			124,524

Operating income		325,121			345,535

Interest expense		68,220			82,558
Other income, net		(1,264	)		(2,418	)
Early extinguishment of debt		—			3,021

Income before income taxes and minority interest		258,165			262,374

Provision for income taxes		102,652			101,014

Income before minority interest		155,513			161,360
Minority interest		1,162			—

Net income	$	156,675		$	161,360


Earnings per share:
Basic	$	1.99		$	1.99

Diluted	$	1.98		$	1.98

Weighted average common shares outstanding:
Basic		78,735			80,985

Diluted		79,011			81,560

Dividends declared per common share	$	0.53		$	0.53

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES

IN SHAREHOLDERS’ DEFICIT

(IN THOUSANDS)


	Common Stock			Treasury Stock					Accumulated Other Comprehensive			Dividend to Artal Luxembourg,			Retained
	Shares	Amount		Shares		Amount			Income/(Loss)			S.A.			Earnings			Total
Balance at December 30, 2006	111,988	$	—	14,486		$	(540,318	)	$	6,247		$	(304,835	)	$	770,539		$	(68,367	)

Comprehensive Income:
Net income																201,180			201,180
Translation adjustment, net of taxes of ($4,734)										8,049									8,049
Change in fair value of derivatives accounted for as hedges, net of taxes of $10,199										(15,950	)								(15,950	)

Total Comprehensive Income																			193,279

Cumulative effect of adoption of FIN 48																(1,907	)		(1,907	)
Issuance of treasury stock under stock plans				(967	)		3,908									13,453			17,361
Tax benefit of restricted stock units vested and stock options exercised																10,879			10,879
Cash dividends declared																(55,694	)		(55,694	)
Purchase of treasury stock				19,059			(1,033,644	)											(1,033,644	)
Compensation expense on share-based awards																11,763			11,763

Balance at December 29, 2007	111,988	$	—	32,578		$	(1,570,054	)	$	(1,654	)	$	(304,835	)	$	950,213		$	(926,330	)

Comprehensive Income:
Net income																156,675			156,675
Translation adjustment, net of taxes of $1,656										(2,280	)								(2,280	)
Change in fair value of derivatives accounted for as hedges, net of taxes of $721										(1,127	)								(1,127	)

Total Comprehensive Income																			153,268

Issuance of treasury stock under stock plans				(254	)		1,023									6,504			7,527
Tax benefit of restricted stock units vested and stock options exercised																13,554			13,554
Cash dividends declared																(41,196	)		(41,196	)
Purchase of treasury stock				2,786			(115,973	)											(115,973	)
Compensation expense on share-based awards																8,322			8,322

Balance at September 27, 2008	111,988	$	—	35,110		$	(1,685,004	)	$	(5,061	)	$	(304,835	)	$	1,094,072		$	(900,828	)

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


	Nine Months Ended
	September 27, 2008			September 29, 2007
Cash provided by operating activities	$	234,124		$	265,276

Investing activities:
Capital expenditures		(13,115	)		(8,651	)
Capitalized software expenditures		(6,313	)		(8,664	)
Website development expenditures		(4,426	)		(3,894	)
Cash paid for acquisitions		(39,660	)		(16,756	)
Other items, net		(210	)		(258	)

Cash used for investing activities		(63,724	)		(38,223	)

Financing activities:
Proceeds from new term loans		—			1,200,000
Proceeds from borrowings		20,000			—
Payments of long-term debt		(25,625	)		(362,909	)
Proceeds from stock options exercised		8,016			17,803
Tax benefit from restricted stock units vested and stock options exercised		92			10,481
Repurchase of treasury stock		(115,973	)		(1,033,644	)
Payment of dividends		(41,589	)		(44,614	)
Deferred financing costs		—			(5,417	)
Investment and advances from minority shareholder		4,843			—

Cash used for financing activities		(150,236	)		(218,300	)

Effect of exchange rate changes on cash/cash equivalents and other		(2,182	)		2,425

Net increase in cash and cash equivalents		17,982			11,178
Cash and cash equivalents, beginning of period		39,823			37,504

Cash and cash equivalents, end of period	$	57,805		$	48,682

The accompanying notes are an integral part of the consolidated financial statements.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1.	Basis of Presentation

The accompanying consolidated financial statements include the accounts of Weight Watchers International, Inc. and all of its subsidiaries. The term “Company” as used throughout this document is used to indicate Weight Watchers International, Inc. and all of its subsidiaries. The term “WWI” as used throughout this document is used to indicate Weight Watchers International, Inc. and all of its subsidiaries other than WeightWatchers.com, Inc. and all of its subsidiaries (“WW.com”). As further discussed in Note 4, effective with its formation in February 2008, the Company consolidates the financial statements of its joint venture entity, Weight Watchers Danone China Limited, and its subsidiaries (the “Joint Venture”).

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts that are based on management’s best estimates and judgments. While all available information has been considered, actual amounts could differ from those estimates. The consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the interim results presented.

These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for fiscal 2007, which includes additional information about the Company, its results of operations, its financial position and its cash flows.

2.	Summary of Significant Accounting Policies

For a discussion of the Company’s significant accounting policies, see “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for fiscal 2007.

3.	Acquisitions

The acquisitions of certain franchisees have been accounted for under the purchase method of accounting and, accordingly, earnings have been included in the consolidated operating results of the Company since their dates of acquisition. Details of these franchise acquisitions are outlined below.

On June 3, 2007, the Company acquired substantially all of the assets of its British Columbia franchisee, Weight Watchers of British Columbia Inc., for a net purchase price of $15,282, plus assumed liabilities and transaction costs of $532. The total purchase price has been allocated to franchise rights acquired ($15,718), inventory ($88), fixed assets ($7) and other current assets ($1).

On January 31, 2008, the Company acquired substantially all of the assets of its Palm Beach, Florida franchisee, Weight Watchers of Palm Beach County, Inc., for a net purchase price of $12,936, plus assumed liabilities and transaction costs of $226. The total purchase price has been allocated to franchise rights acquired ($12,600), inventory ($113), fixed assets ($299) and other current assets ($150).

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

On June 13, 2008, the Company acquired substantially all of the assets of its Wichita, Kansas franchisee, Weight Watchers of Greater Wichita, Inc., for a net purchase price of $5,734. The total purchase price has been allocated to franchise rights acquired ($5,676) and prepaid expenses ($58).

On June 19, 2008, the Company acquired substantially all of the assets of two of its franchisees, Weight Watchers of Syracuse, Inc. and Dieters of the Southern Tier, Inc., for a combined net purchase price of $20,935, plus assumed liabilities of $162. The total purchase price has been allocated to franchise rights acquired ($20,946), fixed assets ($36), inventory ($56) and prepaid expenses ($59).

The effects of these franchise acquisitions, individually or in the aggregate, were not material to the Company’s consolidated financial position, results of operations, or operating cash flows in any of the periods presented.

4.	Joint Venture

On February 5, 2008, Weight Watchers Asia Holdings Ltd. (“Weight Watchers Asia”), a direct wholly-owned subsidiary of the Company, and Danone Dairy Asia, an indirect wholly-owned subsidiary of Groupe DANONE S.A., entered into a joint venture agreement to establish a weight management business in the People’s Republic of China. Pursuant to the terms of the joint venture agreement, Weight Watchers Asia and Danone Dairy Asia own 51% and 49%, respectively, of the Joint Venture.

Because the Company has a direct controlling financial interest in the Joint Venture, it began to consolidate this entity in the first quarter of fiscal 2008 under the provisions of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.”

5.	Goodwill and Intangible Assets

The Company performs its annual impairment review of goodwill and other indefinite-lived intangible assets, including franchise rights acquired, on the last day of its fiscal year, or more frequently if deemed necessary due to significant events or changes in circumstances that could negatively impact the value of its assets. As of December 29, 2007, the Company determined that no impairment existed. The Company does not believe any events have occurred subsequent to December 29, 2007 that would require it to perform an interim impairment test. Goodwill is due mainly to the acquisition of the Company by the H.J. Heinz Company in 1978 and the acquisition of WW.com in 2005. For the nine months ended September 27, 2008, the change in goodwill is due to foreign currency fluctuations. Franchise rights acquired are due to acquisitions of the Company’s franchised territories. For the nine months ended September 27, 2008, the change in franchise rights acquired is due to the acquisition of four franchises during fiscal 2008, as described in Note 3, and foreign currency fluctuations.

Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $2,909 and $8,067 for the three and nine months ended September 27, 2008, respectively. Aggregate amortization expense for finite-lived intangible assets was recorded in the amounts of $2,350 and $5,797 for the three and nine months ended September 29, 2007, respectively.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The carrying amount of finite-lived intangible assets as of September 27, 2008 and December 29, 2007 was as follows:


	September 27, 2008				December 29, 2007
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Deferred software costs	$	36,734	$	16,068	$	30,707	$	11,663
Trademarks		8,845		8,146		8,540		7,937
Website development costs		24,396		14,741		19,970		11,673
Other		5,741		4,714		5,741		4,650

	$	75,716	$	43,669	$	64,958	$	35,923

Estimated amortization expense of existing finite-lived intangible assets for the next five fiscal years is as follows:


Remainder of 2008	$	3,097
2009	$	11,189
2010	$	8,454
2011	$	5,992
2012	$	1,959

6.	Long-Term Debt

WWI Credit Facility

WWI’s credit agreement, dated as of January 16, 2001, and amended and restated as of January 21, 2004, as supplemented on October 19, 2004 and as amended on June 24, 2005, May 8, 2006 and amended and supplemented on January 26, 2007, consists of a term loan facility consisting of two tranche A facilities, or Term Loan A and Additional Term Loan A, and a tranche B facility, or Term Loan B, in an aggregate amount of $1,550,000 and a revolving credit facility, or the Revolver, in the amount of up to $500,000. We refer to the term loan facilities and the Revolver collectively as the WWI Credit Facility. At September 27, 2008, the Company had debt outstanding of $1,642,500 (including $315,000 under Term Loan A, $700,000 under Additional Term Loan A, $492,500 under Term Loan B and $135,000 under the Revolver) and had additional availability under the Revolver of $363,020. The Term Loan A, Additional Term Loan A, Term Loan B and Revolver mature in June 2011, January 2013, January 2014 and June 2011, respectively.

On January 26, 2007, in connection with the Tender Offer (as defined in Note 7) and the share repurchase from Artal (as defined in Note 7), the Company increased its debt capacity by adding an Additional Term Loan A in the amount of $700,000 and a new Term Loan B in the amount of $500,000. The Company utilized (a) $185,784 of these proceeds to pay off the WW.com Credit Facilities (as defined below), (b) $461,593 to repurchase 8,548 of its shares in the Tender Offer and (c) $567,617 to repurchase 10,511 of its shares from Artal. In connection with the early extinguishment of the WW.com Credit Facilities, the Company recorded a charge of $3,021 in the first quarter of 2007 relating to the write-off of the deferred financing costs associated with the WW.com Credit Facilities.

The Term Loan A, Additional Term Loan A and the Revolver bear interest at an initial rate equal to LIBOR plus 1.25% per annum or, at the Company’s option, the alternate base rate (as defined in the WWI Credit Facility agreements). During the first quarter of fiscal 2008, the interest rate on the Term Loan A, Additional Term Loan A and Revolver was reduced to LIBOR plus 1.0% per annum or, at the

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Company’s option, the alternate base rate (as defined in the WWI Credit Facility agreements). The Term Loan B bears interest at an initial rate equal to LIBOR plus 1.5% per annum or, at the Company’s option, the alternate base rate (as defined in the WWI Credit Facility agreements). In addition to paying interest on outstanding principal under the WWI Credit Facility, the Company is required to pay a commitment fee to the lenders under the Revolver with respect to the unused commitments at an initial rate equal to 0.25% per annum. During the first quarter of fiscal 2008, this commitment fee was reduced to 0.20% per annum.

The WWI Credit Facility contains customary covenants including covenants that, in certain circumstances, restrict the Company’s ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other payments, including investments, sell its assets and enter into consolidations, mergers and transfers of all or substantially all of its assets. The WWI Credit Facility also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. At September 27, 2008, the Company was in compliance with all of the required financial ratios and also met all of the financial condition tests and expects to continue to do so for the foreseeable future. The WWI Credit Facility contains customary events of default. Upon the occurrence of an event of default under the WWI Credit Facility, the lenders thereunder may cease making loans and declare amounts outstanding to be immediately due and payable. The WWI Credit Facility is guaranteed by certain of the Company’s existing and future subsidiaries. Substantially all the assets of the Company collateralize the WWI Credit Facility.

On March 20, 2008, Standard & Poor’s affirmed its “BB+” rating on the WWI Credit Facility. On March 31, 2008, Moody’s affirmed its “Ba1” rating for the WWI Credit Facility.

WW.com Credit Facilities

On December 16, 2005, WW.com borrowed $215,000 consisting of (i) a five year, senior secured first lien term loan facility in an aggregate principal amount of $170,000 and (ii) a five and one-half year, senior secured second lien term loan facility in an aggregate principal amount of $45,000, pursuant to two credit agreements among WW.com, Credit Suisse, as administrative agent and collateral agent, and the participating lenders (the “WW.com Credit Facilities”). As discussed above, the WW.com Credit Facilities were repaid in full in January 2007.

7.	Treasury Stock

On October 9, 2003, the Company, at the direction of WWI’s Board of Directors, authorized a program to repurchase up to $250,000 of the Company’s outstanding common stock. On each of June 13, 2005 and May 25, 2006, the Company, at the direction of WWI’s Board of Directors, authorized adding an additional $250,000 to this program. The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal under the program.

During the nine months ended September 27, 2008, the Company purchased 2,786 shares of its common stock in the open market under the repurchase program at a total cost of $115,973. Other than shares repurchased in connection with the Tender Offer and the share repurchase from Artal Holdings Sp. z o.o., an indirect subsidiary of Artal Group, S.A., (Artal Group, S.A., together with its parent and subsidiaries, “Artal”) referred to below, the Company purchased no shares of its common stock during the nine months ended September 29, 2007.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

On December 18, 2006, the Company commenced a tender offer in which it sought to acquire up to 8,300 shares of its common stock at a price between $47.00 and $54.00 per share (the “Tender Offer”). Prior to the Tender Offer, the Company entered into an agreement with Artal whereby Artal agreed to sell to the Company at the same price as was determined in the Tender Offer the number of its shares necessary to keep its percentage ownership in the Company at substantially the same level after the Tender Offer. Artal also agreed not to participate in the Tender Offer so that it would not affect the determination of the price in the Tender Offer.

The Tender Offer expired at midnight on January 18, 2007, and on January 26, 2007 approximately 8,548 shares were repurchased at a price of $54.00 per share. The repurchased 8,548 shares consisted of the 8,300 shares the Company offered to purchase and 248 shares purchased pursuant to the Company’s right to purchase up to an additional 2% of the outstanding shares as of November 30, 2006. On February 2, 2007, the Company repurchased 10,511 of its shares from Artal at a purchase price of $54.00 per share pursuant to its prior agreement with Artal. In January 2007, the Company amended and supplemented the WWI Credit Facility to finance these repurchases. See Note 6 for further information on the WWI Credit Facility.

8.	Earnings Per Share

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

The following table sets forth the computation of basic and diluted EPS:


	Three Months Ended				Nine Months Ended
	September 27, 2008		September 29, 2007		September 27, 2008		September 29, 2007
Numerator:
Net income	$	52,670	$	49,511	$	156,675	$	161,360


Denominator:
Weighted-average shares of common stock outstanding		77,897		79,159		78,735		80,985
Effect of dilutive common stock equivalents		226		449		276		575

Weighted-average diluted common shares outstanding		78,123		79,608		79,011		81,560


EPS:
Basic	$	0.68	$	0.63	$	1.99	$	1.99
Diluted	$	0.67	$	0.62	$	1.98	$	1.98

The number of anti-dilutive common stock equivalents excluded from the calculation of weighted average shares for diluted EPS was 1,791 and 910 for the three months ended September 27, 2008 and September 29, 2007, respectively, and 1,582 and 1,079 for the nine months ended September 27, 2008 and September 29, 2007, respectively.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

9.	Stock Plans

On May 12, 2004 and December 16, 1999, respectively, WWI’s shareholders approved the 2004 Stock Incentive Plan (the “2004 Plan”) and the 1999 Stock Purchase and Option Plan (the “1999 Plan”). On May 6, 2008, the Company’s shareholders approved the 2008 Stock Incentive Plan (the “2008 Plan” and together with the 2004 Plan and the 1999 Plan, the “Stock Plans”). These plans are designed to promote the long-term financial interests and growth of the Company by attracting, motivating and retaining employees with the ability to contribute to the success of the business and aligning compensation for our employees over a multi-year period directly with the interests of the shareholders of the Company. The Board of Directors or a committee thereof administers the Stock Plans.

Under the 2008 Plan, grants may take the following forms at the Compensation and Benefit Committee’s discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and other equity-based awards. As of its effective date, the maximum number of shares available for grant under the 2008 Plan is 3,000, subject to increase and adjustment as set forth in the 2008 Plan.

Under the 2004 Plan, grants may take the following forms at the Board of Directors’ or a committee’s sole discretion: non-qualified stock options, incentive stock options, stock appreciation rights, RSUs and other share-based awards. As of its effective date, the maximum number of shares available for grant under the 2004 Plan is 2,500.

Under the 1999 Plan, grants may take the following forms at the Board of Directors’ or a committee’s sole discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, purchase stock, dividend equivalent rights, performance units, performance shares and other share-based grants. The maximum number of shares available for grant under this plan was 7,058.

On March 28, 2008, the Company granted 310 options and 86 RSUs from the 2004 Plan to certain members of management. The options and RSUs vest over three years and the options expire 10 years from the date of grant. The options and RSUs had an aggregate estimated grant-date fair value of $3,565 and $3,487, respectively.

