Asset Purchase Agreement - Weighco Enterprises Inc., Weighco of Northwest Inc., Weighco of Southwest Inc., Weight Watchers North America Inc. and Weight Watchers International Inc.
-----------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
WEIGHCO ENTERPRISES, INC.,
WEIGHCO OF NORTHWEST, INC.,
WEIGHCO OF SOUTHWEST, INC.,
WEIGHT WATCHERS NORTH AMERICA, INC.
and
WEIGHT WATCHERS INTERNATIONAL, INC.
Dated as of December 11, 2000
----------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. Definitions
2. Purchase and Sale of Assets; Assumption of Certain Liabilities
2.1. Transfer of Assets
2.2. Excluded Assets
2.3. Instruments of Conveyance and Transfer
2.4. Further Assurances
2.5. Assumed Liabilities
3. Closing; Payment of Purchase Price at Closing
3.1. Closing Date
3.2. Purchase Price and Payment
3.3. Payment of Balance of Closing Payment.
3.4. Ownership and Investment of the Escrow Fund; Fees and Expenses of Escrow Agent
3.5. Post Closing Adjustment.
3.6. Prepaid Coupon Adjustment.
3.7. Guaranty; Consent
4. Representations and Warranties
4.1. Representations and Warranties of Sellers.
(a) Due Organization; Power; Capacity; Good Standing
(b) Authorization and Validity
(c) No Governmental Approvals or Notices Required; No Conflict
(d) Financial Information; Liabilities
(e) Title and Condition of Properties; Absence of Liens
(f) List of Properties, Contracts, Permits and Other Data
(g) Receivables; Subscriber Information
(h) Legal Proceedings
(i) Insurance
(j) Labor
(k) Intellectual Property
(l) Government Licenses, Permits and Related Approvals
(m) Compliance with Law and Requirements
(n) Employee Benefit Programs.
<PAGE> 3
(o) Certain Fees
(p) Absence of Certain Changes or Events
(q) Offering Memorandum; Disclosure.
(r) Environmental Matters
(s) Entire Business
(t) Tax Matters
(u) No Subsidiaries
(v) Purchase Price Transfers
(w) Prohibited Payments
(x) Affiliate Transactions.
(y) Compensation of Management Employees
(z) Bankruptcy
(aa) Qualified S Chapter Subsidiaries
4.2. Representations and Warranties of Buyer and WWI
(a) Due Organization; Good Standing and Power
(b) Authorization and Validity.
(c) Governmental Approvals; No Conflict
(d) Brokers' Fees
4.3. Survival of Representations
5. Agreements
5.1. Access to Information
5.2. Conduct of the Business
5.3. Further Actions
5.4. Antitrust Improvements Act
5.5. Notification
5.6. No Inconsistent Action
5.7. No Solicitation
5.8. Delivery of Financial Statements.
5.9. Franchise Agreements
5.10. No Solicitation of Employees
5.11. Payment of Annual Compensation and Bonuses
5.12. Interim Financial Statements
5.13. Covenant Not to Compete
5.14. Employment Matters
<PAGE> 4
5.15. Leases and Service Contracts
5.16. Carolina Acquisition Agreement.
6. Conditions Precedent.
6.1. Conditions Precedent to Obligations of Parties
(a) No Injunction, etc.
(b) Antitrust Matters
6.2. Conditions Precedent to Obligations of Buyer
(a) Accuracy of Representations and Warranties
(b) Performance of Obligations
(c) Officer's Certificate
(d) Absence of Certain Changes
(e) Opinions
(f) Escrow Agreement
(g) Non-Competition Agreement
(h) British Columbia Amendment
(i) Review Financials
(j) No Litigation
(k) Funding
(l) Lien Search
(m) Consents, etc.
(n) Carolina Franchise
(o) Release of Liens
(p) Actions and Proceedings
(q) Closing Deliveries
6.3. Conditions Precedent to the Obligations of Sellers
(a) Accuracy of Representations and Warranties
(b) Performance of Obligations
(c) Officer's Certificate
(d) Actions and Proceedings
(e) Opinions
(f) Escrow Agreement
(g) Non-Competition Agreement
(h) British Columbia Amendment.
(i) Closing Deliveries
<PAGE> 5
(j) No Litigation
(k) Carolina Franchise
7. Employees and Employee Benefits
7.1. Offer of Employment
8. Termination
8.1. Termination of Agreement
8.2. No Liabilities in Event of Termination
8.3. Return of Documents
9. Indemnification
9.1. Sellers Indemnity
9.2. Buyer and WWI Indemnity
9.3. Procedures for Indemnification
9.4. Additional Agreements
9.5. Limits on Indemnification
10. Miscellaneous
10.1. Public Announcements
10.2. Expenses
10.3. Transfer Taxes and Recording Expenses
10.4. Notices
10.5. Entire Agreement
10.6. Binding Effect
10.7. Bulk Sales Law
10.8. Assignability
10.9. No Third Party Beneficiaries
10.10. Amendment; Waiver
10.11. Confidentiality.
10.12. Schedules.
10.13. Section Headings; Table of Contents
10.14. Severability
10.15. Counterparts
10.16. APPLICABLE LAW; JURISDICTION; VENUE
10.17. Further Assurances
10.18. Other Franchise Agreements
10.19. Time of Essence
<PAGE> 6
SCHEDULES
Schedule 1(a) - Franchise Agreements
Schedule 1(b) - Equipment Leases
Schedule 1(c) - Leases
Schedule 1(d) - Service Agreements
Schedule 2.1(b) - Transferred Contracts, Agreements and Purchase Commitments
Schedule 2.1(c) - Transferred Leases
Schedule 2.2 - Excluded Tangible Personal Property
Schedule 2.5(a) - Assumed Contracts, Agreements, Leases and Commitments
Schedule 2.5(b) - Assumed licenses, permits and franchises
Schedule 3.2 - Purchase Price Allocation
Schedule 3.4(b) - Allocation of Seller's Ownership of Escrow Fund
Schedule 4.1 - Employees with Knowledge
Schedule 4.1(c) - Consents, Approvals, etc.
Schedule 4.1(d) - Financial Information
Schedule 4.1(f)(i) - Contracts, Agreements, Commitments, etc.
Schedule 4.1(f)(ii) - Leases
Schedule 4.1(f)(iii) - Licenses, Permits and Franchises
Schedule 4.1(f)(iv) - Intellectual Property
Schedule 4.1(g) - Paid Attendance and Enrollments
Schedule 4.1(h) - Legal Actions
Schedule 4.1(i) - Insurance
Schedule 4.1(j) - Closings, Layoffs, Early Retirement, etc.
Schedule 4.1(k) - Defects in Patents, Trademarks and Similar Rights
Schedule 4.1(l) - Government Licenses, Permits and Related Approvals
Schedule 4.1(n) - Employee Benefit Programs
Schedule 4.1(p) - Absence of Certain Changes or Events
Schedule 4.1(q) - Recipients of Offering Memorandum
Schedule 4.1(r) - Environmental Matters
Schedule 4.1(t) - Tax Matters
Schedule 4.1(u) - Subsidiaries of Sellers
Schedule 4.1(x) - Affiliate Transactions
Schedule 4.1(y) - Compensation of Management Employees
Schedule 5.2(d) - Modified Subscription Fees, Activity Fees or Rebates
Schedule 5.2(e) - Permitted Contracts
Schedule 5.2(g) - Permitted Increase in Compensation or Benefits
Schedule 6.2(d) - Absence of Certain Changes
<PAGE> 7
EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Assumption Agreement
Exhibit C - Form of Tax Affidavit
Exhibit D - Form of Opinion of Law Offices of Alan H. Finegold
Exhibit E - Form of Opinion of New York Counsel to the Sellers
Exhibit F - Form of Non-Competition Agreement
Exhibit G - Form of Opinion of Robert W. Hollweg, Esq.
Exhibit H - Form of Opinion of Simpson Thacher & Bartlett
Exhibit I - Form of Opinion of Hunton & Williams
Exhibit J - Form of British Columbia Amendment
ASSET PURCHASE AGREEMENT, dated as of December 11, 2000, among WEIGHCO
ENTERPRISES, INC., a Delaware corporation ("WEI"), WEIGHCO OF NORTHWEST,
INC., a Delaware corporation ("WNI"), WEIGHCO OF SOUTHWEST, INC., a Delaware
corporation ("WSI", and together with WEI and WNI, each individually a
"Seller" and collectively, the "Sellers"), WEIGHT WATCHERS NORTH AMERICA,
INC., a Delaware corporation ("Buyer"), and Weight Watchers INTERNATIONAL,
iNC., a Virginia corporation ("WWI").