10.

Income Taxes

The Company’s effective tax rate for the three and nine months ended September 27, 2008 was 38.9% and 39.8%, respectively. The Company’s effective tax rate for both the three and nine months ended September 29, 2007 was 38.5%. For the three and nine months ended September 27, 2008, the primary differences between the U.S. federal statutory tax rate and the Company’s effective tax rate were comprised of state income taxes, increases in valuation allowances and the U.K. VAT adjustment, which caused a shift in the mix of earnings.

For the three and nine months ended September 29, 2007, the primary differences between the U.S. federal statutory tax rate and the Company’s effective tax rate were comprised of state income taxes and increases in valuation allowances, offset by lower statutory rates in certain foreign jurisdictions.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

11.

Legal

U.K. VAT Matter

On July 7, 2006, the Company filed an amended notice of appeal with the U.K. VAT and Duties Tribunal, or VAT Tribunal, appealing a ruling by Her Majesty’s Revenue and Customs, or HMRC, that from April 1, 2005 Weight Watchers meetings fees in the U.K. should be fully subject to 17.5% standard rated value added tax, or VAT. For over a decade prior to April 1, 2005, HMRC had determined that Weight Watchers meetings fees in the U.K. were only partially subject to 17.5% VAT. It is the Company’s view that this prior determination by HMRC should remain in effect and this view was further supported on March 8, 2007 when the VAT Tribunal ruled that Weight Watchers meetings in the U.K. should only be partially subject to 17.5% VAT. On May 3, 2007, HMRC appealed to the High Court of Justice Chancery Division, or the High Court, against the VAT Tribunal’s ruling in the Company’s favor, and the appeal at the High Court was heard in November 2007.

On January 21, 2008, the High Court ruled by denying HMRC’s appeal in part by upholding the VAT Tribunal’s decision to the extent that, at the first meeting which members attend, meetings fees associated with such meeting are partially subject to 17.5% VAT. However, the High Court allowed HMRC’s appeal in relation to meetings subsequent to the first meeting and concluded that meetings fees associated with subsequent meetings are fully subject to 17.5% VAT. On April 1, 2008, the Company filed an appeal to the Court of Appeal in part against the High Court’s ruling in relation to meetings subsequent to the first meeting. On April 16, 2008, HMRC filed an appeal to the Court of Appeal in part against the High Court’s ruling in relation to the first meeting which members attend. Following a hearing before the Court of Appeal on June 11 and 12, 2008, the Court of Appeal issued a ruling on June 25, 2008 that Weight Watchers meetings fees in the U.K., including fees relating to the first meeting members attend, were fully subject to 17.5% VAT, thus reversing in its entirety the U.K. VAT Tribunal’s 2007 decision in the Company’s favor.

In light of the Court of Appeal’s ruling that Weight Watchers meetings fees in the U.K. were fully subject to 17.5% VAT and in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS 5”), the Company recorded a charge of approximately $32,500 as an offset to revenue in the second quarter of fiscal 2008 for possible U.K. VAT liability (including interest) in excess of reserves previously recorded. Beginning in the third quarter of fiscal 2008, in accordance with SFAS 5, the Company recorded VAT charges associated with U.K. meeting fees as earned, consistent with the Court of Appeal’s ruling. The Company intends to continue to defend the VAT Tribunal’s 2007 ruling and on July 23, 2008 sought permission from the U.K. House of Lords to appeal the Court of Appeal’s recent ruling. Although it is possible that the Company’s cash flows in a particular fiscal quarter may be adversely affected by this matter, it is the opinion of management that the ultimate disposition of this matter will not have a material impact on the Company’s financial position or ongoing results of operations or cash flows.

U.K. Self-Employment Matter

On July 27, 2007, HMRC issued to the Company notices of determination and decisions that, for the period April 2001 to April 2007, our leaders and certain other service providers should have been classified as employees for tax purposes and, as such, the Company should have withheld tax from the leaders and certain other service providers pursuant to the PAYE and NIC collection rules and remitted such amounts to the HMRC. As of November 3, 2008, the assessment associated with the notices of determination and decisions is approximately $26,000. It is the Company’s view that the U.K. leaders and other service providers identified by HMRC in its notices and decisions are self-employed and no withholding by the Company was required. On September 3, 2007, the Company appealed HMRC’s

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

notices and decisions as to these classifications and against any amount of PAYE and NIC liability claimed to be owed by the Company and on July 22, 2008, filed this appeal with the U.K. Special Commissioners. The Company intends to vigorously pursue this appeal and, although there can be no assurances, it believes it will ultimately prevail in its appeal. If such appeal is unsuccessful, it is possible that the Company’s cash flows and results of operations in a particular fiscal quarter may be adversely affected by this matter. However, it is the opinion of management that the disposition of this matter will not have a material impact on the Company’s financial position or ongoing results of operations or cash flows.

Due to the nature of its activities, the Company is also, at times, subject to pending and threatened legal actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of all such matters is not expected to have a material effect on the Company’s results of operations, financial condition or cash flows.

12.

Derivative Instruments and Hedging

The Company enters into interest rate swaps to hedge a substantial portion of its variable rate debt. As of September 27, 2008 and September 29, 2007, the Company held contracts for interest rate swaps with notional amounts totaling $900,000 and $1,050,000, respectively. The Company is hedging forecasted transactions for periods not exceeding the next four years. At September 27, 2008, given the current configuration of its debt, the Company estimates that no derivative gains or losses reported in accumulated other comprehensive income/(loss) will be reclassified to the statement of operations within the next twelve months.

As of September 27, 2008 and September 29, 2007, cumulative losses for qualifying hedges were reported as a component of accumulated other comprehensive income/(loss) in the amount of $16,121 ($26,431 before taxes) and $3,535 ($5,794 before taxes), respectively. For the three and nine months ended September 27, 2008 and September 29, 2007, there were no fair value adjustments recorded in the statement of operations since all hedges are considered qualifying.

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” This statement amends and expands the disclosure requirements related to derivative instruments and hedging activities by requiring qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. The Company is required to adopt the provisions of this statement at the beginning of fiscal 2009, at which time it will amend its disclosures accordingly.

13.

Fair Value Measurements

On December 30, 2007, the Company adopted the provisions of FASB Statement No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

•

Level 1 – Quoted prices in active markets for identical assets or liabilities.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

•

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Debt

The fair value of the Company’s debt, which is utilized for annual disclosure purposes only, is determined by utilizing quotes and market interest rates currently available to the Company for issuances of debt with similar terms and remaining maturities.

Derivative Financial Instruments

The fair values for the derivative financial instruments are valued using observable current market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates. See Note 12 for disclosures related to derivative financial instruments. The following table presents the aggregate fair value of the Company’s derivative financial instruments at September 27, 2008.


	Total Fair Value		Fair Value Measurements Using:
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate swap liability	$	31,138	—	$	31,138	—

On February 12, 2008, the FASB issued Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS 157 to fiscal 2009 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis. The Company adopted this Staff Position beginning December 30, 2007 and deferred the application of SFAS 157 to goodwill and other intangible assets until the beginning of fiscal 2009.

On December 30, 2007, the Company adopted the provisions of FASB Statement No. 159, “The Fair Value Option for Financial Assets and Liabilities – Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits companies to make an irrevocable election to measure certain financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be recorded in earnings at each subsequent reporting date. Upon adopting SFAS 159, the Company did not elect the fair value option under this standard for any of its financial assets or liabilities.

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

14.

Comprehensive Income

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


	Three Months Ended						Nine Months Ended
	September 27, 2008			September 29, 2007			September 27, 2008			September 29, 2007
Net income	$	52,670		$	49,511		$	156,675		$	161,360
Foreign currency translation adjustments		(2,105	)		2,907			(2,280	)		7,822
Changes in fair value of derivatives		(628	)		(12,473	)		(1,127	)		(4,490	)

Comprehensive income	$	49,937		$	39,945		$	153,268		$	164,692

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

15.

Segment Data

The Company has two operating segments, each of which is a reportable segment: WWI and WW.com. These are two separate and distinct businesses for which discrete financial information is available. This discrete financial information is maintained and managed separately and is reviewed regularly by the chief operating decision maker. All intercompany activity is eliminated in consolidation.

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


	Three Months Ended September 27, 2008
	WWI		WW.com		Intercompany Eliminations			Consolidated
Revenues from external customers	$	304,418	$	48,200	$	—		$	352,618
Intercompany revenue		4,556		—		(4,556	)		—

Total revenue		308,974		48,200		(4,556	)		352,618

Depreciation and amortization		4,912		1,704		—			6,616

Operating income		92,138		15,698		—			107,836

Interest expense									21,342
Other expense, net									1,191
Provision for income taxes									33,151

Income before minority interest								$	52,152

Total assets	$	1,248,480	$	156,226	$	(294,307	)	$	1,110,399


	Three Months Ended September 29, 2007
	WWI		WW.com		Intercompany Eliminations			Consolidated
Revenues from external customers	$	298,366	$	39,084	$	—		$	337,450
Intercompany revenue		3,681		921		(4,602	)		—

Total revenue		302,047		40,005		(4,602	)		337,450

Depreciation and amortization		4,829		1,010		—			5,839

Operating income		92,344		14,155		—			106,499

Interest expense									28,309
Other income, net									(2,315	)
Provision for income taxes									30,994

Net income								$	49,511

Total assets	$	1,238,227	$	93,832	$	(294,571	)	$	1,037,488

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Nine Months Ended September 27, 2008
	WWI		WW.com		Intercompany Eliminations			Consolidated
Revenues from external customers	$	1,044,871	$	144,788	$	—		$	1,189,659
Intercompany revenue		13,613		105		(13,718	)		—

Total revenue		1,058,484		144,893		(13,718	)		1,189,659

Depreciation and amortization		14,630		4,637		—			19,267

Operating income		280,693		44,428		—			325,121

Interest expense									68,220
Other income, net									(1,264	)
Provision for income taxes									102,652

Income before minority interest								$	155,513

Total assets	$	1,248,480	$	156,226	$	(294,307	)	$	1,110,399


	Nine Months Ended September 29, 2007
	WWI		WW.com		Intercompany Eliminations			Consolidated
Revenues from external customers	$	1,008,486	$	114,642	$	—		$	1,123,128
Intercompany revenue		10,798		2,652		(13,450	)		—

Total revenue		1,019,284		117,294		(13,450	)		1,123,128

Depreciation and amortization		12,032		2,871		—			14,903

Operating income		309,820		35,715		—			345,535

Interest expense									82,558
Other income, net									(2,418	)
Early extinguishment of debt									3,021
Provision for income taxes									101,014

Net income								$	161,360

Total assets	$	1,238,227	$	93,832	$	(294,571	)	$	1,037,488

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

16.

Other Recently Issued Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), “Business Combinations”. This Statement established principles and requirements for how the acquirer (a) recognizes and measures the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree, (b) recognizes and measures the goodwill acquired and (c) determines what information to disclose. This Statement is effective for business combinations for which the acquisition date is on or after the beginning of fiscal 2009. The impact to the Company of adopting this standard will depend on the nature, terms and size of any business combinations completed after the effective date.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” This Statement establishes accounting and reporting standards for noncontrolling interests, sometimes referred to as minority interests. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or cash flows.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Quarterly Report on Form 10-Q, or Form 10-Q, unless the context indicates otherwise: “we”, “us”, “our” and the “Company” refers to Weight Watchers International, Inc. and all of its subsidiaries consolidated for purposes of its financial statements, including WeightWatchers.com, Inc. and all of its subsidiaries; “Weight Watchers International” or “WWI” refers to Weight Watchers International, Inc. and all of its subsidiaries other than WeightWatchers.com, Inc. and all of its and subsidiaries; “WeightWatchers.com” or “WW.com” refers to WeightWatchers.com, Inc. and all of its subsidiaries; “NACO” refers to our North American Company-owned operations; and “Artal” refers to Artal Group, S.A., together with its parent and subsidiaries.

Our fiscal year ends on the Saturday closest to December 31^st and consists of either 52- or 53-week periods. In this Form 10-Q:

•

“fiscal 2006” refers to our fiscal year ended December 30, 2006;

•

“fiscal 2007” refers to our fiscal year ended December 29, 2007;

•

“fiscal 2008” refers to our fiscal year ended January 3, 2009;

•

“fiscal 2009” refers to our fiscal year ended January 2, 2010;

•

“fiscal 2010” refers to our fiscal year ended January 1, 2011;

•

“fiscal 2011” refers to our fiscal year ended December 31, 2011; and

•

“fiscal 2012” refers to our fiscal year ended December 29, 2012.

You should read the following discussion in conjunction with our Annual Report on Form 10-K for fiscal 2007 that includes additional information about us, our results of operations, our financial position and our cash flows, and with our unaudited consolidated financial statements and related notes included in Item 1 of this Form 10-Q (collectively, the “Consolidated Financial Statements”). Except for historical information contained herein, this Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, in particular, the statements about our plans, strategies and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have used the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” and similar expressions in this Form 10-Q and the documents incorporated by reference in this Form 10-Q to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:

•

competition, including price competition and competition with self-help, pharmaceutical, surgical, dietary supplements and meal replacement products, and other weight-management brands, diets, programs and products;

•

risks associated with the relative success of our marketing and advertising;

•

risks associated with the continued attractiveness of our plans;

•

risks associated with general economic conditions and consumer confidence; and

•

the other factors discussed under “Item 1A. Risk Factors” of our Annual Report on Form 10-K for fiscal 2007.

You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause our results to differ materially from those expressed or suggested in any forward-looking statements. Except as required by law, we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances that occur after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated results presented in accordance with accounting principles generally accepted in the United States, or GAAP, we have disclosed non-GAAP measures of operating results that exclude certain items. Net revenues and net income, as well as global meeting fees, international meeting fees, gross profit and margin, operating income and margin and effective tax rate are discussed in this Form 10-Q both as reported (on a GAAP basis) and excluding the impact of the recent adverse U.K. VAT ruling against us. See Note 11 to the Consolidated Financial Statements for further details on this ruling. Selling, general and administrative expenses and operating income and margin are discussed in this Form 10-Q both as reported (on a GAAP basis) and excluding the expenses of our China joint venture. See Note 4 to the Consolidated Financial Statements for further details on our China joint venture. Our management believes these non-GAAP financial measures provide useful supplemental information to investors regarding the performance of our business and are useful for period-over-period comparisons of the performance of our business. While we believe that these financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation, or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies. See “Results of Operations for the Three Months ended September 27, 2008 compared to the Three Months ended September 29, 2007” and “Results of Operations for the Nine Months ended September 27, 2008 compared to the Nine Months ended September 29, 2007” in this Form 10-Q for reconciliations of these non-GAAP financial measures to the related GAAP measures.

CRITICAL ACCOUNTING POLICIES

For a discussion of the critical accounting policies affecting us, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” of our Annual Report on Form 10-K for fiscal 2007. Our critical accounting policies have not changed since the end of fiscal 2007.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2008 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 29, 2007

Certain key metrics were negatively affected by an offset to revenue recorded in the third quarter 2008 resulting from the adverse U.K. VAT ruling received by the Company during the second quarter 2008 with respect to the imposition of value added tax, or VAT, on meeting fees collected by our U.K. subsidiary. We discuss the U.K. VAT ruling further in Note 11 of our Consolidated Financial Statements. After accounting for the aforementioned U.K. VAT ruling, our reported revenues for the third quarter of 2008 were $352.6 million, an increase of $15.1 million, or 4.5%, from the prior year quarter. Our global meeting fees were $213.2 million, an increase of $8.7 million, or 4.3%, from the prior year quarter, and our international meeting fees were $66.9 million, an increase of $7.7 million, or 13.0%, from the prior year quarter. Our gross profit margin of 55.1% was also affected by the offset to revenue resulting from the U.K. VAT ruling, decreasing 60 basis points from the prior year’s margin of 55.7%. Our operating income margin was similarly affected, declining from 31.6% to 30.6%. Our operating income for the third quarter of 2008 was $107.8 million, an increase of $1.3 million from the prior year quarter. Our effective tax rate in the third quarter 2008 was also affected by the U.K. VAT ruling, increasing from 38.5% last year to 38.9% this year, due mainly to a shift in the mix of our earnings.

The table below shows our consolidated results for the three months ended September 27, 2008 as compared to the three months ended September 29, 2007 on both a GAAP basis and as adjusted to give effect to the U.K. VAT ruling. See “Non-GAAP Financial Measures” above. As a result of the adverse U.K. VAT ruling, our consolidated results for the three months ended September 27, 2008 include a negative adjustment of $1.8 million to revenues, offset by a tax benefit of $0.6 million.


	(In millions, except per share amounts)
	Three Months Ended September 27, 2008			Three Months Ended September 29, 2007			Increase/ (Decrease)
Revenues, net (as adjusted) ⁽¹⁾	$	354.4		$	337.5		$	16.9
VAT ruling impact on Q3 2008 ⁽¹⁾		(1.8	)		—			(1.8	)

Revenues, net of VAT ruling (as reported)		352.6			337.5			15.1
Cost of revenues		158.2			149.6			8.6

Gross profit		194.4			187.9			6.5
Marketing expenses		40.0			39.2			0.8
Selling, general and administrative expenses		46.6			42.2			4.4

Operating income		107.8			106.5			1.3
Interest expense, net		21.3			28.3			(7.0	)
Other expense/(income), net		1.2			(2.3	)		3.5

Income before income taxes and minority interest		85.3			80.5			4.8
Provision for income taxes		33.1			31.0			2.1

Income before minority interest		52.2			49.5			2.7
Minority interest		0.5			—			0.5

Net income	$	52.7		$	49.5		$	3.2

Weighted average diluted shares outstanding		78.1			79.6

Diluted EPS	$	0.67		$	0.62		$	0.05

(1)	With respect to the three months ended September 27, 2008, revenues, net (as adjusted) is a non-GAAP financial measure that adjusts net revenues to exclude the impact of the U.K. VAT adjustment. See “Non-GAAP Financial Measures” above for an explanation of our use of non-GAAP financial measures.

As noted above, net revenues for the three months ended September 27, 2008 were $352.6 million, an increase of $15.1 million, or 4.5%, from $337.5 million for the three months ended September 29, 2007. Excluding the impact of the U.K. VAT ruling on third quarter 2008 results, net revenues of $354.4 million were up $16.9 million, or 5.0%, versus the third quarter of last year. This includes a 0.6% benefit from favorable foreign currency exchange rates.

For the three months ended September 27, 2008, reported global meeting fees were $213.2 million, an increase of $8.7 million, or 4.3%, from the prior year quarter. Excluding the third quarter 2008 adjustment for the U.K. VAT ruling of $1.8 million, global meeting fees totaled $215.0 million in the third quarter of 2008 versus $204.5 million for the comparable prior year period, an increase of $10.5 million, or 5.1%, despite a 5.7% decline in global attendance volumes. Global attendance was 13.1 million in the third quarter of 2008 as compared to 13.9 million in the comparable prior year quarter, a 0.8 million decline. The increase in adjusted global meeting fees is attributable to the Monthly Pass commitment plan, or Monthly Pass. In addition to the U.S., we now have Monthly Pass internationally, in the U.K., Germany, and Australia, each of which launched in third quarter 2007, and in France, which launched during the second quarter of 2008. Monthly Pass drove third quarter 2008 paid weeks in the global meeting business to 21.1 million, a 7.3% increase versus the third quarter of 2007, and resulted in a 10.8% increase in the average meeting fee per attendee versus the prior year quarter on a constant currency basis.

In NACO, meeting fees for the three months ended September 27, 2008 were $146.3 million, up $1.0 million, or 0.7%, from $145.3 million for the three months ended September 29, 2007. Attendances declined 6.3% versus the prior year quarter to 8.1 million including the impact of acquisitions, and

declined 8.5% without the benefit of acquisitions. Paid weeks rose 1.0% as a result of the continued success of Monthly Pass, outpacing attendance and thereby driving a 7.0% increase in the average meeting fee per attendee versus the prior year period. In the U.S., the third quarter of 2008 marks the second anniversary of the launch of Monthly Pass.

Our reported international meeting fees were $66.9 million, an increase of $7.7 million, or 13.0%, from the prior year quarter. Excluding the adjustment for the U.K. VAT ruling, our international meeting fees were $68.7 million in the third quarter 2008, an increase of $9.5 million, or 16.0%, from $59.2 million in the comparable prior year period. On a local currency basis, adjusted international meeting fees rose 13.7% from the prior year period. Total paid weeks in our international meeting business increased 23.5% versus the prior year period, with the U.K. up 22.2% and Continental Europe up 27.7%, despite a 4.8% decline in international attendance. The drivers of meeting fee revenue and paid weeks growth were Monthly Pass, introduced in the U.K. and Germany in the third quarter of 2007, and in France in the second quarter of 2008, and concurrent price increases taken in the U.K. and France.

Global product sales for the three months ended September 27, 2008 were $68.6 million, down $3.6 million, or 5.0%, from $72.2 million for the three months ended September 29, 2007. International product sales increased to $34.4 million, up $0.9 million, or 2.7% above the prior year quarter in current dollars and 0.6% in local currencies, driven by increases in product sales per attendee. In NACO, product sales declined in the third quarter 2008, by 11.6%, or $4.5 million, to $34.2 million, primarily a result of the decline in attendance, coupled with lower sales per attendee of our more expensive one-time purchased products, such as starter kits and electronics.

Internet revenues, which include subscription revenue from sales of Weight Watchers Online and Weight Watchers eTools, as well as Internet advertising revenue, grew $9.1 million, or 23.6%, for the three months ended September 27, 2008, to $47.7 million, up from $38.6 million for the three months ended September 29, 2007. End-of-period active Weight Watchers Online subscribers increased 24.0%, from 609,000 at September 29, 2007 to 755,000 at September 27, 2008, partially as a result of increasing our investment in television advertising. Strong signup volumes in all geographies, combined with the launch of Weight Watchers Online in France and the Netherlands, drove this growth.

Other revenue, comprised primarily of licensing revenues and our publications, was $19.8 million for the three months ended September 27, 2008, an increase of $1.4 million, or 7.6%, from $18.4 million for the three months ended September 29, 2007. Licensing revenues increased $1.6 million globally, or 11.0%, primarily driven by our dairy product licenses in the U.S.

Third quarter 2008 franchise royalties were $2.2 million in North America and $1.1 million internationally. Total franchise royalties were $3.3 million, down 13.2% from $3.8 million in the prior year quarter. Excluding lost commissions resulting from our recent franchise acquisitions, franchise royalties declined 5.2%.

Cost of revenues was $158.2 million for the three months ended September 27, 2008, an increase of $8.6 million, or 5.7%, from $149.6 million for the three months ended September 29, 2007. Partially as a result of the offset to revenue resulting from the U.K. VAT ruling, our reported gross profit margin dropped 60 basis points, from 55.7% in the third quarter 2007 to 55.1% in the third quarter 2008. Excluding the adjustment for the U.K. VAT ruling, our gross profit was $196.2 million, an increase of $8.3 million, but our gross margin percentage declined 30 basis points to 55.4% from 55.7%. The decline was in the meeting business and was due to two factors: Monthly Pass ramp-up costs in Europe and lower product sales margins in NACO, driven by higher product and transport costs. The WeightWatchers.com business, which carries a structurally higher gross margin, experienced gross margin expansion and partially offset the meeting business decline.

Marketing expenses for the three months ended September 27, 2008 increased $0.8 million, or 2.0%, to $40.0 million, from $39.2 million for the three months ended September 29, 2007. We invested

in online and television marketing for WW.com, which proved successful in driving business, and increased advertising in Continental Europe. These increases were almost completely offset by lower spending in our U.S. and U.K. markets. Third quarter 2008 marketing expenses were 11.3% of revenues as compared to 11.6% in the same period last year.

Selling, general and administrative expenses were $46.6 million for the three months ended September 27, 2008 as compared to $42.2 million for the three months ended September 29, 2007, an increase of $4.4 million, or 10.4%. Foreign currency exchange rates represent 1.1% of this increase. Information technology costs remain the significant driver of the increase, a result of ongoing upgrades to our systems infrastructure. Higher expense in this area added approximately 5.4% to selling, general and administrative expense in the third quarter 2008 and reflects the combined impact of increased depreciation as we brought new information technology systems online, and higher maintenance costs related to new systems already put in service. Our reported selling, general and administrative expenses included $1.3 million of expense related to our China joint venture and were 13.2% of revenues for the third quarter 2008. Excluding the expenses associated with our China joint venture, selling, general and administrative expenses increased slightly, to 12.8% in the third quarter 2008 as compared to 12.5% in the same period last year.

Our reported operating income for the third quarter of 2008 was $107.8 million, an increase of $1.3 million from the prior year period. Our reported operating income margin declined 1.0% from 31.6% in the third quarter of 2007 to 30.6% in the third quarter 2008. Excluding the $1.8 million adjustment for the U.K. VAT ruling and $1.7 million of expenses of our China joint venture, our operating income for the third quarter 2008 was $111.3 million, as compared to $106.5 million in the third quarter of 2007, an increase of $4.8 million, or 4.5%. The adjusted operating income margin excluding the adjustment for the U.K. VAT ruling and expenses of our China joint venture was 31.4% in this year’s third quarter, a slight decrease versus 31.6% for the comparable period last year.

Interest expense was $21.3 million for the 2008 third quarter, a decrease of $7.0 million from $28.3 million in the third quarter 2007, due to a decrease of $111.3 million in our average debt outstanding and lower effective interest rates. The average effective interest rate for the 2008 third quarter declined to 5.10%, versus 6.38% in the prior year period, both as a result of a decline in LIBOR and the 0.25% reduction in our interest rate spread over LIBOR for the Term Loan A, Additional Term Loan A and Revolver, which took effect at the end of February 2008.

For the third quarter 2008, we reported other expense of $1.2 million, as compared to other income of $2.3 million in the third quarter of 2007. The change is primarily the result of the impact of foreign currency exchange rates on intercompany transactions.

The effective tax rate on our reported results for the third quarter of 2008 was 38.9%, as compared to 38.5% in the third quarter of 2007. Excluding the adjustment for the U.K. VAT ruling, our effective tax rate for the three months ended September 27, 2008 was 38.7%.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2008 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 29, 2007

Certain key metrics were significantly negatively affected by an offset to revenue recorded in the second and third quarters of 2008 resulting from the adverse U.K. VAT ruling received by the Company during the second quarter 2008 with respect to the imposition of VAT on meeting fees collected by our U.K. subsidiary. We discuss the U.K. VAT ruling in Note 11 of our Consolidated Financial Statements. After accounting for the aforementioned U.K. VAT ruling, our reported revenues for the nine months ended September 27, 2008 were $1,189.7 million, an increase of $66.6 million, or 5.9%, from the prior year period. Our global meeting fees were $693.6 million, an increase of $21.5 million, or 3.2%, from the prior year period, and our international meeting fees were $212.4 million, an increase of $1.5 million, or

0.7%, from the prior year period. Our gross profit margin of 54.7% was also affected by the offset to revenue resulting from the U.K. VAT ruling, decreasing 170 basis points from the prior year’s margin of 56.4%. Our operating income margin was similarly affected, declining from 30.8% to 27.3%. Our operating income for the nine months ended September 27, 2008 was $325.1 million, a decrease of $20.4 million, or 5.9%, from the prior year period. Our effective tax rate was also affected by the U.K. VAT ruling, increasing from 38.5% for the nine months ended September 29, 2007 to 39.8% for the nine months ended September 27, 2008, due mainly to a shift in the mix of our earnings.

The table below shows our consolidated results for the nine months ended September 27, 2008 as compared to the nine months ended September 29, 2007 on both a GAAP basis and as adjusted to give effect to the U.K. VAT ruling. See “Non-GAAP Financial Measures” above. As a result of the adverse U.K. VAT ruling, our consolidated results for the nine months ended September 27, 2008 include a negative aggregate adjustment of $34.2 million to revenues (including interest), offset by a tax benefit of $11.0 million.


	(In millions, except per share amounts)
	Nine Months Ended September 27, 2008			Nine Months Ended September 29, 2007			Increase/ (Decrease)
Revenues, net (as adjusted) ⁽¹⁾	$	1,223.9		$	1,123.1		$	100.8
VAT ruling impact on Q1-Q3 2008 ⁽¹⁾		(6.3	)		—			(6.3	)
VAT ruling impact on prior years 2005-2007 ⁽¹⁾		(27.9	)		—			(27.9	)

Revenues, net of VAT ruling (as reported)		1,189.7			1,123.1			66.6
Cost of revenues		539.3			489.5			49.8

Gross profit		650.4			633.6			16.8
Marketing expenses		186.6			163.6			23.0
Selling, general and administrative expenses		138.7			124.5			14.2

Operating income		325.1			345.5			(20.4	)
Interest expense, net		68.2			82.6			(14.4	)
Other income, net		(1.3	)		(2.5	)		1.2
Early extinguishment of debt		—			3.0			(3.0	)

Income before income taxes and minority interest		258.2			262.4			(4.2	)
Provision for income taxes		102.7			101.0			1.7

Income before minority interest		155.5			161.4			(5.9	)
Minority interest		1.2			—			1.2

Net income	$	156.7		$	161.4		$	(4.7	)

Weighted average diluted shares outstanding		79.0			81.6

Diluted EPS	$	1.98		$	1.98		$	—

(1)	With respect to the nine months ended September 27, 2008, revenues, net (as adjusted) is a non-GAAP financial measure that adjusts net revenues to exclude the impact of the U.K. VAT adjustment. See “Non-GAAP Financial Measures” above or an explanation of our use of non-GAAP financial measures.

As noted above, net revenues for the nine months ended September 27, 2008 were $1,189.7 million, an increase of $66.6 million, or 5.9%, from $1,123.1 million for the nine months ended September 29, 2007. Excluding the full impact of the U.K. VAT ruling on current and prior year periods, net revenues of $1,223.9 million increased $100.8 million, or 9.0%, versus the nine months ended September 29, 2007. This includes a $29.1 million, or 2.6%, benefit from favorable foreign currency exchange rates.

The U.K. VAT ruling as it currently stands will negatively impact net revenues on an ongoing basis. For 2008, we estimate an annualized impact to net revenues of $8.0 million. The table above shows that $6.3 million of the total charge related to the U.K. VAT ruling pertained specifically to the first nine months of 2008. Earned net revenues in the first nine months of 2008, reduced for this $6.3 million portion of the U.K. VAT charge, were $1,217.6 million.

For the nine months ended September 27, 2008, reported global meeting fees were $693.6 million, an increase of $21.5 million, or 3.2%, from the prior year. Excluding the aggregate adjustment for the U.K. VAT ruling of $34.2 million, global meeting fees totaled $727.8 million in the first nine months of 2008 versus $672.1 million for the comparable prior year period, an increase of $55.7 million, or 8.3%, including the favorable impact of foreign currency translation. Global attendance was 47.2 million in the first nine months of 2008 as compared to 49.7 million in the comparable prior year period, a 2.5 million, or 5.0%, decline. The increase in global meeting fees is attributable to Monthly Pass. We now have Monthly Pass outside the U.S., in the U.K., Germany, and Australia, each of which launched in third quarter 2007, and in France, which launched during the second quarter of 2008. Monthly Pass drove paid weeks in the global meeting business to 69.8 million in the first nine months of 2008, a 7.7% increase versus the first nine months of 2007, and resulted in an 11.3% increase in the average meeting fee per attendee versus the prior year period on a constant currency basis.

In NACO, meeting fees for the nine months ended September 27, 2008 were $481.2 million, up $20.0 million, or 4.3%, from $461.2 million for the nine months ended September 29, 2007. Attendances declined 5.0% versus the prior year period to 28.6 million including the impact of acquisitions, and declined 6.8% without the benefit of acquisitions. Paid weeks rose 4.9% as a result of the continued success of Monthly Pass, outpacing attendance and thereby driving a 9.9% increase in the average meeting fee per attendee.

Our reported international meeting fees were $212.4 million for the nine months ended September 27, 2008, an increase of $1.5 million, or 0.7%, from the prior year period. Excluding the adjustment for the U.K. VAT ruling, our international meeting fees were $246.6 million for the nine months ended September 27, 2008, an increase of $35.7 million, or 16.9%, from $210.9 million for the nine months ended September 29, 2007. On a local currency basis, international meeting fees rose 9.6% compared to the prior year period. Total paid weeks in our international meeting business increased 14.0% versus the prior year period, with the U.K. up 16.5% and Continental Europe up 14.6%. The introduction of Monthly Pass in the U.K. and Germany in the third quarter of 2007, coupled with a concurrent price increase in the U.K., drove international meeting fee revenue growth in the first nine months of 2008, despite a 5.0% decline in attendances.

Global product sales for the nine months ended September 27, 2008 were $276.6 million, up $9.7 million, or 3.6%, from $266.9 million for the nine months ended September 29, 2007, driven by an increase in product sales per attendee across all of our markets. A regular strategy of new product launches, rotation of product offerings, and updating our enrollment products has resulted in the continuing trend of growth in product sales per attendee. Internationally, product sales were strong, increasing 11.1%, or $13.5 million, from the nine months ended September 29, 2007 to $135.3 million for the nine months ended September 27, 2008. In local currencies, international product sales rose 3.6%, as compared with the prior year period. In NACO, product sales declined 2.6%, or $3.8 million, to $141.3 million in the first nine months of 2008.

Internet revenues, which include subscription revenue from sales of Weight Watchers Online and Weight Watchers eTools, as well as Internet advertising revenue, grew $30.0 million, or 26.6%, to $142.6 million for the nine months ended September 27, 2008 from $112.6 million for the nine months ended September 29, 2007. End-of-period active Weight Watchers Online subscribers increased 24.0%, from 609,000 at September 29, 2007 to 755,000 at September 27, 2008. Strong signup volumes in all geographies, combined with the launch of Weight Watchers Online in France and the Netherlands, contributed to this growth.

Other revenue, comprised primarily of licensing revenues and our publications, was $63.8 million for the nine months ended September 27, 2008, an increase of $5.8 million, or 10.0%, from $58.0 million for the nine months ended September 29, 2007. Licensing revenues increased $6.2 million globally, or 14.0%, as a result of higher royalties on our existing ice cream and yogurt licenses and new product licenses in the U.S. as well as higher royalties on various other products in the U.K.

Franchise royalties in the first nine months of 2008 were $8.8 million in North America and $4.3 million internationally. Total franchise royalties were $13.1 million in the first nine months of 2008, and were $0.4 million lower than the prior year period; however, excluding lost commissions resulting from our recent franchise acquisitions, franchise royalties rose 3.4%.

Cost of revenues was $539.3 million for the first nine months of 2008, an increase of $49.8 million, or 10.2%, from $489.5 million for the first nine months of 2007. Primarily as a result of the offset to revenue resulting from the U.K. VAT ruling, our reported gross profit margin dropped 170 basis points, from 56.4% in the first nine months of 2007 to 54.7% in the first nine months of 2008. Excluding the adjustment for the U.K. VAT ruling, our gross margin was 55.9% for the first nine months of 2008. While gross profit in absolute dollars increased $51.0 million to $684.6 million, our adjusted gross profit margin declined 50 basis points. The decline was primarily in the meeting business and was due to start-up costs for Monthly Pass in Europe; lower product sales margins in NACO driven by product mix and higher transport costs; and lower meeting averages in some of our countries. The impact of this decline was partially offset by the continued growth of the WW.com business, which carries a structurally higher gross margin.