WITNESSETH
WHEREAS, Sellers are each franchisees of WWI, authorized exclusively to conduct
Weight Watchers classes for weight reduction and control ("Classes"), in
franchise areas numbers 30, 37, 47, 55, 58, 62, 66, 78, 86, 105, 110, 121 and
123 (the territories specified therein are collectively referred to herein as
the "Territories"), granted pursuant to the several Franchise Agreements between
WWI and each of the respective Sellers, listed on Schedule 1(a) hereto
(collectively, the "Franchise Agreements"); and Sellers own and operate the
business of conducting Classes in the Territories (the "Franchises");
WHEREAS, Buyer is a wholly-owned subsidiary of WWI;
WHEREAS, upon and subject to the terms and conditions set forth herein, Buyer
desires to buy and Sellers desire to sell the Franchises and other businesses,
operations and substantially all of the assets in connection therewith, except,
however, for the Excluded Assets, and Buyer is willing to assume certain
specified related liabilities and obligations of Sellers, all as hereinafter set
forth; and
WHEREAS, concurrently with the closing of the transactions contemplated pursuant
to this Agreement (the "Closing"), Sellers, Buyer and The Chase Manhattan Bank,
N.A., as escrow agent (the "Escrow Agent"), shall enter into an escrow agreement
(the "Escrow Agreement"), substantially in the form attached hereto as Exhibit
A.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants of
the parties hereto, it is hereby agreed as follows:
1. Definitions
The following terms shall have the following respective meanings:
"Acquired Person" has the meaning ascribed thereto in Section 5.13(a).
"Acquisition Proposal" means any offer, proposal or indication of interest
for the acquisition of (including by merger or other business combination)
(i) any of the capital stock or other securities of any of the Sellers or
(ii) any of the assets (including the Assets) of the Sellers (other than a
sale of inventory in the ordinary course of business consistent with past
practice), in each case, other than in a transaction contemplated by this
Agreement.
<PAGE> 8
"Actions" has the meaning ascribed thereto in Section 4.1(h).
"Affiliate" means a Person, which directly or indirectly, alone or through
one or more intermediaries, controls, or is controlled by, or is under
common control with a specified Person.
"Agreement" means this Agreement among Sellers, Buyer and WWI as
originally executed and delivered, as the same may be amended or
supplemented in accordance with the provisions hereof.
"Antitrust Division" means the Antitrust Division of the United States
Department of Justice.
"Antitrust Improvements Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"Assets" has the meaning ascribed thereto in Section 2.1.
"Assumed Liabilities" has the meaning ascribed thereto in Section 2.5.
"Assumption Agreement" has the meaning ascribed thereto in Section 2.5.
"Basket Amount" has the meaning ascribed thereto in Section 9.5.
"Benefit Arrangement" has the meaning ascribed thereto in Section 4.1(n).
"British Columbia Amendment" means the Amendment, dated the Closing Date,
to the Restated Franchise Agreement, dated April 24, 1992, between WWI and
the British Columbia Company, as amended and modified, in substantially
the form set forth in Exhibit J hereto.
"British Columbia Company" means Weight Watchers of British Columbia,
Ltd., a British Columbia corporation.
"Business" means the business of Sellers, including, without limitation,
the business of conducting Classes in the Territories and the sale of
products and publications, but excluding the business related to the
British Columbia Company.
"Buyer" has the meaning ascribed thereto in the recitals to this
Agreement.
"Buyer Escrow Release Amount" has the meaning ascribed thereto in Section
3.3.
"Carolina Acquisition Agreement" means the Third Amendment, dated the
date hereof, to the Management and Option Agreement, dated January 8,
1992, between WEI and W.W. of North Carolina, Inc., as amended by the
First Amendment and the Second Amendment thereto.
"Carolina Franchise" means the Franchise granted by the Carolina
Franchise Agreement.
"Carolina Franchise Agreement" means that certain Restated Franchise
Agreement, dated December 30, 1991, as the same may have been amended or
supplemented from time to time, between WWI and Weight Watchers of North
Carolina, Inc. and Catherine H. Aldridge.
"Cash" means all cash in currency and all cash on deposit and immediately
available for withdrawal.
"Cash Equivalents" means certificates of deposit, money market funds,
Treasury bills and similar instruments, including, without limitation,
repurchase agreements secured thereby.
"Classes" has the meaning ascribed thereto in the recitals to this
Agreement.
"Closing" has the meaning ascribed thereto in the recitals to this
Agreement.
"Closing Date" has the meaning ascribed thereto in Section 3.1.
"COBRA" has the meaning ascribed thereto in Section 4.1(n).
"Code" means the Internal Revenue Code of 1986, as amended and as in
effect from time to time, and any law which shall have been a predecessor
or shall be a successor thereto.
"Conclusive Statement" has the meaning ascribed thereto in Section 3.5(c).
"Confidential Information" has the meaning ascribed thereto in Section
10.11.
<PAGE> 9
"Customer Contracts" means all agreements (including Prepaid Coupons) with
customers of Sellers for attendance at Classes in the Territories in
effect on the Closing Date, including, without limitation, agreements
under the At-Work program.
"Employee Benefit Programs" has the meaning ascribed thereto in Section
4.1(n).
"Environmental Laws" has the meaning ascribed thereto in Section 4.1(r).
"Equipment" means the equipment, furniture, furnishings, fixtures,
machinery, vehicles, telephones and other tangible personal property of
Sellers, including, without limitation, the furniture, fixtures and
equipment used for the conduct of the Classes in the Territories, Weight
Watchers signs and all keys which Sellers may have to locked doors within
the premises subject to the Leases.
"ERISA" has the meaning ascribed thereto in Section 4.1(n).
"Escrow Agent" has the meaning ascribed thereto in the recitals to this
Agreement.
"Escrow Agreement" has the meaning ascribed thereto in the recitals to
this Agreement.
"Escrow Fund" has the meaning ascribed thereto in Section 3.2.
"Excluded Assets" has the meaning ascribed thereto in Section 2.2.
"Financial Information" has the meaning ascribed thereto in Section
4.1(d)
"Franchises" has the meaning ascribed thereto in the recitals to this
Agreement.
"Franchise Agreements" has the meaning ascribed thereto in the recitals to
this Agreement.
"Franchise Fees" has the meaning ascribed thereto in Section 5.9.
"FTC" means the Federal Trade Commission.
"Funded Debt" means any indebtedness of the Sellers, whether or not
contingent, in respect of (i) obligations with regard to borrowed money
(including reimbursement obligations) evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) whether or not secured by any of the
Assets, or bankers' acceptances, (ii) obligations evidenced by bonds,
debentures, notes or similar instruments, (iii) obligations to pay the
deferred purchase price of assets or other property (other than accounts
payable which are incurred in the ordinary course of business consistent
with past practice), other than Leases which are equipment leases and are
set forth on Schedule 1(b), (iv) obligations under leases which are
required to be classified and accounted for as capital leases on financial
statements prepared in accordance with GAAP, other than Leases which are
equipment leases and are set forth on Schedule 1(b) and (v) the guarantee
by any Seller of any indebtedness of any other Person.
"GAAP" means generally accepted United States accounting principles as of
the date hereof applied on a consistent basis during the periods involved.
"Group Health Plan" has the meaning ascribed thereto in Section 4.1(n).
"Intellectual Property" has the meaning ascribed thereto in Section
2.1(o).
"Indemnitee" has the meaning ascribed thereto in Section 9.3(a).
"Indemnitor" has the meaning ascribed thereto in Section 9.3(a).
"Leases" means the real estate leases, equipment leases and rental
agreements listed on Schedule 1(c), including, without limitation, all
license and other agreements providing for the periodic occupancy of space
for the conduct of the Classes in the Territories.
"Letter of Intent" has the meaning ascribed thereto in Section 10.5.
"Liens" means any lien, mortgage, option, pledge, security interest,
assignment by way of security, claim, charge, encumbrance or other
restriction of any kind or nature.
"Losses" has the meaning ascribed thereto in Section 9.1.
<PAGE> 10
"Manager" has the meaning ascribed thereto in Section 5.10.
"Management Employees" has the meaning ascribed thereto in Section 4.1(y).
"Material Adverse Effect" means any material adverse effect on the
condition (financial or other), results of operations, assets, properties,
business or prospects of Sellers or an adverse effect on Sellers' ability
to perform their obligations hereunder or under any other agreement
contemplated hereby.