Marketing expenses for the first nine months of 2008 rose $23.0 million, or 14.1%, to $186.6 million, from $163.6 million for the first nine months of 2007, with foreign currency exchange rates accounting for $5.4 million of the increase. We made significant marketing investments in the WW.com business during the first nine months of 2008 which proved successful, including using television advertising for the first time in the U.K. and Germany, and increasing our online advertising in all WeightWatchers.com geographies. In the meeting business, our international geographies experienced an increase in marketing as well, driven by a combination of more expensive primetime television media coupled with additional television advertising in Continental Europe, partially to support the launch of our new programs there. On a reported basis, marketing expenses for the first nine months of 2008 were 15.7% of revenues. Excluding the adjustment to revenues for the U.K. VAT ruling, our marketing expenses were 15.2% of revenues for the nine months ended September 27, 2008, as compared to 14.6% in the same period last year.

Selling, general and administrative expenses were $138.7 million for the first nine months of 2008, as compared to $124.5 million for the first nine months of 2007, an increase of $14.2 million, or 11.4%. Information technology costs remain the significant driver of the increase, representing our ongoing investment to upgrade our systems infrastructure. Higher expense in this area resulted from a combination of increased depreciation as we brought new information technology systems online, and higher maintenance costs related to new systems already put in service. Foreign currency exchange rates as well as expenses of our China joint venture also contributed to the increase. On a reported basis, selling, general and administrative expenses for the first nine months of 2008 were 11.7% of revenues. Excluding the adjustment to revenues for the U.K. VAT ruling, selling, general and administrative expenses were up slightly versus last year as a percentage of net revenues, at 11.3% for the nine months ended September 27, 2008, versus 11.1% in the same period of 2007.

Our reported operating income for the nine months ended September 27, 2008 was $325.1 million, a decrease of $20.4 million, or 5.9%, as compared to the prior year period. Our reported operating income

margin declined from 30.8% for the nine months ended September 29, 2007 to 27.3% for the nine months ended September 27, 2008. Excluding the adjustment for the U.K. VAT ruling, our operating income was $359.3 million for the first nine months of 2008 as compared to $345.5 million in the prior year period, an increase of $13.8 million, or 4.0%. The adjusted operating income margin for the nine months ended September 27, 2008 was 29.4%, a decrease of 140 basis points from 30.8% in the comparable period last year. This reduction in margin was the result of the decline in gross margin coupled with higher marketing expense.

Interest expense was $68.2 million for the nine months ended September 27, 2008, a decrease of $14.4 million, or 17.4%, from $82.6 million for the nine months ended September 29, 2007, due to lower effective interest rates and a $48.9 million decrease in our average debt outstanding. The average effective interest rate for the nine months ended September 27, 2008 declined significantly to 5.43%, versus 6.42% in the comparable prior year period, as a result of a decline in LIBOR and the 0.25% reduction in our interest rate spread over LIBOR for the Term Loan A, Additional Term Loan A and the Revolver, which took effect at the end of February 2008.

For the nine months ended September 27, 2008, we reported other income of $1.3 million, as compared to $2.5 million in the comparable prior year period. The decrease is primarily the result of the impact of foreign currency exchange rates on intercompany transactions.

In the first quarter of 2007, we recorded a charge of $3.0 million for early extinguishment of debt. This charge reflected the write-off of deferred financing costs associated with the WW.com Credit Facilities, which were paid down during that period (as further explained in Note 6 to the Consolidated Financial Statements).

The effective tax rate on our reported results for the first nine months of 2008 was 39.8%, as compared to 38.5% in the first nine months of 2007. Excluding the adjustment for the U.K. VAT ruling, our effective tax rate for the nine months ended September 27, 2008 was 38.9%.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

For the nine months ended September 27, 2008, cash and cash equivalents were $57.8 million, an increase of $18.0 million from the end of fiscal 2007. Cash flows provided by operating activities were $234.1 million, exceeding the period’s $156.7 million net income by $77.4 million. The excess of cash over net income arose from changes in our working capital, as described below, and differences between book and cash taxes. Funds used for investing and financing activities combined totaled $213.9 million. Investing activities utilized $63.7 million, including $39.7 million for franchise acquisitions and $23.9 million for capital spending. Cash used for financing activities totaled $150.2 million, including $116.0 million used to repurchase 2.8 million shares of our common stock, dividend payments of $41.6 million and net long-term debt payments of $5.6 million.

For the nine months ended September 29, 2007, cash and cash equivalents were $48.7 million, an increase of $11.2 million from the end of fiscal 2006. Cash flows provided by operating activities were $265.3 million. The cash provided by operations exceeded our net income of $161.4 million, with the excess arising from changes in our working capital, in particular a significant increase in deferred revenues, and differences between book and cash taxes. Funds used for investing and financing activities combined totaled $256.5 million. Investing activities utilized $38.2 million, primarily for acquisitions of $16.8 million, and capital spending of $21.3 million. Cash used for financing activities totaled $218.3 million. This included the repurchase of 19.1 million shares of our common stock for $1,033.6 million in connection with our Tender Offer and share repurchase from Artal (as further explained in “Liquidity and Capital Resources–Stock Transactions”) and dividend payments of $44.6 million, financed primarily by net proceeds from borrowings of $837.1 million.

Balance Sheet

Comparing our balance sheet at September 27, 2008 with that at December 29, 2007, our cash balance increased by $18.0 million. Our working capital deficit at September 27, 2008 was $269.7 million, including $57.8 million of cash (as discussed above), as compared to $172.1 million at December 29, 2007, including $39.8 million of cash. Excluding the change in cash, the working capital deficit increased by $115.6 million during the first nine months of 2008.

Of the $115.6 million increase in negative working capital, $96.3 million represented increases in the current portion of our long-term debt, $7.6 million represented an increase in our derivative payable due to changes in the interest rate yield curve and $37.5 million represented the increase in the U.K. VAT liability. Negative working capital decreased $3.7 million as a result of higher deferred taxes. The remaining $22.1 million related to operational items and is in keeping with the normal seasonality of the business, notably a $12.5 million reduction in inventory and a $23.9 million increase in deferred revenue for the growth in member prepayments associated with our commitment plans, notably Monthly Pass. These changes were partially offset by a $51.9 million increase in net payables and accrued expenses and $6.6 million growth in our receivables balance.

Long-Term Debt

As of September 27, 2008, our credit facilities consisted of Term Loan A, Additional Term Loan A, Term Loan B, and the Revolver, collectively, the WWI Credit Facility. At September 27, 2008, we had debt of $1,642.5 million and had additional availability under our $500.0 million Revolver of $363.0 million.

At September 27, 2008 and December 29, 2007, our debt consisted entirely of variable-rate instruments. The average interest rate on our debt was approximately 4.0% and 6.5% per annum at September 27, 2008 and December 29, 2007, respectively.

The following schedule sets forth our long-term debt obligations and interest rates at September 27, 2008:

Long-Term Debt

At September 27, 2008

(Balances in millions)


	Balance		Interest Rate
Revolver due 2011	$	135.0	3.92	%
Term Loan A due 2011		315.0	3.81	%
Additional Term Loan A due 2013		700.0	3.81	%
Term Loan B due 2014		492.5	4.31	%

Total Debt		1,642.5
Less Current Portion		141.9

Total Long-Term Debt	$	1,500.6

The Term Loan A, Additional Term Loan A and the Revolver bear interest at an initial rate equal to LIBOR plus 1.25% per annum or, at our option, the alternate base rate (as defined in the WWI Credit Facility agreements). During the first quarter of fiscal 2008, the interest rate on the Term Loan A,

Additional Term Loan A and the Revolver was reduced to LIBOR plus 1.0% per annum or, at our option, the alternate base rate (as defined in the WWI Credit Facility agreements). The Term Loan B bears interest at an initial rate equal to LIBOR plus 1.5% per annum or, at our option, the alternate base rate (as defined in the WWI Credit Facility agreements). In addition to paying interest on outstanding principal under the WWI Credit Facility, we are required to pay a commitment fee to the lenders under the Revolver with respect to the unused commitments at an initial rate equal to 0.25% per year. During the first quarter of fiscal 2008, this commitment fee was reduced to 0.20% per annum.

The WWI Credit Facility contains customary covenants, including covenants that, in certain circumstances, restrict our ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or substantially all of our assets. The WWI Credit Facility also requires us to maintain specified financial ratios and satisfy certain financial condition tests. At September 27, 2008, we were in compliance with all of the required financial ratios and also met all of the financial condition tests and we expect to continue to do so for the foreseeable future. The WWI Credit Facility contains customary events of default. Upon the occurrence of an event of default under the WWI Credit Facility, the lenders thereunder may cease making loans and declare amounts outstanding to be immediately due and payable. The WWI Credit Facility is guaranteed by certain of our existing and future subsidiaries. Substantially all of our assets collateralize the WWI Credit Facility.

On March 20, 2008, Standard & Poor’s affirmed its “BB+” rating on the WWI Credit Facility. On March 31, 2008, Moody’s affirmed its “Ba1” rating for the WWI Credit Facility.

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


Total Debt Obligation (Including Current Portion) As of September 27, 2008 (in millions)



Remainder of 2008	$	20.0
2009		162.5
2010		215.0
2011		490.0
2012		229.0
Thereafter		526.0

Total	$	1,642.5

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

Dividends

We have issued a quarterly cash dividend of $0.175 per share every quarter beginning with the first quarter of fiscal 2006. Prior to these dividends, we had not declared or paid any cash dividends on our common stock since our acquisition by Artal in 1999.

Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors, after taking into account our financial results, capital requirements and other factors they may deem relevant. Our Board of Directors may decide at any time to increase or decrease the amount of dividends or discontinue the payment of dividends based on these factors. The WWI Credit Facility also contains restrictions on our ability to pay dividends on our common stock. The WWI Credit Facility

provides that we are permitted to pay dividends and extraordinary dividends so long as we are not in default under our credit agreement. However, payment of extraordinary dividends shall not exceed $150 million in any fiscal year if net debt to EBITDA (as defined in the WWI Credit Facility agreements) is greater than 3.75:1 and investment grade rating date (as defined in the WWI Credit Facility agreements) has not occurred. We do not expect this restriction to impair our ability to pay dividends, but it could do so. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Long-Term Debt” for further description of the WWI Credit Facility.

Stock Transactions

On December 18, 2006, we commenced a Tender Offer in which we sought to acquire up to 8.3 million shares of our common stock at a price between $47.00 and $54.00 per share. Prior to the Tender Offer, we entered into an agreement with Artal whereby Artal agreed to sell to us at the same price as was determined in the Tender Offer the number of our shares necessary to keep its percentage ownership in us at substantially the same level after the Tender Offer. Artal also agreed not to participate in the Tender Offer so that it would not affect the determination of the price in the Tender Offer.

The Tender Offer expired at midnight on January 18, 2007, and on January 26, 2007 we repurchased approximately 8.5 million shares at a price of $54.00 per share. The repurchased 8.5 million shares consisted of the 8.3 million shares we offered to purchase and 0.2 million shares purchased pursuant to our right to purchase up to an additional 2% of the outstanding shares as of November 30, 2006. On February 2, 2007, we repurchased 10.5 million of our shares from Artal at a purchase price of $54.00 per share pursuant to our prior agreement with Artal.

On October 9, 2003, our Board of Directors authorized a program to repurchase up to $250.0 million of our outstanding common stock. On each of June 13, 2005 and May 25, 2006, our Board of Directors authorized adding an additional $250.0 million to this plan. The repurchase program allows for shares to be purchased from time to time in the open market or through privately negotiated transactions. No shares will be purchased from Artal under the program. During the nine months ended September 27, 2008, we purchased 2.8 million shares of our common stock in the open market under the repurchase program at a total cost of $116.0 million. Other than the aforementioned Tender Offer and share repurchase from Artal, we purchased no shares of our common stock during the nine months ended September 29, 2007.

Factors Affecting Future Liquidity

Any future acquisitions, joint ventures or other similar transactions could require additional capital and we cannot be certain that any additional capital will be available on acceptable terms or at all. Our ability to fund our capital expenditure requirements, interest, principal and dividend payment obligations and working capital requirements and to comply with all of the financial covenants under our debt agreements depends on our future operations, performance and cash flow. These are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

OFF-BALANCE SHEET TRANSACTIONS

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

SEASONALITY

Our business is seasonal, with revenues generally decreasing at year end and during the summer months. Our advertising schedule supports the three key enrollment-generating seasons of the year: winter, spring and fall, with winter having the highest concentration of advertising spending. The timing of certain holidays, particularly Easter, which precedes the spring marketing campaign and occurs between March 22 and April 25, may affect our results of operations and the year-to-year comparability of our results. For example, in 2008, Easter fell on March 23, which means that our spring marketing campaign began in the first quarter of fiscal 2008 as opposed to the second quarter of fiscal 2007. Our operating income for the first half of the year is generally the strongest. While WW.com experiences similar seasonality in terms of new subscriber signups, its revenue tends to be less seasonal because it amortizes subscription revenue over the related subscription period.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” This statement amends and expands the disclosure requirements related to derivative instruments and hedging activities by requiring qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements. We are required to adopt the provisions of this statement at the beginning of fiscal 2009 and we do not expect this adoption to have a material impact on our financial position, results of operations or cash flows.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interest in Consolidated Financial Statements – an amendment of ARB No. 51.” This statement establishes accounting and reporting standards for noncontrolling interests, sometimes referred to as minority interests. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the adoption of this standard to have a material impact on our financial position, results of operations or ongoing cash flows.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), “Business Combinations”. This statement established principles and requirements for how the acquirer (a) recognizes and measures the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree, (b) recognizes and measures the goodwill acquired and (c) determines what information to disclose. This statement is effective for business combinations for which the acquisition date is on or after the beginning of fiscal 2009. The impact to us of adopting this standard will depend on the nature, terms and size of any business combinations completed after the effective date.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to foreign currency fluctuations and interest rate changes. Since 100% of our debt is variable rate-based, any changes in market interest rates will cause a direct proportional change in our interest expense associated with our long-term debt. Accordingly, we have entered into interest rate swaps to hedge a substantial portion of our variable rate debt, which mitigate a substantial portion of the associated market risk.

For a more detailed discussion of our quantitative and qualitative disclosures about market risks that affect us, see Item 7A. “Quantitative and Qualitative Disclosure About Market Risk” of our Annual Report on Form 10-K for fiscal 2007. Our exposure to market risks has not changed materially since the end of fiscal 2007.

ITEM 4.

CONTROLS AND PROCEDURES

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

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

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

U.K. VAT Matter

On July 7, 2006, we filed an amended notice of appeal with the U.K. VAT and Duties Tribunal, or VAT Tribunal, appealing a ruling by Her Majesty’s Revenue and Customs, or HMRC, that from April 1, 2005 Weight Watchers meetings fees in the U.K. should be fully subject to 17.5% standard rated value added tax, or VAT. For over a decade prior to April 1, 2005, HMRC had determined that Weight Watchers meetings fees in the U.K. were only partially subject to 17.5% VAT. It is our view that this prior determination by HMRC should remain in effect and this view was further supported on March 8, 2007 when the VAT Tribunal ruled that Weight Watchers meetings in the U.K. should only be partially subject to 17.5% VAT. On May 3, 2007, HMRC appealed to the High Court of Justice Chancery Division, or the High Court, against the VAT Tribunal’s ruling in our favor, and the appeal at the High Court was heard in November 2007.

On January 21, 2008, the High Court ruled by denying HMRC’s appeal in part by upholding the VAT Tribunal’s decision to the extent that, at the first meeting which members attend, meetings fees associated with such meeting are partially subject to 17.5% VAT. However, the High Court allowed HMRC’s appeal in relation to meetings subsequent to the first meeting and concluded that meetings fees associated with subsequent meetings are fully subject to 17.5% VAT. On April 1, 2008, we filed an appeal to the Court of Appeal in part against the High Court’s ruling in relation to meetings subsequent to the first meeting. On April 16, 2008, HMRC filed an appeal to the Court of Appeal in part against the High Court’s ruling in relation to the first meeting which members attend. Following a hearing before the Court of Appeal on June 11 and 12, 2008, the Court of Appeal issued a ruling on June 25, 2008 that Weight Watchers meetings fees in the U.K., including fees relating to the first meeting members attend, were fully subject to 17.5% VAT, thus reversing in its entirety the U.K. VAT Tribunal’s 2007 decision in our favor.

In light of the Court of Appeal’s ruling that Weight Watchers meetings fees in the U.K. were fully subject to 17.5% VAT and in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS 5”), we recorded a charge of approximately $32.5 million as an offset to revenue in the second quarter of fiscal 2008 for possible U.K. VAT liability (including interest) in excess of reserves previously recorded. Beginning in the third quarter of fiscal 2008, in accordance with SFAS 5, we recorded VAT charges associated with U.K. meeting fees as earned, consistent with the Court of Appeal’s ruling. We intend to continue to defend the VAT Tribunal’s 2007 ruling and on July 23, 2008 sought permission from the U.K. House of Lords to appeal the Court of Appeal’s recent ruling. Although it is possible that our cash flows in a particular fiscal quarter may be adversely affected by this matter, it is the opinion of management that the ultimate disposition of this matter will not have a material impact on our financial position or ongoing results of operations or cash flows.

U.K. Self-Employment Matter

On July 27, 2007, HMRC issued to us notices of determination and decisions that, for the period April 2001 to April 2007, our leaders and certain other service providers should have been classified as employees for tax purposes and, as such, we should have withheld tax from the leaders and certain other service providers pursuant to the PAYE and NIC collection rules and remitted such amounts to the HMRC. As of November 3, 2008, the assessment associated with the notices of determination and decisions is approximately $26 million. It is our view that the U.K. leaders and other service providers identified by HMRC in its notices and decisions are self-employed and no withholding by us was required. On September 3, 2007, we appealed HMRC’s notices and decisions as to these classifications and against any amount of PAYE and NIC liability claimed to be owed by us and on July 22, 2008, filed this appeal with the U.K. Special Commissioners. We intend to vigorously pursue this appeal and, although there can be no assurances, we believe we will ultimately prevail in our appeal. If such appeal is unsuccessful, it is possible that our cash flows and results of operations in a particular fiscal quarter may

be adversely affected by this matter. However, it is the opinion of management that the disposition of this matter will not have a material impact on our financial position or ongoing results of operations or cash flows.

Due to the nature of its activities, we are also, at times, subject to pending and threatened legal actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of all such matters is not expected to have a material effect on our results of operations, financial condition or cash flows.

ITEM 1A.

RISK FACTORS

There have been no material changes in the risk factors at September 27, 2008 from those detailed in the Company’s Annual Report on Form 10-K filed with the SEC for fiscal 2007.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
June 29 - August 2	—	$	—	—	$	162,983,634
August 3 - August 30	931,100		39.31	931,100		126,386,144
August 31 - September 27	662,100		39.14	662,100		100,473,445

Total	1,593,200	$	39.24	1,593,200		100,473,445

(1)	For a discussion of the Company’s program to repurchase its common stock, see Note 7 to the Consolidated Financial Statements.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Nothing to report under this item.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Nothing to report under this item.

ITEM 5.

OTHER INFORMATION

Nothing to report under this item.

ITEM 6.

EXHIBITS



Exhibit 10.1		Intellectual Property License Agreement, dated as of July 7, 2008, by and between Weight Watchers International, Inc. and Weight Watchers Danone China Limited.

Exhibit 31.1		Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.

Exhibit 31.2		Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.

Exhibit 32.1		Certification pursuant to 18 U.S.C. Section 1350.

Exhibit 32.2		Certification pursuant to 18 U.S.C. Section 1350.

SIGNATURES

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


	WEIGHT WATCHERS INTERNATIONAL, INC.

Date: November 6, 2008	By:	/s/ DAVID P. KIRCHHOFF
		David P. Kirchhoff
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

Date: November 6, 2008	By:	/s/ ANN M. SARDINI
		Ann M. Sardini
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EXHIBIT INDEX


Exhibit Number		Description
Exhibit 10.1		Intellectual Property License Agreement, dated as of July 7, 2008, by and between Weight Watchers International, Inc. and Weight Watchers Danone China Limited.

Exhibit 31.1		Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.

Exhibit 31.2		Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Exchange Act.

Exhibit 32.1		Certification pursuant to 18 U.S.C. Section 1350.

Exhibit 32.2		Certification pursuant to 18 U.S.C. Section 1350.

EX-10.1 2 dex101.htm INTELLECTUAL PROPERTY LICENSE AGREEMENT, DATED AS OF JULY 7, 2008 Intellectual Property License Agreement, dated as of July 7, 2008

EXHIBIT 10.1

Execution Copy

July 7, 2008

Weight Watchers International, Inc.

and

Weight Watchers Danone China Limited

INTELLECTUAL PROPERTY LICENSE AGREEMENT

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS		2

ARTICLE II RIGHT TO USE THE LICENSED IP		7

ARTICLE III INTELLECTUAL PROPERTY RIGHTS		10

ARTICLE IV KNOWLEDGE TRANSFER; ADDITIONAL SERVICES		12

ARTICLE V ROYALTIES, ACCOUNTING AND AUDIT RIGHTS		15

ARTICLE VI QUALITY CONTROL		17

ARTICLE VII REPRESENTATIONS, WARRANTIES AND COVENANTS		22

ARTICLE VIII ASSIGNMENT		24

ARTICLE IX CONFIDENTIALITY		24

ARTICLE X TERM AND TERMINATION		25

ARTICLE XI MISCELLANEOUS		27

SCHEDULE A LLC MARKS

ANNEX 1 F & B LICENSE AGREEMENT

INTELLECTUAL PROPERTY LICENSE

THIS INTELLECTUAL PROPERTY LICENSE AGREEMENT (this “Agreement”), dated this 7th day of July, 2008, is entered into by and between Weight Watchers International, Inc., a company duly organized under the laws of Virginia, (“Licensor”), and Weight Watchers Danone China Limited, a company duly organized and existing under the laws of Hong Kong (the “Company”, and together with Licensor, each a “Party” and collectively, the “Parties”).

RECITALS

WHEREAS, Licensor has expended considerable time, effort and resources developing an international network of businesses throughout the world devoted to weight management (the “Weight Watchers Business”);

WHEREAS, Licensor owns valuable intellectual property and know-how used in connection with the marketing and operation of the Weight Watchers Business;

WHEREAS, Weight Watchers Asia Holdings Ltd. (“WTW”) and DAP (as defined herein) have entered into a Joint Venture Agreement on February 5, 2008 (and, together with any and all amendments thereto, the “Joint Venture Agreement”) setting forth the terms and conditions of their investment in the Company;

WHEREAS, the Company has been formed by WTW and DAP as of March 7, 2008 for the purpose of developing and operating the Approved Lines (as defined herein) in the Territory (as defined herein);

WHEREAS, in connection with the Joint Venture Agreement, Licensor has agreed to license the Licensed IP (as defined herein) to the Company and to provide certain know-how to the Company for use in connection with the Approved Lines in accordance with the terms and conditions set forth herein; and

WHEREAS, the Company wishes to exploit the Licensed IP and certain know-how pursuant to the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the mutual agreements and covenants set forth herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere herein, as used in this Agreement, the following terms have the meanings specified below when used in this Agreement:

“Affiliate” of a Person (the “Subject Person”) means any other Person directly or indirectly Controlling, Controlled by, or under common Control with, the Subject Person; provided, however, (i) the Company and its Subsidiaries shall not be deemed Affiliates of Licensor or DAP (ii) Licensor and DAP shall not be deemed Affiliates of each other, and (iii) Artal and Artal’s Affiliates, other than Licensor or subsidiaries of Licensor, shall not be deemed Affiliates of Licensor.

“Approved Lines” means (i) the operation of Classes; (ii) the manufacture and in-Class sale of products, including the Food and Beverage Products (the “Class Products”) branded with one or more of the trademarks, trade names, logos, symbols, insignia, trade dress or other source identifiers owned by or licensed to Licensor (collectively, the “Marks”); (iii) the production, publication and distribution of a print magazine branded with one or more of the Marks; (iv) the offering to individuals via the Electronic Medium of (a) the Class Products or (b) electronic weight reduction or weight maintenance subscription products similar to those offered by Licensor outside the Territory (the items referred to in clauses (ii) through (iv) of this definition shall be referred to together as the “Licensed Products”); and (v) any extensions, alterations, modifications or expansions of the foregoing approved pursuant to Section 2.3(b).

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the PRC, Hong Kong or the U.S. are required or authorized by law or executive order to be closed.

“Classes” means the presentations of the Licensed Techniques, through a structured program defined by Licensor, in live, in-person classes held at physical locations.

“Commercial Launch Date” means the date that is six (6) months from the Soft Launch Date.

“Confidential Information” means (i) the User Data, Standards, Licensed IP and all Modifications and Company Improvements; (ii) all information disclosed by a Party (the “Disclosing Party”) or its Representatives to the other Party (the “Receiving Party”) or any of Representatives, including all information concerning the Disclosing Party’s, or any of its Affiliates’, businesses, finances, designs, advertising, marketing, sales, plans for future developments and internal processes or systems whether furnished before or after the date hereof and whether furnished in oral, written, visual, machine readable or any other form, and regardless of the manner in which it is furnished (including by fax and any other form of electronic delivery); and (iii) any document or material prepared by the Receiving Party or its Representatives based on any confidential

information described in sub-paragraphs (i) and (ii) of this definition and all copies, extracts, reproductions, summaries or analyses of any such information (whether created by the Receiving Party, its Representatives or any other Person), including all digital and electronic copies. Confidential Information shall not include information that: (a) is already known to the Receiving Party without restriction on use or disclosure prior to receipt of such information from the Disclosing Party or its Representatives; (b) is or becomes part of the public domain other than by breach of this Agreement, or other wrongful act, by the Receiving Party or its Representatives (and in the case of the Company, its Subsidiaries); (c) is developed by the Receiving Party (and in the case of the Company, a Subsidiary) independently of and without reference to any Confidential Information; or (d) is received by the Receiving Party (and in the case of the Company, its Subsidiary) from a third party who is not under any obligation to maintain the confidentiality of such information. The Receiving Party shall have the obligation of demonstrating that such an exception to the definition of Confidential Information exists.

“Control” with respect to any Person, means (i) holding, whether individually or in concert with one or more other Persons, directly or indirectly, any fraction of the capital of such Person giving the holder the majority of the voting rights of such Person; (ii) holding alone the majority of the voting rights of such Person (including pursuant to the provisions of a shareholders’, investors’ or other equity holders’ agreement, undertaking or arrangement); (iii) being able, whether individually or in concert with one or more other Persons, to effectively determine decisions taken at any such Person’s shareholders’ or other equity holders’ meetings (or pursuant to any written consent or other action in lieu thereof); or (iv) being a shareholder or other equity holder of such Person and having, whether individually or in concert with one or more other Persons, the power to appoint a majority of the members of the board of directors, management, supervisory or administrative body of such Person. The terms “Controls”, “Controlled” and “Controlling” shall have corresponding meanings.

“Customer” means a Member, Subscriber or other purchaser of Company products or services.

“Effective Date” means March 7, 2008.

“Electronic Medium” means the Internet and any other related or similar form of interactive and connected electronic delivery or digital transmission that now exist or may hereafter be developed.

“Food and Beverage Products” means food and beverage products using the LLC Marks manufactured by the Company or by a third party manufacturer on behalf of the Company.

“DAP” means Danone Dairy Asia, a company incorporated under the laws of France.

“Licensed Business” means the business of operating the Approved Lines in the Territory, including the advertising and promotion of the Approved Lines in the Territory.

“Licensed IP” means the Licensed Marks, Licensed Materials and Licensed Techniques.

“Licensed Marks” means (i) the trademark and service mark “Weight Watchers” and (ii) such other trademarks, service marks, names, logos, symbols, insignia, trade dress and other source identifiers owned by or licensed to Licensor in the Territory and used in the Approved Lines, including all brands and trade names used by the Company in connection with the Licensed Business pursuant to Section 3.1, which are reasonably requested in writing by the Company to be licensed hereunder.

“Licensed Materials” means those textual, visual or audiovisual materials or other works and materials, whether or not subject to copyright protection, owned by Licensor and used in connection with the Approved Lines, as designated from time to time by Licensor. For the avoidance of doubt, the Licensed Materials shall not include any software, source code or other technology.

“Licensed Techniques” means those methods, techniques, programs, procedures, trade secrets, know-how, patents and unpatented inventions owned by Licensor as may be used by Licensor or its other franchisees in connection with the Approved Lines, including Licensor’s weight loss or weight control plans, which are reasonably requested in writing by the Company to be licensed hereunder. For the avoidance of doubt, the Licensed Techniques shall not include any software or source code.

“LLC Classes” means International Trademark Classes 1, 5, 29, 30, 31, 32 and 33 (or comparable classes).

“LLC Marks” means those trademarks within the LLC Classes owned by WW Foods, LLC identified on Schedule A.

“Member” means an individual who has registered for, joined or otherwise attend Classes offered by the Company or its Affiliates.

“Modifications” means any and all modifications, developments or improvements made by Licensor or one of its Affiliates to the Licensed IP.

“Person” means any individual, firm, corporation, joint venture, enterprise, partnership, trust, unincorporated association, limited liability company, government (or agency or political subdivision thereof), or other entity of any kind.

“PRC” or “China” means the People’s Republic of China.

“Soft Launch Date” means the date that is twelve months from the date of the Joint Venture Agreement.

“Subscriber” means an individual who has signed up to use products or tools on the Web Site.

“Subsidiary” means any Person wholly owned by the Company.

“Territory” means the PRC. For the purposes of this Agreement, Taiwan and the special administrative regions of Hong Kong and Macau shall not be considered part of the Territory.

“Transfer” means, whether voluntarily or involuntarily, to give, sell, issue, assign, pledge, encumber, hypothecate, grant a security interest in or otherwise dispose or convey, whether in one transaction or a series of related transactions. The terms “Transferee,” “Transferor,” “Transferred” and other forms of the word “Transfer” shall have the correlative meanings.

“U.S.” or “United States” means the United States of America.

“Web Site and Technology Services” means any and all services related to (i) the development and maintenance of a web site or other successor technology that may exist in the future for delivering information, products, tools or services via the Electronic Medium (each such site, a “Web Site”), (ii) providing any technology services related to the Electronic Medium (such as eCRM, database maintenance and web hosting services), or (iii) developing or providing any other consumer-facing or retail point-of-sale systems, technologies or applications (such as the CHAMP networked software application or any similar application that may be used by the Company or its Subsidiaries to store Customer transaction data and provide receipts).

1.2 The following terms have the meanings specified in the indicated Sections:


Term		Section
Additional Services		4.3(a)
Alternative Means		6.1
Alternative Means of Modification		6.3
Approved Lines		2.3(b)
Approved Use		3.6
Agreement		Preamble
Arbitrators		11.6(b)
Class Products		1.1
Company		Preamble
Company’s Local Counsel		6.1
Company Materials		6.4(a)
Company Improvements		2.6
Counsel Modified Standards		6.3


Disclosing Party		1.1
F&B License Agreement		6.7
Force Majeure Event		11.4
Joint Venture Agreement		Recitals
Licensed Products		1.1
Licensor		Preamble
Licensor Termination Trigger		10.2(c)
Marks		1.1
Milestones		3.4
MPT		3.4
Operating Manual		6.2
Parties		Preamble
Party		Preamble
PRC Withholding Rate		5.1
Receiving Party		1.1
Representatives		9.1
Resolution Representative		11.6(a)
Revenues		5.1
Royalty		5.1
Rules		11.6(b)
Standards		6.1
Subject Person		1.1
Sublicense Royalties		5.1
Term		10.1
User Data		3.6
Web Site		1.1
WTW		Recitals
Weight Watchers Business		Recitals

1.3 Interpretation. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement.

(a) Unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender; (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (v) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including all rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive

amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (vii) numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement; (viii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (ix) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto; (x) any term in any Schedule or Exhibit hereto shall have the meaning ascribed to such term in this Agreement, unless otherwise defined therein; (xi) reference to dollars or $ shall be deemed to refer to U.S. Dollars; and (xii) reference to a year or to a quarter means the fiscal year or fiscal quarter of the Company, respectively, and reference to a month means a calendar month.

(b) It is the intention of the Parties that every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party (notwithstanding any rule of law requiring an agreement to be strictly construed against the drafting party), it being understood that the Parties to this Agreement are sophisticated and have had adequate opportunity and means to retain counsel to represent their interests and to otherwise negotiate the provisions of this Agreement.

ARTICLE II

RIGHT TO USE THE LICENSED IP

2.1 License. Subject to the terms and conditions set forth herein, Licensor hereby grants to the Company, and the Company hereby accepts, a non-transferable, limited right and license for the duration of the Term to (a) use the Licensed IP (including any Modifications) solely for the operation of the Licensed Business in the Territory and (b) use the Licensed Marks in connection with the trade name of the Company or any Subsidiary.

2.2 Sublicense. The Company may not sublicense any of the rights granted herein or authorize any person to act as its agent in connection with its obligations herein without the prior written consent of Licensor, which consent shall not be unreasonably withheld; provided, however, the Company may, without Licensor’s consent, sublicense its rights hereunder to its Subsidiaries or independent contractors engaged by the Company or its Subsidiaries in lieu of employees solely to present the Company’s or its Subsidiaries’ Classes and in such case, the right to sublicense shall be limited to the extent required for such independent contractors to present the Company’s or its Subsidiaries’ Classes (provided that the form of any agreement to be used with such independent contractors shall be subject to Licensor’s approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b)). The Company shall be liable for any breach of the terms

hereof by any Subsidiary or independent contractor to whom a sublicense is granted pursuant to this Section 2.2, and such Subsidiary shall in addition be directly liable to Licensor. No sublicensee hereunder, other than a Subsidiary with the prior written consent of Licensor, which consent shall not be unreasonably withheld, shall have the right to further sublicense any rights granted herein.

2.3 Exclusivity.

(a) For the duration of the Term, Licensor (i) shall not, and shall not authorize any other Person to, engage in the Approved Lines within the Territory, including licensing the Licensed IP to any Person, other than the Company, for use in the Approved Lines in the Territory, (ii) shall not, and shall not authorize any other person to, conduct any of the Approved Lines outside of the Territory so as to target residents of the Territory, and (iii) shall use reasonable efforts not to, and ensure that its licensees and franchisees conducting the Approved Lines outside of the Territory do not, target residents of the Territory.

(b) For the duration of the Term, the Company and its Subsidiaries shall not conduct any business other than that of the Approved Lines and shall ensure that only the Licensed Techniques, and no other technique or method, are presented in Classes or otherwise utilized by the Company in the operation of the Licensed Business. Any alteration, modification or expansion of a pre-existing Approved Line or business extension by the Company beyond the Approved Lines shall require Licensor’s prior written approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b), and in the case of a proposed alteration, modification or expansion of a pre-existing Approved Line, such approval shall not be unreasonably withheld; provided, however, Licensor may, in its sole discretion, grant or withhold its approval of any business extension or the offering of an Approved Line through a new medium. Upon approval by Licensor in accordance with the terms hereof, such business extension, alteration, modification or expansion shall constitute part of the “Approved Lines” for purposes of this Agreement.