"Montford Center Litigation" means the action brought in Mecklenburg
County, North Carolina under the name Weighco Enterprises Inc. f/k/a
Weighco of Florida, Incorporated v. Catherine H. Aldridge, et al. and
currently on appeal to the North Carolina Court of Appeals.
"Neutral Auditor" has the meaning ascribed thereto in Section 3.5(c).
"Notice of Claim" has the meaning ascribed thereto in Section 9.3(b).
"Offering Memorandum" means the undated Confidential Offering Memorandum
prepared by Houlihan, Lokey, Zukin & Howard with respect to Sellers and
the Business.
"Other Real Property" has the meaning ascribed thereto in Section 4.1(r).
"Permitted Liens" has the meaning ascribed thereto in Section 4.1(e).
"Person" means an individual, a corporation, a limited liability company,
a partnership, an association, a trust or other entity or organization.
"Plans" has the meaning ascribed thereto in Section 4.1(n).
"Prepaid Coupons" means any prepaid coupon or other arrangement with
customers, including, without limitation, customers under the At-Work
program, whereby the customer has paid to or for the benefit of any Seller
in advance for Classes or other services not yet provided to or received
by such customer prior to the opening of business on the Closing Date or
for goods not yet provided to or received by such customer prior to the
opening of business on the Closing Date.
"Prepaid Coupon Payment Date" has the meaning ascribed thereto in Section
3.6(b).
"Prepaid Coupon Statement" has the meaning ascribed thereto in Section
3.6(a).
"Prepaid Coupon Liability" has the meaning ascribed thereto in Section
3.6(a).
"Proceeding" has the meaning ascribed thereto in Section 10.16.
"Protected Business" has the meaning ascribed thereto in Section 5.13(a).
"Purchase Price" has the meaning ascribed thereto in Section 3.2.
"Receivables" has the meaning ascribed thereto in Section 4.1(g).
"Representatives" means any stockholder, director, officer, employee,
advisor, attorney, accountant or other representative or agent of a
Person.
"Resolution Period" has the meaning ascribed thereto in Section 3.5(b).
"Review Financials" has the meaning ascribed thereto in Section 5.8.
"Schedules" means the schedules furnished by Sellers to Buyer in the form
attached to this Agreement.
"Section 3.5 Assumed Assets" has the meaning ascribed thereto in Section
3.5(a).
"Section 3.5 Assumed Liabilities" has the meaning ascribed thereto in
Section 3.5(a).
"Section 4.1 Employees" has the meaning ascribed thereto in Section 4.1.
"Section 6 Liens" has the meaning ascribed thereto in Section 6(l).
"Sellers" has the meaning ascribed thereto in the recitals to this
Agreement.
"Service Agreements" means those certain service contracts, maintenance
contracts and other agreements
<PAGE> 11
listed in Schedule 1(d).
"Statement" has the meaning ascribed thereto in Section 3.5(a).
"Supplies" means all inventory, including, without limitation, cookbooks
and other books, calendars, food diaries, food companions, food scales,
measuring devices, calculators, vitamins, weight systems, tapes, binders
and other materials and all products held for sale to customers, supplies
of attendance books and other program materials used in the conduct of the
Classes in the Territories, including, without limitation, stationery,
forms, labels, directories and promotional materials and supplies of
office materials used for the Business on the Closing Date.
"Taxes" has the meaning ascribed thereto in Section 4.1(t).
"Tax Return" has the meaning ascribed thereto in Section 4.1(t).
"Territories" has the meaning ascribed thereto in the recitals to this
Agreement.
"Third Parties" has the meaning ascribed thereto in Section 5.7.
"Third Party Claims" has the meaning ascribed thereto in Section 9.3(c).
"WEI" has the meaning ascribed thereto in the recitals to this Agreement.
"WNI" has the meaning ascribed thereto in the recitals to this Agreement.
"WSI" has the meaning ascribed thereto in the recitals to this Agreement.
"WWI" has the meaning ascribed thereto in the recitals to this Agreement.
2. Purchase and Sale of Assets; Assumption of Certain Liabilities
1. Transfer of Assets
On the basis of the representations, warranties, covenants
and agreements and subject to the satisfaction (or waiver by
the party whose obligations hereunder are subject to such
satisfaction) of the conditions set forth in this Agreement,
on the Closing Date, Sellers shall sell, convey, assign,
transfer and deliver to Buyer free and clear of all Liens
(other than liens of landlords or lessors under the Leases),
and Buyer shall purchase and acquire from Sellers free and
clear of all Liens (other than liens of landlords or lessors
under the Leases), all of the businesses and substantially all
of the assets, rights, properties, claims and contracts of
Sellers (other than the Excluded Assets) at the Closing Date
of every kind, nature, character and description, tangible and
intangible, real, personal or mixed, wherever located,
including, without limitation, the following:
a. The Franchises;
b. All the contracts and agreements (including,
without limitation, the Franchise
Agreements, all agreements by customers of
Sellers for attendance at the Classes in the
Territories in effect on the Closing Date,
including but not limited to the Customer
Contracts, Service Agreements, maintenance
agreements, operating agreements, customer
subscription agreements, non-competition
agreements, the indemnification and
non-competition provisions under all
acquisition agreements, marketing agreements
and agreements relating to servicing,
distribution, solicitation, hardware and/or
software, advertising, promotional, lease
and other agreements) and purchase
commitments listed on Schedule 2.1(b);
c. All of the Leases listed on Schedule 2.1(c),
including, without limitation, (i) the
leasehold interests in real property, all
buildings, structures and other improvements
situated thereon, (ii) equipment leases and
(iii) other rental agreements entered into,
or assumed, by Sellers; subject, however, to
the provisions of Section 5.15;
d. All accounts receivable and other
receivables of Sellers in existence on or
prior to the opening of business on the
Closing Date (whether or not billed);
e. All deposits and prepaid expenses as of the
opening of business on the Closing Date
(other than with respect to policies of
insurance);
<PAGE> 12
f. All Equipment, and all warranties and
guarantees, if any, express or implied,
existing for the benefit of Sellers with
respect to the Equipment;
g. All the Supplies;
h. All mailing lists relating to the Business;
i. All management information systems and
software, and customer, subscriber and
vendor lists, catalogs, research material,
technical information, technology,
specifications, designs, drawings,
processes, and quality control data and all
rights respecting software packages and
systems;
j. All sales promotion and selling literature
and promotional and advertising materials,
customer lists and customer information
maintained by Sellers with respect to
customers within the Territories;
k. All books, records and files of Sellers
relating to the operation of the Business;
l. All licenses, permits or franchises issued
by any domestic or foreign governmental
authority or other third party, including,
without limitation, all occupancy permits,
licenses and other permits that Sellers may
have with respect to its properties, and the
premises subject to the Leases, their use,
maintenance and occupancy;
m. All security deposited with third parties
and security bonds and all claims against
other parties (other than claims relating to
the Montford Center Litigation);
n. All goodwill and going concern value;
o. All Sellers' right, title and interest in
and to the following types of property
(including all rights to sue for past
infringement thereof) (collectively, the
"Intellectual Property") relating to the
Business:
i. all United States and foreign registered and unregistered
trademarks and service marks, trademark and service mark
registrations, trademark and service mark applications for
registration, trade names and the like (including corporate
names), together with the goodwill connected with the use of
and symbolized by such marks, names, registrations and
applications for registration;
ii. all United States and foreign patents, patent applications,
and all other patent rights, copyrights, copyright
registrations and copyright applications;
iii. all information, recorded knowledge, surveys, engineering
reports, manuals, catalogues, research data, proprietary
information, know-how, trade and business secrets, photos, art
work, editorial materials, formats, syndicated market research
data, sales data and other similar information and all other
intellectual property;
iv. all non-governmental licenses, sublicenses, covenants or
agreements to which Sellers are a party, which relate in whole
or in part to any items of the categories mentioned above in
clauses (i) - (iii), including all trademark licenses; and
v. all other proprietary rights, trade secrets, ideas or
know-how;
(p) All plans, owner's and operator's manuals, user's instruction and warranties
of manufacturers and contractors which Sellers may have with respect to items
used in the Business and the premises and equipment subject to the Leases, their
use, maintenance and operation.
The assets being sold, conveyed, assigned, transferred and delivered to Buyer by
Sellers hereunder are sometimes hereinafter referred to as the "Assets."
2. Excluded Assets
It is expressly understood and agreed that the Assets shall not
include the following (collectively, the "Excluded Assets"):
a. Cash and Cash Equivalents owned or held by
Sellers as of the close of business on the
business day immediately preceding the
Closing Date;
b. The life insurance policies on Catherine H.
Aldridge, Lola A. Bode, Stanley L. Lipman
and Richard J. McSorley and any other
employees or former employees of Sellers and
all other policies of insurance insuring
Sellers;
c. The proceeds to be received by Sellers upon
consummation of the transactions
contemplated hereby;
d. Any federal, state or municipal tax refunds
or overpayments;
e. Any rights under the Montford Center
Litigation;
<PAGE> 13
f. The items of tangible personal property
listed in Schedule 2.2;
g. The corporate names "Weighco Enterprises,
Inc.," "Weighco of Northwest, Inc." and
"Weighco of Southwest, Inc." and any
goodwill associated with such names;
h. The capital stock, including treasury
shares, of Sellers; provided, however, that
the Assets shall include all of the assets
and property of Sellers except as otherwise
specified in this Section 2.2;
i. The books, records and files of Sellers not
related to the conduct of the Business,
including without limitation, income tax and
other tax records;
j. The corporate minute books and stock
transfer books of the Sellers; and
k. Any agreement, contract, arrangement or
transaction to which any Affiliate of any
Seller is a party.
3. Instruments of Conveyance and Transfer
On the Closing Date, Sellers shall (a) deliver or cause to be
delivered to Buyer such deeds, bills of sale, endorsements, consents,
assignments and other good and sufficient instruments of conveyance
and assignment all in recordable form, where applicable, as shall be
effective to vest in Buyer all right, title and interest of Sellers in
and to the Assets; subject, however, to the provisions of Section 5.15
and (b) transfer to Buyer originals of all contracts, agreements,
commitments, books, records, files, certificates, licenses, permits,
plans and specifications and other data of Sellers, including, without
limitation, computer tapes and computer-generated records constituting
part of the Assets. All materials referred to in clause (b) shall be
delivered to Buyer in the form and order in which Sellers maintained
such materials.
4. Further Assurances
From time to time after the Closing Date, Sellers shall promptly
execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such other instruments of conveyance,
assignment, transfer and delivery and will take or cause to be taken
such other actions as Buyer may reasonably request in order to more
effectively sell, convey, assign, transfer and deliver to Buyer any of
the Assets or to enable Buyer to protect, exercise and enjoy all
rights and benefits of Sellers with respect thereto and as otherwise
may be appropriate to carry out the transactions herein contemplated.
From time to time, at Sellers' request and without further
consideration, Buyer will execute and deliver or cause to be executed
and delivered such other instruments and take such other actions as
Sellers or their counsel may reasonably request to more effectively
assume, pay, perform and discharge the Assumed Liabilities or to carry
out the transactions herein contemplated.
5. Assumed Liabilities
On the basis of the representations, warranties, covenants and agreements and
subject to the satisfaction (or waiver by the party whose obligations hereunder
are subject to such satisfaction) of the conditions set forth in this Agreement,
on the Closing Date, Buyer shall deliver to Sellers an undertaking in the form
attached as Exhibit B (the "Assumption Agreement") pursuant to which Buyer
shall, subject to the provisions of Section 5.15, on and as of the Closing Date,
assume and agree to pay, perform and discharge when due, the following
liabilities and obligations of Sellers (without duplication): (a) Sellers'
obligations under the contracts, agreements, leases and commitments listed in
Schedule 2.5(a), which are assigned by Sellers to Buyer and as to which Buyer
succeeds to the rights of Sellers, but, only to the extent of liabilities and
obligations that arise thereunder after the opening of business on the Closing
Date; (b) Sellers' obligations under the licenses, permits and Franchises listed
in Schedule 2.5(b), but only to the extent of liabilities and obligations that
arise thereunder after the opening of business on the Closing Date; (c)
liabilities and obligations of Sellers arising out of the operation of the
Assets from and after the opening of business on the Closing Date (other than as
a result of any breach by Sellers of their obligations hereunder); (d) the
payment of rent and the performance of other obligations pertaining to the
operations of the Franchises from and after the opening of business on the
Closing Date, (e) obligations incurred after the opening of business on the
Closing Date for the Service Agreements, (f) obligations incurred after the
opening of business on the Closing Date for the employees hired by Buyer;
provided that Buyers shall not be responsible for any "stay" or "retention"
bonuses agreed to be awarded by any Seller or any of their respective Affiliates
to any employee of Sellers and (g) Customer Contracts. Notwithstanding the
foregoing, Buyer is not assuming, nor shall it be deemed to have assumed, any
obligations or liabilities of Sellers to any of the Sellers' respective
stockholders or Affiliates or to any of their employees for any pre-Closing
period or for personal services for any pre-Closing period, for Funded Debt, for
federal, state or municipal income or other taxes or (iv) related to any
previous acquisitions or similar transactions (except, however, for rent and
other post-Closing obligations under Leases and post-Closing obligations under
Service Agreements that were assumed by Sellers in such
<PAGE> 14
acquisitions or similar transactions), (v) any liability or obligation of any
kind or nature, except as expressly provided in the Assumption Agreement or this
Agreement or (vi) any liability or obligation relating to the Excluded Assets.
The liabilities and obligations assumed by Buyer in accordance with clauses (a)
through (g) of this Section 2.5 are sometimes hereinafter referred to as the
"Assumed Liabilities."
3. Closing; Payment of Purchase Price at Closing
1. Closing Date
On and subject to the conditions herein set forth, the Closing shall
take place at the offices of Simpson Thacher & Bartlett, located at
425 Lexington Avenue, New York, New York 10017, at 10 a.m., New York
City time, on the third business day following the satisfaction of
waiver of all conditions set forth herein, or at such other time and
place as shall be agreed upon by the parties hereto; provided that in
no event shall the Closing occur prior to January 2, 2001. The day on
which the Closing actually takes place is herein referred to as the
"Closing Date." The Closing Date shall be deemed to have occurred as
of 12:01 a.m. (New York time) on the Closing Date.
2. Purchase Price and Payment
In consideration for the Assets, and subject to the terms and
conditions of this Agreement, Buyer shall on the Closing Date (a)
assume the Assumed Liabilities as provided in Section 2.5, (b)
transfer to the order of WEI, on behalf of the Sellers, in immediately
available funds the amount of $73,800,000 and (c) transfer to the
Escrow Agent in immediately available funds the amount of $10,000,000
(the "Escrow Fund") to be held pursuant to the Escrow Agreement (such
payments collectively the "Purchase Price"), and Sellers on the
Closing Date will sell, assign and transfer the Assets to Buyer in
accordance with the provisions of this Agreement. Buyer and Sellers
agree to allocate the Purchase Price among the Assets in accordance
with the rules under Section 1060 of the Code and the Treasury
Regulations promulgated thereunder and in the manner set forth in
Schedule 3.2. Buyer and Sellers agree to act in accordance with such
allocations in all Tax Returns, reports or filings, including IRS Form
8594. Unless otherwise required by applicable law, neither Buyer nor
Sellers shall, after filing IRS Form 8594, revoke or amend IRS Form
8594 without the prior written consent of the other.
3. Payment of Balance of Closing Payment.
In accordance with and subject to the terms of the Escrow Agreement,
(a) nine months following the Closing Date, the Escrow Agent will
release to (i) Buyer funds from the Escrow Fund equaling the amounts
owed but not yet paid to Buyer (x) pursuant to Sections 3.5 and 3.6 of
this Agreement or (y) as a result of any indemnification obligation
pursuant to Section 9 of this Agreement (collectively, the "Buyer
Escrow Release Amount") and (ii) WEI, on behalf of the Sellers, an
amount equal to $5,000,000 minus the Buyer Escrow Release Amount and
(b) eighteen months following the Closing Date, the Escrow Agent will
release to (i) Buyer funds equaling the amounts owed but not yet paid
to Buyer (x) pursuant to Sections 3.5 and 3.6 of this Agreement or (y)
as a result of any indemnification obligation pursuant to Section 9 of
this Agreement and (ii) WEI, on behalf of the Sellers, all amounts
remaining in the Escrow Fund after payment of funds to Buyer pursuant
to Section 3.3(b)(i).
4. Ownership and Investment of the Escrow Fund; Fees and Expenses of Escrow
Agent
The Escrow Agent shall retain the Escrow Fund subject to the terms and
conditions hereof and of the Escrow Agreement, and shall be empowered
and directed, upon receipt of written instructions signed by WEI, on
behalf of the Sellers, to invest said sum in such investments as WEI,
on behalf of Sellers, shall direct, provided that such investments
shall be limited to those described in Schedule I of the Escrow
Agreement. The Escrow Agent shall further be authorized to sell or
redeem any or all of such investments and to reinvest the proceeds of
such sales or redemptions in accordance with the provisions of the
Escrow Agreement. The Escrow Agent shall further be authorized to sell
or redeem any or all of such investments without further instructions
as may be necessary from time to time to pay in cash any amount to be
paid pursuant to the provisions hereof of or the Escrow Agreement. All
amounts and investments (other than bearer instruments) comprising the
Escrow Fund shall be registered and held in the name of the Escrow
Agent, as escrow agent for Buyer and Sellers.