2.4 Territory. The Company and its Subsidiaries shall operate the Licensed Business solely in the Territory and shall not conduct the Approved Lines in a manner that would target Persons resident outside the Territory.

2.5 Licensor Modifications. Licensor and its Affiliates shall have the right to add to and otherwise modify the Licensed Techniques or the Licensed Marks, from time to time, including changes deemed necessary by Licensor or its Affiliates to reflect changes in the content of or manner of presenting Classes, Licensed Products, standards of quality, or the manner of operation of the Approved Lines. Licensor shall disclose all Modifications to the Company and such Modifications shall constitute “Licensed IP” for all purposes of this Agreement.

2.6 Company Improvements. The Company, its Subsidiaries, or third parties operating on the Company’s or its Subsidiaries’ behalf, may, subject to Licensor’s approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b), make modifications or translations to adapt the Licensed IP for use in the Licensed Business, create intellectual property derived from the Licensed IP, or develop ideas, concepts, methods, techniques, products and services relating to the development and operation of the Licensed Business (collectively, “Company Improvements”). All Company Improvements shall constitute “Licensed IP” for purposes of this Agreement and shall be exclusively owned by Licensor. The Company and its Subsidiaries shall, and hereby do irrevocably, assign all rights in and to the Company Improvements to Licensor.

2.7 Assignments. In furtherance of the obligations of the Company and its Subsidiaries to assign Company Improvements to Licensor in accordance with Section 2.6, the Company and its Subsidiaries shall each obtain, with all of their respective employees, subcontractors, consultants and other parties making modifications or translations to adapt the Licensed IP for use in the Licensed Business, enforceable contracts, in form and substance reasonably acceptable to Licensor containing provisions whereby all intellectual property, including any and all inventions and improvements conceived and developed by such employees, subcontractors, consultants or other parties shall be transferred and assigned to, and owned in full by the Company and its Subsidiaries.

2.8 Reservation of Rights. Licensor hereby retains, and reserves all rights not expressly licensed to the Company herein, including the rights to use the Licensed IP for any purpose within the Territory other than to engage in the Approved Lines. Notwithstanding the above, Licensor shall not use the Licensed IP in the Territory in a manner that fundamentally damages the image of Licensor and the Company, it being understood and agreed that in no event shall any use of the Licensed IP in the Territory be deemed to fundamentally damage the image of Licensor or the Company if Licensor uses the Licensed IP in a manner substantially similar to any use Licensor has previously made or is currently making of the Licensed IP anywhere in the world or in connection with any substantially similar business in which Licensor has been previously or is currently engaged anywhere in the world. For illustrative purposes only, the following uses of the Licensed IP would be considered fundamentally damaging to the image of Licensor and the Company, and Licensor will not engage in the following uses of the Licensed IP: in connection with firearms, tobacco products or pornography.

ARTICLE III

INTELLECTUAL PROPERTY RIGHTS

3.1 Trade Names. Licensor and the Company shall mutually agree upon the trade name(s) to be used by the Company (and any Affiliates and Subsidiaries) and the brands under which the Licensed Business shall be conducted in the Territory. Such trade names and brands shall be owned by Licensor and included in the Licensed Marks licensed under this Agreement.

3.2 Ownership of Licensed IP. All uses of the Licensed IP, including all goodwill associated with any use of any of the Licensed Marks or other trademarks or trade names included in the Licensed IP, shall inure exclusively to Licensor. The Company and its Subsidiaries shall, and hereby do, irrevocably assign to Licensor any and all rights that they may acquire in the Licensed IP including any goodwill associated therewith by virtue of the Company’s or its Subsidiaries’ use thereof pursuant to this Agreement. The Company hereby acknowledges and agrees that Licensor or its Affiliates own and control all worldwide rights, title and interest in and to the Licensed IP and all Modifications and Company Improvements, which shall remain the sole property of Licensor or its Affiliates throughout the Term and thereafter, subject only to the Company’s limited right to use the Licensed IP (including Modifications and Company Improvements) as set forth herein and, except for the exclusive rights granted in Section 2.3(a), nothing contained herein shall limit the right and ability of Licensor, its Affiliates, licensees and franchisees to exploit, license, distribute, sell or otherwise use the Licensed IP.

3.3 No Challenge. The Company and its Subsidiaries shall not, during the Term or thereafter, directly or indirectly, challenge or assist any Person in challenging the validity of the Licensed IP as it may exist anywhere in the world or Licensor’s or its Affiliates’ right, title and interest in and to any of the Licensed IP as it may exist anywhere in the world.

3.4 Protection of Licensed IP. Licensor shall exercise its reasonable efforts to protect the Licensed IP by, whenever practicable, taking the necessary steps to register and maintain the registration of, at its own expense, the Licensed IP with the proper governmental authorities in the Territory. The Company shall cooperate with Licensor in good faith and shall, where practicable or as reasonably requested by Licensor, take all reasonable actions in connection with the filing, prosecution and maintenance of any registered rights or any other type of protective measures, for the Licensed IP in the Territory. Notwithstanding the foregoing, to the extent that local ownership of any Licensed IP is required pursuant to applicable law in the Territory, the Parties shall cooperate to effect, prosecute and maintain such filings in a manner that satisfies such legal requirements while maintaining Licensor’s ultimate ownership and control over the Licensed IP and any applications or registrations therefor in the Territory; provided that Licensor shall reimburse the Company for all reasonable third-party costs incurred by the Company in connection with such cooperation, filings, prosecution and maintenance.

3.5 Enforcement of Licensed IP. The Company shall promptly notify Licensor in writing if and when the Company or any of its Subsidiaries becomes aware that any Person is infringing, misappropriating, has access to, or is otherwise using the intellectual property of Licensor or any of its Affiliates anywhere in the world without authorization from Licensor or such Affiliate. Licensor shall, when reasonable, institute administrative or legal proceedings to enjoin any action which it regards as an infringement of the Licensed IP, or take such other steps with respect to such infringement as it deems necessary. For purposes of determining whether it is reasonable to institute administrative or legal proceedings in accordance with the provisions of this Section 3.5, Licensor shall, in its sole good faith discretion, consider the impact of any such allegedly infringing action on the Licensed Business in the Territory, including the impact on the ability of the Company to reach any of the MPTs or Milestones (each as defined in the Joint Venture Agreement). The Company shall, at its sole cost and expense, cooperate with Licensor and provide Licensor with such assistance and information as may be reasonably requested by Licensor in respect of any such action; provided, however, that all reasonable third-party costs shall be borne by Licensor. Any monetary recovery or settlement payable as a result of any such action shall be the exclusive property of Licensor; provided, however, that where the Company has suffered losses as a result of such infringement, the Company shall be entitled to a share of such recovery or settlement calculated as follows: the portion of such recovery or settlement, following deduction of all of Licensor’s reasonable third party costs and expenses relating to such proceedings or settlement, corresponding to the proportion of the Company’s losses to the total losses experienced by the Company, Licensor and any of Licensor’s Affiliates, licensees or franchisees. In the event Licensor elects not to institute administrative or legal proceedings to enjoin an alleged infringement in accordance with this Section 3.5, and the Company reasonably believes such alleged infringement has a significant negative impact on the Licensed Business in the Territory, the Company shall, upon reasonable advance notice to Licensor, be entitled to institute administrative or legal proceedings to enjoin such alleged infringement and may, subject to Licensor’s approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b), enter into settlements with such infringing parties. The Company shall bear all costs and expenses of such administrative or legal proceedings and shall be entitled to retain all monetary recoveries or settlements obtained as a result; provided, however, that all such recoveries or settlements, after the deduction of all of the Company’s actual third party costs associated with any such proceeding and excluding any monetary recoveries or settlements solely representing harm to the reputation of the Company or that take into account the Royalty cost in the calculation of lost profits, shall be treated as Revenues hereunder for purposes of Section 5.1.

3.6 User Data. Any personal information and user data submitted by Customers or Web Site users or otherwise collected by the Company or its Subsidiaries (collectively, “User Data”) shall be jointly owned by Licensor and the Company. For the duration of the Term, Licensor shall have access to the User Data and the right to use such User Data solely for its internal purposes (such as market research) provided that it will not use the User Data to contact Customers or Web

Site users directly) and the Company and its Subsidiaries shall have the right to use such User Data in connection with the Licensed Business conducted in accordance with this Agreement, subject to Licensor’s approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b) ; provided, however, that upon the termination or expiration of this Agreement, the Company and its Subsidiaries shall immediately transfer and assign all such User Data to Licensor and Licensor shall become the sole owner of all User Data, and the foregoing restrictions shall cease to apply to Licensor’s use thereof. Once Licensor has approved a particular type of use of the User Data by the Company and its Subsidiaries in connection with the Licensed Business (an “Approved Use”), the Company shall be entitled to use User Data for all uses substantially similar to any Approved Use without obtaining further approval from Licensor.

3.7 Assignment of Licensed IP. Licensor shall reasonably notify the Company of any assignment of the Licensed IP and any such assignment shall be subject to the licenses set forth herein.

ARTICLE IV

KNOWLEDGE TRANSFER; ADDITIONAL SERVICES

4.1 Knowledge Transfer.

(a) In accordance with the terms of the license granted herein, Licensor shall provide the Company with representative information concerning the Licensed Techniques as used in the U.S. and any other relevant jurisdictions agreed by the Parties for the purposes of explaining to the Company the operation of the Licensed Business, including: (i) copies of representative program materials and related items used in Classes in the U.S. and such other jurisdictions agreed to by the Parties, as well as samples of manuals, instructional material and other literature published by Licensor in the U.S. and any other relevant jurisdictions agreed by the Parties, including, e.g., the Meeting Procedures Manual and Program & Service Reference Manual, and (ii) representative copies of recipes, meal plans and exercise techniques developed or approved by Licensor for introduction in Classes in the U.S. and such other jurisdictions agreed by the Parties. Licensor shall continue to supply such materials to the Company as and when they are revised by Licensor.

(b) Upon the reasonable request of the Company and at the Company’s sole cost and expense, Licensor shall arrange for the Company’s staff to participate in Licensor’s or its Affiliates’ regularly-scheduled training sessions and for visits by the Company’s staff to Classes outside the Territory.

(c) Upon the reasonable request of the Company, Licensor shall advise the Company of all products and services being offered for sale by Licensor in connection with the Approved Lines in the U.S. and such other jurisdictions agreed by the Parties, and provide any available printed marketing material describing such products and services.

(d) Upon the reasonable request of the Company, Licensor shall provide the Company with samples of select advertising and promotional materials used by Licensor in connection with the Approved Lines in the U.S. and such other jurisdictions agreed by the Parties.

4.2 Consultations. Upon the reasonable request of the Company, Licensor shall make reasonable good faith efforts to consult and cooperate regularly (but not more than once per month) with the Company for the purpose of sharing information about market trends, advertising, marketing and promotional activities and plans, the Company’s use of the Licensed Techniques and Licensed Materials, and program innovation plans in the U.S. or such other jurisdictions agreed by the Parties; provided, however, that after three (3) years from the Effective Date, Licensor’s obligation to consult with the Company under this paragraph shall be limited to not more than one consultation per quarter.

4.3 Additional Services.

(a) Throughout the Term, and subject to the terms and conditions of this Agreement, Licensor may, in its discretion, provide such additional services as the Company may, from time to time request pursuant to the procedures set forth herein (“Additional Services”). Additional Services may include the development or modification of the Licensed Techniques, market research, marketing advice and consulting, training, as well as any other services Licensor and the Company may mutually agree upon. All modifications to the Licensed IP and all materials provided by Licensor as a result of the Additional Services or the Web Site and Technology Services shall be considered “Licensed IP” and shall be exclusively owned by Licensor and licensed to the Company solely to engage in the Approved Lines pursuant to the terms of this Agreement. Notwithstanding the foregoing, subject to Sections 2.2 and 4.5, the Company shall be free to obtain such services from a third-party vendor or perform such services itself.

(b) Notwithstanding the provisions of Section 4.3(a) above, all work performed by Licensor in connection with the development and localization of Licensor’s food plan and food database, for the Territory prior to December 31, 2007 shall be performed at Licensor’s cost.

4.4 Additional Services Costs. In exchange for the provision of Additional Services, the Company shall pay to Licensor quarterly in arrears within thirty (30) days of receipt of a full and accurate itemized invoice (together with copies of the properly issued invoices provided by third party vendors for those third party vendor costs itemized in the Licensor invoice to the extent that such third party vendors have provided any properly issued invoices, provided that, Licensor shall use reasonable efforts to procure properly issued invoices from such third party vendors)

of such costs from Licensor, all fully-loaded costs incurred during the preceding quarter by Licensor in connection with Licensor’s provision of such Additional Services plus a fee of ten percent (10%) of all such fully-loaded costs; provided, however, such ten percent (10%) fee shall not apply to all travel and living expenses incurred during the provision of the Additional Services, which expenses shall be invoiced to the Company at cost.

4.5 Web Site and Technology Services.

(a) If the Company or any of its Subsidiaries requires any Web Site and Technology Services, the Company shall first notify Licensor in writing of such requirement and provide Licensor with the first opportunity to provide such Web Site and Technology Services. Licensor shall respond within thirty (30) days of receipt of any such notice from the Company indicating whether it wishes to provide the Web Site and Technology Services requested. All Web Site and Technology Services that may be provided to the Company or its Subsidiaries by Licensor shall be treated as Additional Services, and shall be invoiced in accordance with Section 4.4. Licensor shall provide the Web Site and Technology Services with the same quality of service as provided internally within Licensor’s business and to other franchisees, and Licensor shall not discriminate against the Company by unreasonably prioritizing Licensor’s internal projects at the expense of the Web Site and Technology Services requested by the Company. If Licensor grants the Company access to Licensor’s computer systems in connection with Licensor’s provision of the Web Site and Technology Services, the Company shall comply with all reasonable security measures and policies imposed by Licensor in connection with Licensor’s computer systems and shall indemnify Licensor for any losses incurred or damages suffered by Licensor resulting from or arising out of any breach by the Company of any such security measures or policies.

(b) In the event Licensor indicates that it does not wish to provide such Web Site and Technology Services, the Company shall, subject to the requirements of Section 4.6, be free to obtain such Web Site and Technology Services from a third-party vendor, subject to Licensor’s approval of the third party, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b), or perform such services itself.

(c) In the event that Licensor elects to use independent contractors located within the Territory to provide any of the Web Site and Technology Services referred to herein, such independent contractors shall be subject to the Company’s prior approval, which approval shall not be unreasonably withheld.

4.6 Standards for Web Site and Technology Services. In the event that Licensor elects not to provide any requested Web Site and Technology Services pursuant to Section 4.5 above, the Company shall ensure that all material aspects of the Web Sites (including the so called “look and feel” of the Web Sites, any

advertising content, the operation and hosting thereof, and the applicable privacy policy and terms of use) comply with any and all Standards and Modifications, and the initial version of the Web Sites and any material changes thereto, whether such changes are material individually or in the aggregate, shall be subject to Licensor’s approval, which approval shall be obtained consistent with the terms and conditions of Section 6.4(b). Without limiting the generality of the foregoing, the Company and its Subsidiaries shall use such industry-standard systems and technology as Licensor may require from time to time (including “gating” technology and address or credit card verification systems) to verify that all users of any Web Site are located within the Territory, and the Company and its Subsidiaries shall update, maintain and improve such technology and such address or credit card verification systems as necessary such that at all times during the Term these are consistent with industry standards then in effect.

ARTICLE V

ROYALTIES, ACCOUNTING AND AUDIT RIGHTS

5.1 Royalty. In consideration of the rights granted herein, the Company shall pay Licensor a royalty of ten percent (10%) on all Revenues of the Company or its Affiliates (the “Royalty”); provided, however, no Royalties shall be due on Revenues of the Company collected prior to the first anniversary of the Commercial Launch Date. For purposes of this Agreement, “Revenues” means all amounts collected by the Company or its Affiliates from non-affiliated third parties, without any deductions of any kind, including all (i) registration, attendance, subscription or other fees paid by Customers, (ii) payments received for Licensed Products, (iii) advertising revenues, (iv) revenues realized from the operation of any Web Site, and (v) other amounts received by the relevant party in connection with the Licensed Business; provided, however, Revenues shall not include business tax or value-added tax directly associated with the receipt of revenues for services or goods respectively. For the avoidance of doubt, the exclusion of taxes in the preceding sentence shall not apply to enterprise income tax or non-turnover taxes.

5.2 Payments. All payments shall be made by wire transfer to the account specified in writing by Licensor. To the extent permitted under applicable law, and after the deduction of only the tax amounts referred to in the next sentence, Royalties shall be payable in U.S. Dollars on or before the twentieth (20th) day following the close of each quarter. The Company shall be entitled to deduct from Royalties payable hereunder only the following amounts: (i) mandatory withholding taxes at the then applicable withholding tax rate in Hong Kong on royalty payments between Hong Kong and the U.S. associated with Licensor’s receipt of Royalties due hereunder; and (ii) any withholding tax or business tax on the royalties payable by any permitted sublicensees to the Company hereunder (the “Sublicense Royalties”) up to a rate equal to the aggregate of the withholding tax rate and the business tax rate applicable to the Sublicense Royalties as required under PRC Laws as of the date hereof, which, for purposes of clarity, are seven percent (7%) and five percent (5%) respectively based on a rate of Sublicense Royalties that is up to 11% (collectively, the “PRC Withholding Rate,” which PRC Withholding Rate, for the avoidance of

doubt, is (up to 7% + up to 5%) * up to 11% = up to 1.32% of Revenues). It is understood and agreed that the Company shall bear, and shall not be entitled to deduct from Royalties payable to Licensor hereunder, any new tax imposed on, or any increase in tax rates of any existing taxes on, the Sublicense Royalties to the extent such new tax or such increase in tax rates results in any Sublicense Royalties being taxed at an aggregate rate that is greater than the PRC Withholding Rate. The Company shall assist Licensor in submitting any application for, exemption from or refund of tax deducted from the payment of such royalties.