It is understood that Sellers are the owners of the Escrow Fund in the
proportionate interests set forth in Schedule 3.4(b), including all
interest and distributions thereon and investments thereof. The Escrow
Fund shall be increased from time to time by any and all interest
accrued and paid thereon (after payment of expenses incurred in
connection with the investment,
<PAGE> 15
reinvestment or sale thereof) pursuant to the Escrow Agreement. For
purposes of all Tax laws, all items of asset, liability, income, gain,
loss, expense, deduction, credit and other items of the Escrow Fund
shall be allocated to Sellers in the proportionate interests set forth
in Schedule 3.4(b). The Escrow Agent, after consultation with WEI, on
behalf of the Sellers, and at the direction of WEI, on behalf of the
Sellers, shall file with the appropriate taxing authority such Tax
Returns or other materials and send to Sellers such materials, as may
be required by any applicable taxing jurisdiction with respect to any
funds held by it hereunder. Any expense in connection with such Tax
Returns or other materials shall be borne by the Sellers.
All fees and expenses of the Escrow Agent in connection with the
administration of the Escrow Fund shall be borne by the Sellers.
5. Post Closing Adjustment.
a. Within 120 calendar days after the Closing Date, Buyer
shall prepare and deliver to Sellers (i) a statement
(the "Statement") setting forth (x) the accounts
receivable, deposits and prepaid expenses constituting
part of the Assets (the "Section 3.5 Assumed Assets")
and (y) the amount of the obligations and liabilities
of Sellers assumed by Buyer as of the opening of
business on the Closing Date, except, however, for
obligations for rent and other charges under the Leases
not accrued as of the opening of business on the
Closing Date and obligations under the Service
Agreements not accrued as of the opening of business on
the Closing Date (collectively, the "Section 3.5
Assumed Liabilities") and (ii) the workpapers of Buyer
used in the preparation of the Statement. The Statement
shall be prepared in accordance with GAAP.
b. After receipt of the Statement, Sellers will have
thirty (30) calendar days to review the Statement
together with the workpapers used in its preparation.
Buyer shall provide Sellers with access to the relevant
books and records and employees of Buyer to the extent
required to review the Statement. Unless Sellers
deliver written notice to the Buyer setting forth the
specific items disputed by Sellers, on or prior to the
thirtieth calendar day after their receipt of the
Statement, Sellers will be deemed to have accepted and
agreed to the Statement and such agreement will be
final and binding. Any such notice of disagreement
shall specify the basis of such objection, including
identifying any alleged miscalculation or alleged
uncounted or improperly included items, and Sellers
shall be deemed to have agreed with all other items and
amounts contained in the Statement. If Sellers so
notify Buyer of its objections to the Statement, Buyer
and the Sellers will, within thirty (30) calendar days
following delivery of the notice of disagreement (the
"Resolution Period"), use their reasonable best efforts
to reach agreement on the disputed items. Any
resolution by Buyer and Sellers during the Resolution
Period as to any disputed amounts will be final,
binding and conclusive.
c. If Buyer and Sellers do not resolve all disputed items
by the end of the Resolution Period or any mutually
agreed extension thereof, then all items remaining in
dispute will be submitted within thirty (30) calendar
days after the expiration of the Resolution Period to
Ernst & Young LLP, or such other independent accounting
firm mutually acceptable to Buyer and Sellers (the
"Neutral Auditor"). The Neutral Auditor shall act as an
arbitrator to determine only those items remaining in
dispute. All fees and expenses relating to the work, if
any, to be performed by the Neutral Auditor will be
borne equally by Buyer, on the one hand, and Sellers,
on the other hand. The Neutral Auditor will deliver to
Buyer and Sellers a written determination (such
determination to include a work sheet setting forth all
material calculations used in arriving at such
determination and to be based solely on information
provided to the Neutral Auditor by the Sellers and
Buyer) of the disputed items within thirty 30 calendar
days of receipt of the disputed items, which
determination, in the absence of manifest error, will
be final, binding and conclusive. The final, binding
and conclusive Statement, which is agreed upon by Buyer
and Sellers or is delivered by the Neutral Auditor in
accordance with this Section 3.5(c), will be the
"Conclusive Statement." In the event that either
<PAGE> 16
Buyer or Sellers fail to submit their respective
statement regarding any items remaining in dispute
within the time determined by the Neutral Auditor,
then the Neutral Auditor shall render a decision
based solely on the evidence timely submitted to the
Neutral Auditor by Buyer and Sellers.
d. If the amount of Section 3.5 Assumed Liabilities
exceeds the amount of Section 3.5 Assumed Assets as
shown on the Conclusive Statement, then the Sellers
shall pay Buyer, as an adjustment to the Purchase
Price, an amount equal to the difference between the
amount of Section 3.5 Assumed Liabilities and the
amount of Section 3.5 Assumed Assets. If the amount of
Section 3.5 Assumed Assets exceeds the amount of
Section 3.5 Assumed Liabilities, then Buyer shall pay
WEI, on behalf of the Sellers, as an adjustment to the
Purchase Price, an amount equal to the difference
between the amount of Section 3.5 Assumed Assets and
the amount of Section 3.5 Assumed Liabilities. If the
amount of Section 3.5 Assumed Liabilities equals the
amount of Section 3.5 Assumed Assets, no payment shall
be required and no adjustment shall be made to the
Purchase Price. All payments to be made pursuant to
this Section 3.5(d) will be made on the tenth business
day following the date on which the Conclusive
Statement is determined by wire transfer (to an account
previously designated in writing by the receiving
party) of immediately available funds. Any payment
required to be made pursuant to this Section 3.5(d), if
made following the date which shall be 120 calendar
days after the Closing Date, shall bear interest
accrued from the date 120 days after the Closing Date
through the date of payment at a rate of interest equal
to 13% per annum and the amount of interest shall be
added to the amount to be paid pursuant to this Section
3.5(d).
6. Prepaid Coupon Adjustment.
Sellers are responsible for all Prepaid Coupons issued or sold
prior to the Closing Date and redeemed after the commencement of
business on the Closing Date. As soon as reasonably practicable
after the end of each month after the Closing Date, Buyer shall
prepare and deliver to Sellers a statement (the "Prepaid Coupon
Statement") setting forth a summary of the amount payable
hereunder with respect to such Prepaid Coupons (the "Prepaid
Coupon Liabilities"), together with the Prepaid Coupons redeemed
during such month.
After receipt of the Prepaid Coupon Statement, Sellers shall pay
to Buyer, as an adjustment to the Purchase Price, no later than
the tenth business day following the date on which the Prepaid
Coupon Statement is delivered (the "Prepaid Coupon Payment Date")
an amount equal to the Prepaid Coupon Liabilities by wire transfer
(to an account previously designated in writing by the Buyer) of
immediately available funds. Any payment required to be made
pursuant to this Section 3.6 and not so paid shall bear interest
from the tenth business day after the Prepaid Coupon Payment Date
through the date of payment at a rate of interest equal to 13% per
annum, and the amount of interest shall be added to the amount to
be paid pursuant to this Section 3.6.
The amount of the Prepaid Coupon Liabilities shall be the excess
of the amount received by Sellers from the sale of the Prepaid
Coupons redeemed after the commencement of business on the Closing
Date, less any and all royalties paid or payable by Sellers to WWI
with respect to the sale of such Prepaid Coupons.
7. Guaranty; Consent
WWI does hereby guarantee the performance of each of the obligations (financial
or otherwise) of the Buyer under this Agreement, including, without limitation,
the obligations of Buyer under Section 3.2 hereof. WWI, by its execution and
delivery of this Agreement, does hereby consent to, and approve, the assignment
of the Franchises, including without limitation, the Carolina Franchise, by
Sellers hereunder in accordance with the provisions of the Franchise Agreements
and waives the compliance by Sellers and Buyer with any and all requirements
under the Franchise Agreements with respect to such assignments, except as
otherwise specifically provided in this Agreement.
4. Representations and Warranties
1. Representations and Warranties of Sellers.
Sellers jointly and severally represent and warrant to Buyer as
follows (provided that, with respect to Sellers, if any representation
or warranty is made hereunder to the "best
<PAGE> 17
knowledge" of Sellers or any similar phrase, such knowledge shall be
limited to information obtained by an examination of Sellers'
managerial employees specified on Schedule 4.1 (the "Section 4.1
Employees") and records and any public record pertinent to the
relevant representation or warranty):
a. Due Organization; Power; Capacity; Good Standing
Each of the Sellers is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization and has the requisite corporate power and authority to
own, lease and operate its properties and assets and to conduct its
business as now conducted by it. Each of the Sellers has all requisite
corporate and other power and authority to enter into this Agreement
and any other agreement contemplated hereby and to perform its
obligations hereunder and thereunder. Each Seller is duly authorized,
qualified or licensed to do business as a foreign corporation, and is
in good standing, in each of the jurisdictions in which its right,
title or interest in or to any of the assets held by it, or the
conduct of its business, requires such authorization, qualification or
licensing, except where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, have a Material
Adverse Effect.
b. Authorization and Validity
Each Seller has all requisite power and authority to execute, deliver
and perform their respective obligations under this Agreement and any
other agreement contemplated hereby and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and
performance by each Seller of this Agreement and any other agreement
contemplated hereby and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by the
stockholders and by the Board of Directors of each Seller. No other
corporate or stockholder action is necessary for the authorization,
execution, delivery and performance by any Seller of this Agreement
and any other agreements contemplated hereby and the consummation by
Sellers of the transactions contemplated hereby or thereby. This
Agreement has been duly executed and delivered by each of the Sellers
and constitutes a valid and legally binding obligation of each of the
Sellers, enforceable against them in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
c. No Governmental Approvals or Notices Required; No Conflict
Except as set forth in Schedule 4.1(c), the execution, delivery and
performance of this Agreement and any other agreements contemplated
hereby by each Seller and the consummation by each Seller of the
transactions contemplated hereby and thereby will (i) not conflict
with or violate (with or without the giving of notice or the lapse of
time or both), or require any consent, registration, declaration,
approval, filing or notice under, any provision of any law, statute,
ordinance, rule or regulation, court or administrative order, writ,
judgment or decree of any court or any public governmental or
regulatory body, agency or authority having jurisdiction over any of
the Sellers or any of their assets (including the Assets) or
properties, except for such conflicts or violations the occurrence of
which, and such consents, approvals, filings or notices the failure of
which to obtain or make, would not, individually or in the aggregate,
have a Material Adverse Effect, and (ii) not (with or without the
giving of notice or the lapse of time or both) (x) violate or conflict
with, or result in the breach, suspension or termination of any
provision of, or constitute a default under, or require any consent,
approval or notice under, or result in the acceleration of the
performance of the obligations of Sellers under, or give rise to any
right of termination, purchase, amendment or any other right under,
increase the liability of any party under or (y) result in the
creation of any Lien upon all or any portion of the properties, assets
(including the Assets) or business of Sellers pursuant to, the charter
or by-laws or any provision of the organizational documents of any
Seller, or any indenture, mortgage, deed of trust, lease, agreement,
contract or instrument to which any Seller is a party or by which any
of the Sellers or any of their properties, assets (including the
Assets) or business is bound, except for such violations, conflicts,
breaches, suspensions, terminations, defaults, accelerations or Liens
which, individually or in the aggregate, would not have a Material
Adverse Effect.
<PAGE> 18
d. Financial Information; Liabilities
The consolidated balance sheets of Sellers as at December 26,
1998 and December 25, 1999 and for the period from December 26,
1999 to September 30, 2000 and the related consolidated
statements of income and retained earnings and consolidated
statements of cash flows for the fiscal years and nine month
period ended on such dates, copies of which are attached hereto
in Schedule 4.1(d), are complete and correct and present fairly
the consolidated financial condition of Sellers as at such dates,
and the consolidated results of their operations for the fiscal
years and nine month period then ended. Except as set forth in
Schedule 4.1(d), all such financial statements, including the
related schedules and notes thereto, have been prepared in
accordance with GAAP. Except as set forth in Schedule 4.1(d),
none of the Sellers had, at the date of the most recent balance
sheet referred to above, any material contingent obligation,
contingent liability or liability for taxes, or any long-term
lease or unusual forward or long-term commitment not reflected
therein or in a footnote thereto that would have been required to
be reflected in or reserved against on a balance sheet (or the
notes thereto) for the Sellers prepared in accordance with GAAP.
All such financial statements, including the related schedules
and notes thereto, are sometimes hereinafter referred to as the
"Financial Information."
i. Except to the extent set forth in the financial
statements for the nine month period ending September 30,
2000 included in the Financial Information or set forth in
Schedule 4.1(d) or incurred since September 30, 2000 in the
ordinary course of Sellers' business consistent with past
practice, none of the Sellers have any material liabilities
or material obligations (absolute, accrued, contingent or
otherwise), whether due or to become due.
e. Title and Condition of Properties; Absence of Liens
Except for Uniform Commercial Code security interests held by PNC
Bank, National Association and WWGWS, Inc. which shall be
released upon the Closing and liens of landlords or lessors under
the Leases, Sellers have, and Buyer on the Closing Date will
receive, good and marketable title to all the Assets, free and
clear of all Liens, except for such imperfections of title,
easements, pledges, charges and encumbrances, if any, as do not
in the aggregate materially detract from the value or materially
interfere with the present use of the Assets or otherwise
materially impair or interfere with Sellers' business ("Permitted
Liens"). Sellers do not, directly or indirectly, own any real
property, other than leasehold rights and leasehold improvements
under certain of the Leases.
i. Sellers have no knowledge of any material defect in the
normal operating condition and repair of the Equipment. The
Supplies are good and merchantable in all material respects,
except for ordinary wear and tear.
ii. The Assets constitute all of the assets used in the
Business as currently conducted and as conducted since
January 1, 1998, except with respect to assets relating to
Franchises acquired by any of the Sellers after such date
and with respect thereto, since the date of the acquisition
of such assets.
f. List of Properties, Contracts, Permits and Other Data
The following Schedules set forth certain information with
respect to the Assets and Sellers on the date of this Agreement:
i. Schedule 4.1(f)(i) contains a complete and correct list
of all oral and written contracts, agreements, commitments,
licenses, sublicenses or other binding arrangements
(including, without limitation, the Franchise Agreements,
all agreements by customers of Sellers for attendance at the
Classes in the Territories in effect on the Closing Date
(including but not limited to the Customer Contracts),
Service Agreements, maintenance, operating, customer
subscription, non-competition, acquisition, marketing and
servicing, distribution, solicitation, hardware and/or
software, advertising, promotional, lease and other
agreements) to which Sellers are a party or by which any of
their respective assets or properties is bound;
ii. Schedule 4.1(f)(ii) contains a complete and correct
list of all (A) leases under which any of the Sellers is a
lessee and all license and other agreements providing for
the periodic occupancy of space for the conduct of Classes
in the Territories and (B) all other leases under which any
of the Sellers is a lessee. The applicable Seller holds a
valid leasehold or subleasehold interest in each such lease
subject to only (A) any and all underlying mortgages, deeds
of trust, leases, grants of term or other estates in or
interests affecting the landlord's or fee
<PAGE> 19
owner's interest in the applicable portion of such property
which are superior to the interests of such Seller as
lessee, (B) any encumbrances of title to the leased real
property other than those granted by, authorized by or
attributable to acts or omissions of any Seller, (C) all
applicable building and zoning ordinances and (D) liens
securing taxes, assessments, governmental charges or levies,
or the claims of contractors, material men, carriers,
landlords, warehousemen, workmen, repairmen, customers,
employees and similar persons which are not yet due and
payable or are being contested in good faith.
iii. Schedule 4.1(f)(iii) contains a complete and correct list of
all licenses, permits and franchises issued by governmental
authorities or other third parties; and
iv. Schedule 4.1(f)(iv) contains a complete and correct list of
all Intellectual Property owned or licensed by any Seller.