5.3 Interest Calculation. Interest at an annual rate of the current U.S. prime rate as quoted by the Wall Street Journal (or a comparable source in the event the Wall Street Journal ceases to exist or fails to publish such exchange rate) shall accrue daily on any amount due hereunder, from the date upon which the payment is due up to but excluding the date of payment.

5.4 Accounting. The Company and its Affiliates shall maintain and preserve at their respective offices full, complete and accurate records, books of account and reports pertaining to the development and operation of the Licensed Business and of the performance of their obligations hereunder including, records and information relating to all Revenues earned in connection with the conduct of the Approved Lines, and other records and reports as periodically may reasonably be prescribed by Licensor (including monthly reports setting forth for the preceding month the number of Classes held, total Member enrollments, paid Member attendances, prepaid or recur bill memberships or subscriptions and total Product sales, and other reports substantially similar to those provided by Licensor’s licensees or franchisees). The Company and its Affiliates shall prepare for, and provide to, Licensor, on a basis consistent with generally accepted accounting principles in the United States, and otherwise as required by the laws of the Territory and such entity’s jurisdiction of formation: (a) within thirty (30) days following the close of each quarter of the Company’s and each Subsidiary’s fiscal year, a profit and loss account for such quarter for the Licensed Business and a report disclosing the net worth of the respective entity as of the end of such quarter; and (b) within forty-five (45) days following the close of the Company’s and each Subsidiary’s fiscal year, a fiscal year-end balance sheet, a profit and loss statement for such fiscal year, and a statement of changes in financial condition, prepared by the Company’s outside accountants. Such records shall be furnished to Licensor whether or not any Royalties are due and payable for the preceding fiscal quarter.

5.5 Audit Rights.

(a) Licensor, or its agents or representatives, shall have the right to inspect, audit and makes copies or extracts of the books and records of the Company and any Subsidiary. Licensor may conduct such audit upon providing a reasonable period of written notice to the Company, only during the Company’s or such Subsidiary’s, normal business hours and only at the place where the Company or such Subsidiary keeps the books and records to be examined. Licensor shall be entitled to conduct such audit once per

calendar year or more frequently in circumstances where it has reason to believe there is a material inaccuracy in the calculation of the Royalty. All such audits shall be conducted at Licensor’s expense and shall not unreasonably disrupt the Company or such Subsidiary’s business activities; provided, however, if a discrepancy of five percent (5%) or more in the amount of Royalties paid to Licensor, which is in Licensor’s favor, is discovered during an audit, the Company shall reimburse Licensor for all of its costs and expenses reasonably incurred in connection with such audit. If such a discrepancy in Licensor’s favor is discovered during an audit, or otherwise by the Company, the Company shall immediately pay Licensor the full amount of such discrepancy, with interest calculated in accordance with the terms of Section 5.3. If a discrepancy in the Company’s favor is discovered during an audit, Licensor shall credit the full amount of such discrepancy against any Royalties owed to Licensor and, if no further Royalties are owed to Licensor at the time such discrepancy is discovered, Licensor shall reimburse the Company the full amount of such discrepancy. The audit rights set out in this Section 5.5(a) shall survive termination or expiration of this Agreement for a period of three (3) years after such termination or expiration.

(b) Licensor, or its agents or representatives, shall have the right to inspect, upon providing a reasonable period of written notice to the Company and only during normal business hours, the premises and any assets of the Company and its Subsidiaries for the purpose of monitoring compliance with this Agreement, and the Company and its Subsidiaries shall provide such other information as is reasonably required by Licensor in connection therewith. In the event that Licensor is no longer a shareholder in the Company, Licensor’s rights under this Section 5.5(b) shall be limited to no more than two inspections per calendar year.

ARTICLE VI

QUALITY CONTROL

6.1 Standards. Except as otherwise specifically provided herein, the Company and its Subsidiaries shall operate the Licensed Business in accordance with all of Licensor’s standards, specifications, guidelines, procedures and requirements as they may exist from time to time (the “Standards”) and any Modifications communicated to the Company by Licensor from time to time as though they were set forth in detail in this Agreement, including any such Standard or Modification relating to quality control, Licensed Techniques, and global or local brand image. The Company and its Subsidiaries shall accept such changes, modifications and additions to the Standards as Licensor deems necessary in its sole discretion, including any Modifications, and shall, as soon as reasonably practicable upon notification, modify its operation of the Licensed Business to comply with modified or newly developed Standards and to implement the Modifications (but in no event shall the time for compliance exceed one (1) year, unless the Parties otherwise agree). Licensor shall use good faith in promulgating, modifying and determining a time for implementation of the Standards and the Modifications to and

for the Licensed Business, which Standards and Modifications shall not intentionally discriminate against the Company in relation to the other operations of Licensor and shall not be substantially inconsistent with the Standards and Modifications promulgated by the Licensor outside the Territory. The Company shall not be required to operate the Licensed Business in accordance with any Standards or Modifications (or changes, modifications or additions thereto) if the Company provides Licensor with a written opinion by reputable independent legal counsel in the Territory or Hong Kong (the “Company’s Local Counsel”) advising that compliance with such Standards or Modifications would cause the Company to be in breach of any laws of the Territory or Hong Kong and Licensor shall have ten (10) Business Days to review such opinion. During such review period, Licensor or Licensor’s counsel may suggest alternative means (the “Alternative Means”) by which compliance with the laws of the Territory or Hong Kong may be achieved. Upon receipt of Licensor or Licensor’s counsel’s suggestions relating to the Alternative Means, the Company may consult with the Company’s Local Counsel regarding the Alternative Means’ compliance with the law of the Territory or Hong Kong (as the case may be). If the Company does not provide to Licensor a written legal opinion from the Company’s Local Counsel indicating that the Alternative Means fail to comply with the law of the Territory or Hong Kong (as the case may be) as soon as reasonably practicable (but in no event more than ten (10) Business Days) after receiving the Licensor or Licensor’s counsel’s suggestions relating to the Alternative Means, the Company and its Subsidiaries shall accept the Alternative Means, and shall use reasonable commercial efforts to cooperate with the Alternative Means and to modify the Standards or Modifications as little as possible in order to achieve compliance with the law of the Territory or Hong Kong. If the Company provides to Licensor a written legal opinion from the Company’s Local Counsel indicating that the Alternative Means fail to comply with the law of the Territory or Hong Kong (as the case may be) as soon as reasonably practicable (but in no event more than ten (10) Business Days) after receipt of Licensor or Licensor’s counsel’s suggestions relating to the Alternative Means, the Company and its Subsidiaries shall not be required to comply with any such Standards or Modifications that violate the law of the Territory or Hong Kong. If the Company proposes to implement any new or modified marketing or operating policy not generally addressed by the Standards, the Company shall obtain Licensor’s prior approval of such policy, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b).

6.2 Operating Manual. The Company shall compile, in compliance with the Standards, an operating manual for the Licensed Business (the “Operating Manual”) setting forth, in one or more of the languages of the Territory, the Licensed Techniques for the Territory. Prior to the Company’s or its Subsidiaries’ use of the Operating Manual or any modification to or translation of Operating Manual the Company shall obtain Licensor’s approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5. The compilation, and all modifications and translations, of the Operating Manual shall be at the Company’s sole expense.

6.3 Modification of Standards. If the Company’s Local Counsel in the Territory advises the Company that any exemption from, or modification to, the Standards is required for the Company to comply with, or operate the Licensed Business in accordance with, the laws of the Territory, the Company shall provide Licensor with a written opinion from the Company’s Local Counsel detailing any such exemption or modifications prior to implementation (the “Counsel Modified Standards”) and Licensor shall have ten (10) Business Days to review such opinion. During such review period, Licensor or Licensor’s counsel in the Territory may suggest alternative means (the “Alternative Means of Modification”) by which compliance with the laws of the Territory may be achieved. Upon receipt of Licensor or Licensor’s counsel’s suggestions relating to the Alternative Means of Modification, the Company may consult with the Company’s Local Counsel regarding the Alternative Means of Modification’s compliance with the law of the Territory or Hong Kong (as the case may be). If the Company does not provide to Licensor a written legal opinion from the Company’s Local Counsel indicating that the Alternative Means of Modification fail to comply with the law of the Territory or Hong Kong (as the case may be) as soon as reasonably practicable (but in no event more than ten (10) Business Days) after receipt of Licensor or Licensor’s counsel’s suggestions relating to the Alternative Means of Modification, Licensor may modify the Standards to comply with the Alternative Means of Modification and the Alternative Means of Modification shall form part of the Standards, and the Company and its Subsidiaries shall use reasonable commercial efforts to cooperate with the Alternative Means of Modification and to modify the Standards as little as possible in order to achieve compliance with the law of the Territory. If the Company provides to Licensor a written legal opinion from the Company Local Counsel indicating that the Alternative Means of Modification fail to comply with the law of the Territory or Hong Kong (as the case may be) as soon as reasonably practicable (but in no event more than ten (10) Business Days) after receipt of Licensor or Licensor’s counsel’s suggestions relating to the Alternative Means of Modification, Licensor shall modify the Standards to comply with the Counsel Modified Standards and the Counsel Modified Standards shall form part of the Standards. Any other exemption or modification of the Standards shall be subject in all respects to the prior approval of Licensor, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.5(b); provided, however, that if any proposed exemption or modification is rejected, the Company may appeal Licensor’s decision to the CEO of Licensor, whose decision shall be final.

6.4 Approval of Company Materials.

(a) All materials distributed by, or on behalf of, the Company or its Subsidiaries, including materials distributed to Customers in Classes, all print publications produced by or on behalf of the Company, all content published or displayed via the Electronic Medium, all advertising, promotional or public relations materials, and all Licensed Product packaging bearing any Licensed IP (collectively, the “Company Materials”), shall be submitted to Licensor for approval, which approval shall be obtained consistent with the terms and conditions set forth in Section 6.4(b), and the Company shall

neither sell nor use any Company Materials that have not previously been approved by Licensor. Licensor shall use its reasonable efforts to review and comment upon and, if practicable, make suggestions with respect to proposed materials submitted by the Company in accordance with this Section 6.4(a).

(b) Licensor shall notify the Company of Licensor’s approval or disapproval (and in the event of disapproval, of the reason therefor) of Company Materials submitted to Licensor for approval within ten (10) days after Licensor’s receipt thereof; provided, however, that the period for approval of packaging for Food and Beverage Products shall be twenty-one (21) days. If Licensor does not notify the Company of its approval or disapproval within such ten (10) or twenty-one (21) day period, as applicable, then the submitted item shall be deemed approved; provided, however, that Licensor shall have the right, at any time, to withdraw any approval granted by Licensor hereunder if Licensor determines in its sole good faith discretion that the item previously approved ceases to conform to Licensor’s Standards as they may exist from time to time, in which case the Company and its Subsidiaries shall not, and shall not authorize the printing or other reproduction or dissemination of additional copies of such Company Materials and, if reasonable, shall promptly discontinue the promotion or use of such Company Materials. In the event Licensor withdraws its approval, the Company may continue to use and distribute such Company Materials and sell such Food and Beverage Products that were produced prior to the date Licensor withdrew its approval and the Company shall not be required to recall any Food and Beverage Products that were sold prior to the withdrawal of the approval except in the case when such withdrawal of approval is related to a health or safety issue or is required by applicable law.

6.5 Other Approvals.

(a) Prior to the offering of any Class Product by the Company or any Subsidiary, the Company shall submit to Licensor for approval, which approval shall be obtained consistent with the terms and conditions set forth in Section (b), (i) samples, or where samples are not available, a detailed description of such Class Product, and (ii) where such Class Product is a Food and Beverage Product, documentation describing the formulation and ingredients of such Class Product.

(b) Licensor shall notify the Company of Licensor’s approval or disapproval (and in the event of disapproval, of the reason therefor) of all items other than Company Materials submitted to Licensor for approval within forty-five (45) days after Licensor’s receipt thereof. If Licensor does not notify the Company of its approval or disapproval within such forty-five (45) day period, then the submitted item shall be deemed approved; provided, however, that Licensor shall have the right, at any time, to withdraw any approval granted by Licensor hereunder if Licensor determines in its sole good faith discretion that the item previously approved ceases to conform to

Licensor’s Standards as they may exist from time to time, in which case the Company shall discontinue the conduct or distribution of the activity or item in question as soon as reasonably practicable, depending upon the nature of the item.

6.6 Standard for Approvals. Except as otherwise expressly set forth herein, all approvals to be exercised by Licensor must be in writing and may be granted or withheld by Licensor in its sole good faith discretion.

6.7 Food and Beverage Products. Notwithstanding any other provision in this Agreement, all of the rights granted herein to the Company to use the Licensed Marks in connection with Food and Beverage Products shall be subject to the License Agreement dated September 29, 1999, by and between WW Foods, LLC and Licensor as set out in Annex 1 (“F&B License Agreement”). Without limiting the foregoing:

(a) The Food and Beverage Products shall comply with the Standards, including the Weight Watchers Quality Control Standards, and shall be in conformance with good manufacturing practices.

(b) The Company and its Subsidiaries shall comply in all material respects with any and all laws, regulations, governmental decrees and orders which are applicable to the manufacture, marketing, distribution or sale of the Food and Beverage Products.

(c) The Company and its Subsidiaries shall ensure that proper notice is placed on all labels, advertising and promotional materials carrying the LLC Marks with respect to Food and Beverage Products stating that such LLC Marks are the registered trademarks of WW Foods LLC and, when appropriate or required by local law, such use is under license.

(d) Neither the Company nor its Subsidiaries shall exercise any rights granted hereunder with respect to Food and Beverage Products in any manner that would have a material tendency to denigrate or otherwise diminish the value of the LLC Marks.

(e) On twenty-one (21) days’ prior written notice from Licensor and not more than once per calendar year, the Company and its Subsidiaries, as applicable, shall permit Licensor, or its agents or representatives, during normal business hours and accompanied by a representative of the Company or its Subsidiaries, to visit those areas of their respective factories and premises at which the Food and Beverage Products are manufactured or distributed to ascertain compliance with the provisions hereof. In connection with such visits, Licensor or its agents or representatives may review appropriate documentation to ascertain such compliance.

(f) In the event of a recall of a Food and Beverage Product, the Company or its Subsidiaries will inform Licensor and Licensor agrees that the handling of such matter will be the responsibility of the Company and its Subsidiaries.

(g) To the extent that the Company or any Subsidiary utilizes the services of a third party manufacturer pursuant to Section 2.2 to produce Food and Beverage Products, the Company or such Subsidiary will ensure that the agreement with such manufacturer contains provisions consistent with this Section 6.7.

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1 Licensor Representations and Warranties. Licensor hereby represents and warrants to the Company that (i) Licensor has the full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (ii) the execution, delivery and performance of this Agreement has been duly authorized by Licensor in accordance with all requisite legal power (including business and corporate power) and authority and this Agreement constitutes a legal, valid and binding obligation, enforceable against Licensor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and that enforcement may be limited by general principles of equity; (iii) Licensor’s execution, delivery and performance does not violate, contradict or cause a breach of, or default under, any contract or agreement to which it is a party, or violate any decree order or judgment to which it is a party or otherwise bound or any law or regulation applicable to it; (iv) no consent from, filing with, or notice to any person or entity is required in connection with its execution, delivery and performance of this Agreement; (v) Licensor owns or has the right to license to the Company the material Licensed Marks and all other material Licensed IP as contemplated by this Agreement, and the use by the Company of the material Licensed IP as contemplated hereby, does not violate or infringe the intellectual property rights, privacy rights or other rights of any third party in the Territory; (vi) to Licensor’s knowledge, Licensor owns or has the right to license to the Company all non-material Licensed Marks and non-material Licensed IP as contemplated by this Agreement, and the use by the Company of the non-material Licensed IP as contemplated hereby, does not violate or infringe the intellectual property rights, privacy rights or other rights of any third party in the Territory; and (vii) to Licensor’s knowledge, there are no pending actions or legal proceedings or any claims by a third party that would adversely affect the abilities of Licensor to grant the rights granted, and perform its obligations, under this Agreement.

7.2 Company Representations and Warranties. The Company hereby represents and warrants to the Licensor that (i) the Company has the full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (ii) the execution, delivery and performance of this Agreement has been duly authorized by the Company in accordance with all requisite legal power (including business and corporate power) and authority and this Agreement

constitutes a legal, valid and binding obligation, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and that enforcement may be limited by general principles of equity; (iii) the Company’s execution, delivery and performance does not violate, contradict or cause a breach of, or default under, any contract or agreement to which it is a party, or violate any decree order or judgment to which it is a party or otherwise bound or any law or regulation applicable to it; (iv) no consent from, filing with, or notice to any person or entity is required in connection with its execution, delivery and performance of this Agreement;

7.3 Licensor’s Covenant. Licensor shall not knowingly exercise its approval rights hereunder in a way which will cause the Company to violate any applicable law.

7.4 Company’s Covenant. The Company hereby agrees that:

(a) the Company and its Subsidiaries will conduct the Licensed Business in compliance with all laws and regulations applicable to the Licensed Business, provided, however, if the Company notifies Licensor that it intends to provide a written opinion from the Company’s Local Counsel stating that any exemption from, or modification to, the Standards is required for the Company to comply with, or operate the Licensed Business in accordance with the laws of the Territory, then the Company shall not be in breach of this covenant by continuing to comply with the existing Standards during the period from the date on which the Company provides such notice to Licensor and ending on the date that either the Counsel Modified Standards or the Alternative Means of Modification has been adopted in order for the Standards to comply with the laws of the Territory; and

(b) the Company shall use the Licensed IP in accordance with the provisions of this Agreement and in accordance with any approvals granted by Licensor hereunder.