True and complete copies of all documents (including all
amendments thereto and waivers in respect thereof) referred to in
the foregoing Schedules 4.1(f)(i), (ii), (iii) and (iv) have been
delivered to Buyer. To the best knowledge of Sellers, all rights,
licenses, permits, leases, registrations, applications,
contracts, agreements, commitments and other arrangements
referred to in such Schedules are in full force and effect and
are valid and enforceable in accordance with their respective
terms, except where the failure to be in full force and effect
and valid and enforceable would not, either individually or in
the aggregate, have a Material Adverse Effect. Except for the
failure to obtain consent to, or approval of, the assignment or
other transfer of certain of the Leases and Service Contracts
assigned by third parties to Sellers, Sellers are not (and to the
best knowledge of Sellers, each other party thereto is not) in
breach or default in the performance of any obligation
thereunder, and, to the best knowledge of Sellers, no event has
occurred or has failed to occur whereby, with or without the
giving of notice or the lapse of time or both, a default or
breach will be deemed to have occurred thereunder or any of the
other parties thereto have been or will be released therefrom or
will be entitled to refuse to perform thereunder, except for such
breaches, defaults and events which, individually or in the
aggregate, would not have a Material Adverse Effect. None of the
Sellers has delivered or received notice of termination of any
right, license, permit, lease, registration, contract, agreement
or other arrangement referred to in such Schedules.
g. Receivables; Subscriber Information
The accounts receivable and other receivables (collectively,
"Receivables") of Sellers arose from bona fide transactions in
the ordinary course of business and are, to the best knowledge of
Sellers, current and fully collectible. No counterclaims or
offsetting claims with respect to presently outstanding
Receivables are pending or, to the best knowledge of Sellers,
threatened.
i. The number of paid attendance and enrollments of Weight
Watchers Classes in each of the Territories for each
fiscal month commencing on December 27, 1998 or, with
respect to Franchises acquired by Sellers after such
date, for each fiscal month commencing after the date
of the acquisition of such Franchise by Sellers,
whichever is later, through September 30, 2000 are
listed on Schedule 4.1(g).
h. Legal Proceedings
Except for the Montford Center Litigation or as set forth on
Schedule 4.1(h), there is no claim, cause of action, allegation,
suit, litigation, proceeding, arbitration or investigation
(collectively, "Actions") to which any Seller is a party pending
or, to the best knowledge of Sellers, threatened against any of
them or relating to the assets (including the Assets) or the
business of Sellers or the transactions contemplated by this
Agreement which would be likely, individually or in the
aggregate, to result in a Material Adverse Effect or which seeks
to prevent, restrain, enjoin, delay or interfere with the
consummation of any of the transactions contemplated hereby. None
of Sellers is in violation of any term of any judgment, writ,
decree, injunction or order entered by any court or governmental
authority and outstanding against any Seller or with respect to
any of their respective assets (including the Assets) or
properties which violation would be likely to have, individually
or in the aggregate, a Material Adverse Effect. To the best
knowledge of Sellers, there are no facts that could provide a
basis for any successful prosecution of any such Action. There is
no order, decree, injunction or judgment pending or in effect
against any of the Sellers which would be likely to prevent,
materially interfere with or materially delay the consummation of
the transactions contemplated hereby or, individually or in the
aggregate, would be likely to have a Material Adverse Effect.
<PAGE> 20
i. Insurance
Each Seller maintains insurance on its properties and assets
(including the Assets) and with respect to its employees and
representatives and business which, in the reasonable judgment of
Sellers, is provided by financially sound and reputable insurers
and which covers risks customarily insured by businesses similar
to the business of Sellers. Schedule 4.1(i) is a list of Sellers'
insurance maintained on their respective properties and assets
(including the Assets). All such policies are in full force and
effect, all premiums due thereon have been paid, and Sellers have
complied with the provisions of all such policies.
j. Labor
(i) Each Seller is in compliance in all material respects with
all applicable laws relating to employment practices, terms and
conditions of employment and wages and hours; (ii) there are no
controversies pending or, to the best knowledge of Sellers,
threatened between any Seller and its employees, prospective
employees, former employees or labor unions or other collective
bargaining representatives representing their employees; (iii) no
unfair labor practice complaints have been filed against any
Seller, and no Seller has received any notice or communication
reflecting an intention or a threat to file any such complaint;
(iv) there is no labor strike, dispute, slow-down or stoppage
pending or, to the best knowledge of Sellers, threatened against
any Seller; (v) no representation petition is pending with the
National Labor Relations Board (or any other labor relations
board) in respect of any of Sellers' business; (vi) each Seller
has paid in full to all of its employees all wages, salaries,
commissions, bonuses, benefits and other compensation due to such
employees except for severance payments and bonuses which Sellers
may pay to certain employees in anticipation of, or upon, the
consummation of the transactions contemplated hereby; (vii)
except as set forth in Schedule 4.1(j), none of the Sellers has
closed any facility, effectuated any layoffs of employees or
implemented any early retirement, separation or window program
within the past three years, nor has any Seller planned or
announced any such action or program for the future; (viii) no
promises of benefit improvements under the Employee Benefit
Programs have been made by any Seller or any Affiliate thereof to
any current or former employee of any Seller; and (ix) each
Seller is in compliance with its respective obligations pursuant
to the Worker Adjustment and Retraining Notification Act of 1988,
and all other notification and bargaining obligations arising
under any collective bargaining agreement, statute or otherwise.
k. Intellectual Property
Except as set forth in Schedule 4.1(k), Sellers have, and will
transfer to Buyer on the Closing Date, good and marketable title
to all the Intellectual Property, free and clear of all Liens. No
claims have been asserted within the past five years or are
currently in dispute to the effect that the use of the
Intellectual Property by Sellers infringes on any intellectual
property of any other Person in any material respect. To the best
knowledge of Sellers, the use of all other material Intellectual
Property by Sellers does not infringe on the rights of any
Person. Except as set forth in Schedule 4.1(k), Sellers own all
material Intellectual Property used in Sellers' business as
presently conducted. Except as set forth in Schedule 4.1(k), no
material part of the business of the conduct of the Classes in
the Territories depends on any Intellectual Property except for
the trademark licenses under the Franchise Agreements.
l. Government Licenses, Permits and Related Approvals
Except as set forth in Schedule 4.1(l), each Seller has all
licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities required
for the conduct of its business as presently conducted, except
where the failure to have such licenses, permits, consents,
approvals, authorizations, qualifications and orders would not be
likely, individually or in the aggregate, to have a Material
Adverse Effect.
m. Compliance with Law and Requirements
Each Seller is conducting and has conducted for the applicable
period (as specified below) its business in compliance with all
applicable laws, statutes, ordinances, rules, regulations,
decrees, judgments, writs, injunctions, or orders, rights of
concession, licenses, know-how or other proprietary rights of
others, the failure to comply with which would, individually or
in the aggregate, be likely to have a Material Adverse
<PAGE> 21
Effect. For the purposes of this Section 4.1(m), the applicable period
in the case of WEI shall be the period of three years prior to the date
hereof and in the case of each of the other of the Sellers shall be the
period from the commencement of business thereof.
n. Employee Benefit Programs.
i. Schedule 4.1(n) identifies each "employee benefit plan" as such
term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that is
covered by ERISA and that is maintained, or otherwise
contributed to by Sellers or any Affiliates of Sellers for the
benefit of the current or former employees or directors of
Sellers (a "Plan" and, collectively, the "Plans"), copies of
which have been delivered to Buyer (together with (A) the most
recent Annual Report on Form 5500 required to be filed by
Sellers and (B) the most recent actuarial valuation reports, in
connection with any Plan);
ii. Schedule 4.1(n) identifies each plan or arrangement not subject
to ERISA maintained or otherwise contributed to by Sellers for
the benefit of employees of Sellers and providing for deferred
compensation, bonuses, stock options, employee insurance
coverage or any similar compensation arrangement (a "Benefit
Arrangement"; such Benefit Arrangements, together with the
Plans, are referred to herein collectively as the "Employee
Benefit Programs"), true and correct copies of which have been
delivered to Buyer.
iii. Each Employee Benefit Program has been maintained and
administered at all times substantially in compliance with its
terms and with all applicable laws, rules and regulations,
including, without limitation, ERISA and the Code;
iv. No "prohibited transaction" (as such term is used in Section
406 of ERISA or Section 4975 of the Code) has occurred with
respect to any Plan which could have a Material Adverse Effect;
v. Sellers do not sponsor, contribute to, participate in or have
any other obligations or liabilities (whether or not
contingent) which remain unsatisfied or are pending with
respect to any employee pension benefit plan (within the
meaning of Section 3(2) of ERISA) that is subject to Title IV
of ERISA or Section 302 of ERISA.