ARTICLE VIII

ASSIGNMENT

8.1 By the Company. Except as set forth in the Joint Venture Agreement, the Company shall not Transfer (by operation of law or otherwise),this Agreement or any of its rights or obligations under this Agreement to any Person without Licensor’s prior written consent. Any purported Transfer in violation of the preceding sentence shall be null and void ab initio. For the purposes of clarity, the Parties understand and agree that Licensor shall be entitled to Transfer (by operation of law or otherwise), this Agreement or any of its rights or obligations under this Agreement without the Company’s consent, provided that such Transfer does not alter the rights licensed to the Company hereunder as such rights may exist immediately prior to such Transfer.

ARTICLE IX

CONFIDENTIALITY

9.1 Confidentiality Obligation. The Receiving Party recognizes and acknowledges the competitive value and confidential nature of the Confidential Information and the damage that would result to the Disclosing Party and its Affiliates if any of the Confidential Information were to be disclosed to any third party. The Receiving Party hereby agrees that the Confidential Information shall be used solely for the purposes expressly set forth in this Agreement and that all of the Confidential Information shall be kept confidential by the Receiving Party; provided that any such information may be disclosed only to the Receiving Party and its respective officers, directors, employees, agents, Affiliates, subcontractors, representatives, advisors and consultants (such Persons hereinafter collectively being referred to as “Representatives”), who are actually engaged in, and need to know, the Confidential Information for the purposes expressly set forth in this Agreement, who have been informed of the confidential nature of the Confidential Information, who have been advised that such information is to be kept confidential and who have entered into enforceable written confidentiality agreements with the Receiving Party agreeing that Confidential Information shall not be used for any other purpose. The Receiving Party agrees that it shall (a) cause its Representatives to observe all terms of this Agreement, and (b) be responsible for any breach of this Agreement by any of its Representatives.

9.2 Remedies. The Receiving Party acknowledges and agrees that the Disclosing Party would be irreparably damaged by any unauthorized disclosure or use of any Confidential Information in violation of this Article X. Without prejudice to the rights and remedies otherwise available to the Disclosing Party, the Receiving Party, therefore, agrees that the Disclosing Party shall be entitled, without the requirement of posting a bond or other security, to equitable relief, including an injunction or specific performance, in the event of any breach or threatened breach of the provisions of this Article X by the Receiving Party or its Representatives. Such remedies shall not be deemed to be exclusive remedies but shall be in addition to all other remedies available at law or equity to the Disclosing Party.

9.3 Disclosure Required by Law. In the event that the Receiving Party or any of its Representatives become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigation, demand, order or other legal process) to disclose any of the contents of the Confidential Information, the Receiving Party shall use commercially reasonable efforts to (i) promptly notify Disclosing Party prior to any such disclosure to the extent practicable and (ii) cooperate with Disclosing Party in any attempts it may make to obtain a protective order or other appropriate assurance that confidential treatment shall be afforded to the Confidential Information.

9.4 Return of Confidential Information. Upon the expiration or termination of this Agreement for whatever reason, the Receiving Party shall return to the Disclosing Party all Confidential Information (including all copies thereof) received by it or its Representatives prior to the termination of this Agreement. To the extent that it is impractical to return any Confidential Information as provided above, such Confidential Information (including all copies thereof) may be destroyed, and the Receiving Party shall certify in writing to the Disclosing Party that it has destroyed or returned all such Confidential Information (including all copies thereof).

ARTICLE X

TERM AND TERMINATION

10.1 Term. The Agreement shall have an initial term of ten (10) years from the Effective Date, and shall automatically renew for successive ten (10) year periods, unless terminated earlier for cause by one of the Parties in accordance with the terms and conditions set forth in Section 11.2 below. (The initial term and any renewal term shall be collectively referred to as the “Term”).

10.2 Termination. Without limiting any other termination right available to the Parties at law or equity, this Agreement may immediately be terminated for cause by either Party by delivery of written notice to the other Party if the Joint Venture Agreement is terminated in accordance with Section 13.3(b) or 13.3(c) of the Joint Venture Agreement, or as follows:

(a) If Licensor does not Control (as such term is defined in the Joint Venture Agreement) the Company, Licensor may terminate this Agreement if a Licensor Termination Trigger (as defined in clause (c) below) occurs;

(b) If Licensor Controls (as such term is defined in the Joint Venture Agreement) the Company, Licensor may only terminate this Agreement if: (1) a Licensor Termination Trigger occurs and (2) such Licensor Termination Trigger occurred as a direct or indirect result of DAP (or any of its Affiliates, or any Person acting on their behalf) acting in bad faith or engaging in willful misconduct in connection with the operation of the Licensed Business of the Company or intentionally breaching any obligation to the Company;

(i) the Company or any of its Subsidiaries fails to use the Licensed IP for a continuous period of at least six months;

(ii) the Company or any of its Subsidiaries commits, and fails to cure within thirty (30) days following Licensor’s written notice thereof, (A) a willful breach of any material term or condition, or (B) a breach of a material term or condition, which if uncured would likely would cause all or a portion of the Licensed IP to be abandoned, deemed invalid or unenforceable;

(iii) the Company or any of its Subsidiaries fails to correct a breach of any material term or condition within one hundred eighty (180) days of receiving the first written notice thereof, provided that Licensor has provided at least two written notices of such breach;

(iv) the Company or any of its Subsidiaries commits a breach of the same material term or condition three or more times within any five (5) year period, provided that Licensor has provided written notice of each such breach; or

(v) the Company or any of its Subsidiaries becomes insolvent; makes an assignment for the benefit of creditors; files a voluntary petition in bankruptcy or fails to contest the material allegations of any such pleading filed against it, or is adjudicated a bankrupt or insolvent.

(d) The Company may terminate this Agreement if Licensor:

(i) at any time during the Term, commits and fails to cure, within ninety (90) days following the Company’s written notice thereof, a breach of a material term or condition of this Agreement, which breach, if uncured, would likely negatively affect the exclusivity of the license grant to the Company provided herein;

(ii) at any time during the Term, commits and fails to cure, within ninety (90) days following the Company’s written notice thereof, a breach of a material term or condition under the Agreement, which breach, if uncured, would likely affect the Company’s ability to operate the Licensed Business or reach any of the MPTs or Milestones (each as defined in the Joint Venture Agreement);

(iii) commits a breach of the same material term three or more times within any five (5) year period, provided that the Company has provided written notice of each such breach; or

(iv) becomes insolvent; makes an assignment for the benefit of creditors; files a petition in bankruptcy or fails to contest the material allegations of any such pleading filed against it, or is adjudicated a bankrupt or insolvent.

10.3 Effect of Termination. Upon expiration or termination of this Agreement, this Agreement shall, subject to Section 11.7, immediately terminate and be of no further force and effect, all rights granted to the Company hereunder shall automatically revert to Licensor and the Company shall immediately cease any and all use of the Licensed IP. In the event of termination of this Agreement for any reason, the Joint Venture Agreement shall terminate.

ARTICLE XI

MISCELLANEOUS

11.1 Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four (4) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or two Business Days after it is sent for next business day delivery via a reputable international overnight courier service, or deemed dispatched immediately after it is sent by facsimile transmission properly addressed and dispatched and a transmission report confirming dispatch is received, in each case to the intended recipient as set forth below:

(a)

If to the Licensor:

Weight Watchers International, Inc.

11 Madison Avenue, 17^th Floor

New York, NY 10010

Attention: Jeffrey Fiarman, General Counsel

Facsimile: (212) 589-2601

Copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, NY 10019-6064

Attention: Martin Flumenbaum

Facsimile: (212) 757-3990

(b)

If to Company:

12/F, Ruttonjee House

11 Duddell Street, Central, Hong Kong

Attention: Chief Executive Officer

Facsimile: (852) 2845 9198

Copy to:

c/o Danone Asia-Pacific Management Co., Ltd.

19th Floor, Kerry Center

1515 Nanjing Road (W)

Shanghai 200040, PRC

Attention: David Flavell, General Counsel

Facsimile: 86-21-5298-6800

Copy to:

Baker & McKenzie

Unit 1601, Jin Mao Tower

88 Century Avenue

Pudong, Shanghai 200121

Attention: Howard H. Wu

Facsimile: 86-21-5047-0020

Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it is received by the Party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. Any notice, request, demand, claim, or other communication hereunder or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict, the English version shall prevail.

11.2 Further Assurances. The Company and its Subsidiaries agree to execute and deliver, at Licensor’s expense, such assignments, intellectual property right applications, licenses, and other documents as Licensor may direct and to cooperate fully with Licensor, both during and after the Term, to enable Licensor to secure and maintain in any and all countries the intellectual property rights described and granted to Licensor in Sections 2.6, 3.2, 3.6 and 4.3 of this Agreement.

11.3 Binding Effect. This Agreement shall be binding upon the permitted successors and assigns of the parties.

11.4 Force Majeure. Neither of the Parties shall be liable to the other Party for any loss, injury, delay, damages or other casualty suffered or incurred by such other Party arising out of any delay, inability to perform or interruption of its performance of its obligations under this Agreement as a result of any circumstances beyond its reasonable control, including epidemic, incident or threat of war or terrorism, earthquake, storm, flood, fire or other act of God, strike or lock-out, the effect of any change in applicable laws, orders, rules and regulations of any government or competent authority or any failure of utilities or telecommunications service interruption (any such event, a “Force Majeure Event”), and failure or delay by any Party in performing any of its obligations under this Agreement due to a Force Majeure Event shall not be considered as a breach of this Agreement; provided, however, that the Party suffering such Force Majeure Event shall notify the

other Party in writing promptly after the occurrence of such Force Majeure Event and shall, to the extent reasonable and lawful, use its best efforts to remove or remedy the Force Majeure Event. Licensor acknowledges that events of Force Majeure shall not affect its ability to comply with its obligations under Sections 2.1 and 2.3(a). Following a notice of a Force Majeure Event in accordance with this Section 11.4, and while the Force Majeure Event continues, the obligations which cannot be performed because of the Force Majeure will be suspended, other than any obligation to pay money.

11.5 Awareness of Adverse Facts. Any of the Parties that becomes aware of a fact that has occurred, which could in any way adversely affect or impair the rights of the other Party or the fulfillment of any of the obligations undertaken herein in any material respect, shall promptly inform the other Party of such fact.

11.6 Dispute Resolution.

(a) In the event of a dispute, the Parties shall work together in good faith to resolve their dispute for such time as may be agreed by the involved Parties or, if the involved Parties cannot agree, then for fifteen (15) days from the date of written notice by either Party first describing the applicable dispute. If the Parties are unable to resolve such dispute within the applicable period, the most senior executive officer of the Company and the Chief Operating Officer or Chief Executive Officer of Licensor (or an authorized representative thereof) (each such designee, a “Resolution Representative”) shall meet to resolve the dispute in good faith. If the Resolution Representatives of the involved Parties are unable to resolve such dispute within fifteen (15) days following referral of such dispute pursuant to this Section 11.6(a), then such dispute shall be resolved by arbitration in accordance with the procedures set forth in Section 11.6(b) below.

(b) Any dispute, controversy or claim for damages or otherwise, arising out of or in connection with this Agreement, or any modification or termination thereof, that is not resolved by the Parties in accordance with the procedures described in Section 11.6(a) above shall be finally settled by binding arbitration between the Parties as provided herein. The place of arbitration shall be New York, New York, and the arbitration shall be conducted in the English language. The arbitration shall be conducted in accordance with the then-prevailing International Arbitration Rules of the American Arbitration Association (the “Rules”) by a panel of three arbitrators (the “Arbitrators”). Each participating Party shall nominate in the request and answer, respectively, one arbitrator. If a claimant or respondent fails to nominate an arbitrator, the appointment of the arbitrator shall be made in accordance with the Rules. Within and no later than thirty (30) days after the nomination or appointment of the second arbitrator, the two arbitrators shall agree upon and nominate the third arbitrator, who shall act as Chairman of the panel; provided that, if the two arbitrators are unable to agree upon the identity of the third arbitrator, then the third arbitrator shall be appointed in accordance

with the Rules. Each participating Party shall pay its own costs for the arbitration, with the cost of the Arbitrators to be equally divided between the participating Parties; provided that the Arbitrators may, in their discretion, award reasonable attorneys’ fees and expenses to the prevailing Party. The Arbitrators shall have no authority to award punitive damages or any other damages not measured by the prevailing Party’s actual damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Agreement. A judgment upon an award may be entered in any court having jurisdiction. Neither a Party nor the Arbitrators may publicly disclose the existence, content, or results of any arbitration hereunder without the prior written consent of the other participating Party.

(c) Notwithstanding any other provision in this Agreement, a Party shall not be required to engage in the dispute resolution procedure set forth above or to seek arbitration, but shall have the right to immediately file an action and, without prejudice to any other rights and remedies of the Party seeking relief, shall be entitled to the entry of temporary, preliminary and permanent injunctive relief, if (i) in the case of Licensor, (A) the Company exceeds the scope of the license granted pursuant to Section 2.1 of this Agreement, or (B) fails to materially comply with the Standards or the Modifications in a manner that could cause irreparable harm to any Licensed IP; (ii) in the case of the Company, Licensor breaches, or the Company has reasonable grounds to believe Licensor may breach, Section 2.3(a); or (iii) either Party determines in its sole discretion that such an action is necessary or appropriate to protect its rights under ARTICLE IX.

11.7 Survival. The following sections and articles shall survive the termination or expiration of this Agreement: ARTICLE I, Sections 3.3, 5.5(a) (but only to the extent set out in that Section), ARTICLE IX, Sections 11.1, 11.2, 11.6, 11.7 and 11.14.

11.8 Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof.

11.9 Amendments.

(a) This Agreement shall not be amended, altered or changed except by a written agreement signed by the Parties. Unless expressly agreed, no amendment shall constitute a general waiver of any provisions of this Agreement, nor shall it affect any rights, obligations or liabilities under or pursuant to this Agreement which have already accrued up to the date of amendment, and the rights and obligations of the Parties under or pursuant to this Agreement shall remain in full force and effect, except and only to the extent that they are so amended.

(b) No delay on the part of any Party in exercising any right hereunder shall operate as a waiver thereof, nor shall any waiver, express or implied, by any Party of any right hereunder or of any failure to perform or breach hereof by any other Party constitute or be deemed a waiver of any other right hereunder or of any other failure to perform or breach hereof by the same or any other Party, whether of a similar or dissimilar nature.

11.10 Severability. If any provision of this Agreement is or is held to be invalid or unenforceable, then to the extent of its invalidity or unenforceability it shall have no effect and shall be deemed not to be included in this Agreement, and the remaining provisions of this Agreement shall not be invalidated. The Parties shall then use all reasonable efforts to replace the invalid or unenforceable provision by a valid provision the effect of which is as close as practicable to the intended effect of the invalid or unenforceable provision.

11.11 No Constructive Waiver of Rights. Failure of a Party to exercise any of its rights under this Agreement shall in no way be considered a waiver of the right to so exercise at any later time.

11.12 No Agency. Nothing in this Agreement (or any of the arrangements contemplated by it), save as may be expressly set out in it, constitute any Party the agent of the other Party for any purpose. Unless the Parties agree otherwise in writing, none of them shall (a) enter into contracts with any Person as agent for the other Party or (b) describe itself as such an agent or in any way hold itself out as being such an agent.

11.13 Counterparts. This Agreement may be executed in any number of counterparts and by the Parties to it on separate counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

11.14 Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of New York without regard to any choice of law or conflict of law, choice of forum or provision, rule or principle (whether of the State of New York or any other jurisdiction) that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. Each Party irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 11.1.

11.15 Language. This Agreement shall be drafted and executed in the English language.

[The remainder of the page is intentionally left blank.

Signatures appear on the next page]

IN WITNESS WHEREOF, the Parties have executed or caused to be executed this Agreement as of the date first written above.


Weight Watchers International, Inc.

By:		/s/ Jeffrey A. Fiarman
		Name: Jeffrey A. Fiarman
		Title: EVP, General Counsel & Secretary


Weight Watchers Danone China Limited

By:		/s/ Matthew Mouw
		Name: Matthew Mouw
		Title: CEO

Signature Page to Intellectual Property License Agreement

SCHEDULE A

LLC MARKS

(1) The following registered trademarks and service marks:


Mark	Country	Reg. No.	Class
WEIGHT WATCHERS	China	874745	29
WEIGHT WATCHERS	China	847219	30
WEIGHT WATCHERS	China	847262	32

(2) Such other common law trademarks, trademark applications and trademark registrations within the LLC Classes that may be acquired by or contributed to WW Foods, LLC from time to time.

S-A

ANNEX 1

F & B LICENSE AGREEMENT

A-1

EX-31.1 3 dex311.htm CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A) Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a)

EXHIBIT 31.1

CERTIFICATION

I, David P. Kirchhoff, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Weight Watchers International, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15 (f) and 15d – 15 (f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-31.2 4 dex312.htm CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A) Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a)

EXHIBIT 31.2

CERTIFICATION

I, Ann M. Sardini, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Weight Watchers International, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a—15 (f) and 15d – 15 (f)) for the registrant and have:

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-32.1 5 dex321.htm CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 Certification pursuant to 18 U.S.C. Section 1350

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the quarterly report of Weight Watchers International, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 27, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David P. Kirchhoff, certify, pursuant to 18 U.S.C. Section 1350, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

EX-32.2 6 dex322.htm CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 Certification pursuant to 18 U.S.C. Section 1350

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the quarterly report of Weight Watchers International, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 27, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ann M. Sardini, certify, pursuant to 18 U.S.C. Section 1350, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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