vi. Sellers have not at any time contributed to or participated in
any pension plan which is a "multiemployer plan," as defined in
Section 3(37) of ERISA;
vii. No material litigation or administrative or other proceedings
involving the Employee Benefit Programs have occurred, are
pending or, to the best knowledge of Sellers, are threatened;
viii. Except as set forth in Schedule 4.1(n), there are no other
employment agreements, contracts or understandings with any
employee of Sellers;
ix. There are no collective bargaining agreements which Sellers or
their Affiliates have entered into on behalf of any employees
of Sellers, nor, to the best knowledge of Sellers, are there
any ongoing efforts to organize any union representation; and
x. Except as set forth on Schedule 4.1(n), with respect to any
Plan that is an employee welfare benefit plan (within the
meaning of Section 3(1) of ERISA), (1) no such Plan is funded
through a "welfare benefits fund", as such term is defined in
Section 419(e) of the Code, (2) each such Plan that is a group
health plan ("Group Health Plan"), as such term is defined in
Section 4980B(g)(2) of the Code, complies with the applicable
requirements of Section 4980B(f) of the Code ("COBRA") and (3)
no such Plan (other than as required by COBRA) provides any
post-employment welfare benefits for former employees
(including retirees), either currently or at any time
hereafter.
o. Certain Fees
With the exception of the engagement of and the fees and
expenses payable to Houlihan Lokey Zukin & Howard (which will
be paid by Sellers), none of the Sellers nor any of their
officers, directors or employees or Affiliates has employed
any broker or finder or incurred any other liability for any
brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
p. Absence of Certain Changes or Events
Except as set forth in Schedule 4.1(p), since December 26,
1999 there has not been (i) any material adverse change in the
Assets or in the condition (financial or other), results of
operations, prospects or business of Sellers, (ii) any
material damage, destruction or loss relating to the business
or assets (including the Assets) of Sellers, whether or not
insured, (iii) any liability created or incurred which Buyer
will assume under the Assumption Agreement other than
liabilities created or incurred in the
<PAGE> 22
ordinary course of business and in amounts not unusual in
respect of the ordinary course of business consistent with
past practice, (iv) any Lien created on any Asset, (v) except
in the ordinary course of business, any increase in, or
commitment or plan adopted to increase, the wages, salaries,
compensation, pension or other benefits or payments to
employees, (vi) any material capital expenditures or
commitment to make any such expenditures with respect to the
Assets or as to which Buyer will become obligated after the
Closing pursuant to the Assumption Agreement, (vii) any
condemnation proceedings commenced with respect to any Asset
or any notice received by Sellers as to the proposed
commencement of any such proceedings, (viii) any rights of
substantial value knowingly waived with respect to the Assets
or the Business, (ix) any sale or transfer of any Assets other
than dispositions of obsolete property in the ordinary course
of business consistent with past practice or (x) any action
performed, taken, agreed to or permitted of the type described
in Section 5.2(a) through (p). Since December 25, 1999, except
as set forth in Schedule 4.1(p), other than acts relating to
the transactions contemplated by this Agreement, the business
of each Seller has been conducted only in the ordinary course
consistent with past practice.
q. Offering Memorandum; Disclosure.
Neither this Agreement, the information set forth in Schedule
4.1(q) nor any other document and instrument to be executed
and delivered by Sellers pursuant hereto, contains or will
contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the
statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.
There is no fact which Sellers have not disclosed to Buyer in
writing and of which any Section 4.1 Employees is aware which
has had or would reasonably be expected to have a Material
Adverse Effect. Schedule 4.1(q) sets forth a true and complete
list of all Persons who received the Offering Memorandum from
any of the Sellers or their respective Affiliates or
Representatives.
r. Environmental Matters
Except as set forth in Schedule 4.1(r), none of the Sellers
has in the past materially violated or is now in material
violation of any federal, state or local law, code, statute,
common law, ordinance, rule, regulation, order, decree or
guideline relating in any manner to contamination, pollution,
or protection of human health or the environment
("Environmental Laws") in connection with the ownership or
operation of any of its assets (including the Assets) and the
conduct of the Business. None of the Sellers has received any
written notice from any governmental authority, and does not
have knowledge of any governmental inquiry, with respect to
any actual or alleged violation of any Environmental Laws with
respect to any of its assets (including the Assets) or the
Business and there is not pending or, to the best knowledge of
Sellers, threatened any suit, claim, proceeding or
investigation against Sellers relating to any violation or
threatened violation of any Environmental Law. There has been
no storage, disposal or treatment of solid wastes or hazardous
wastes on, under or at any real property currently or formerly
owned by Sellers or, to the best knowledge of Sellers, any
other real property ("Other Real Property") currently or
formerly leased or otherwise used by Sellers. There has been
no release, including any spill, discharge, leak, emission,
injection, escape or dumping of any kind, from operations of
Sellers or, to the best knowledge of Sellers, otherwise, onto
any real property currently or formerly used by Sellers or
into the environment surrounding any such real property, of
any hazardous substances, other than those releases
permissible under applicable regulations, laws or statutes or
allowable under applicable permits. Except as set forth in
Schedule 4.1(r), none of the Sellers nor, to the best
knowledge of Sellers, any other person has discovered any
occurrence or condition on any real property adjoining or in
the vicinity of any real property that could cause such real
property or any part thereof to be subject to any restrictions
on the ownership, occupancy, transferability or use of such
real property under any Environmental Law. None of the Sellers
has contractually assumed any liabilities or obligations under
any Environmental Law other than as a result of its status as
a lessee under the Leases. As used in this Section 4.1(r), the
terms "storage", "treatment", "disposal", "solid wastes" and
"hazardous wastes" shall have the meanings set forth under the
Resource Conservation and Recovery Act, 42 U.S.C.A. Section
6901 et seq.; and the terms "release" and "hazardous
substance" shall have the meanings set forth under the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C.A. Section 9601 et seq. For purposes
of this Section 4.1(r) only, "best knowledge of Sellers" shall
not require the conduct of any environmental or engineering
study of properties nor the examination of public records
normally
<PAGE> 23
examined in such studies.
s. Entire Business
On the Closing Date, Sellers will transfer to Buyer
all of the assets used by Sellers in and necessary
for the conduct by Buyer of the Business, except for
the Excluded Assets.
t. Tax Matters
For purposes of this Agreement, (i) "Taxes" shall
mean all United States federal, state, provincial,
local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property,
excise, value added, estimated, stamp, alternative or
add-on minimum, environmental, withholding and any
other taxes, duties or assessments, together with all
interest, penalties and additions imposed with
respect to such amounts; and (ii) "Tax Return" shall
mean any return, declaration, report, claim for
refund or information return or statement relating to
Taxes, including any schedule or attachment thereto,
and including any amendment thereof. None of the
Assets is (A) subject to section 168(f)(8) of the
Internal Revenue Code of 1954 or (B) tax-exempt use
property within the meaning of Section 168(h)(1) of
the Code. Except as provided under Section 10.3
hereof, all Tax Returns required to be filed by
Sellers (or their respective predecessors) on or
before the Closing Date have been or shall be timely
filed and all such Tax Returns were true, correct and
complete in all material respects. All Taxes with
respect to any of the Assets which are due or which
may be claimed to be due (whether or not shown to be
due on any Tax Return) have been or shall be paid or
accrued within the prescribed period or any extension
thereof. There are no tax liens upon any of the
Assets except for Liens for current Taxes not yet due
and payable. Except as set forth in Schedule 4.1(t)
and except as disclosed in the Financial Information,
none of the Sellers (or any of their respective
predecessors) is a party to or has received any
notice with respect to any proposed or pending action
by any governmental authority for assessment or
collection of Taxes with respect to any of the
Assets, or is party to any dispute or threatened
dispute relating to Taxes with respect to any of the
Assets in which action or dispute an adverse
determination could have a Material Adverse Effect
and no such claim for assessment or collection of
Taxes with respect to any of the Assets has been made
upon Sellers. No Seller is a "foreign person" within
the meaning of section 1445 of the Code and Sellers
will furnish Buyer with an affidavit that satisfies
the requirements of section 1445(b)(2) of the Code,
in the form attached as Exhibit C.
u. No Subsidiaries
Except as set forth on Schedule 4.1(u), each of the
Sellers does not directly or indirectly own or
control any capital stock of or other interests or
investments in any other individual, corporation
(including any non-profit corporation), general or
limited partnership, limited liability company, joint
venture, estate, trust, or other entity or
governmental body nor do Sellers have any obligation
or right to acquire any such interest or investment.
v. Purchase Price Transfers
After the Closing and upon any transfer of the
Purchase Price following the Closing, Sellers will
not (i) be insolvent; (i) have unreasonably small
capital with which to engage in their respective
businesses; or (iii) have incurred or plan to incur
debts beyond their respective ability to pay as they
become absolute and matured.
w. Prohibited Payments
No Seller nor any of their respective officers,
directors, employees, agents or Affiliates has
offered, paid, or agreed to pay to any Person,
including any government official, or solicited,
received or agreed to receive from any such Person,
directly or indirectly, any money or anything of
value for the purpose of or with the intent of
obtaining or maintaining the business of Sellers or
otherwise affecting the business, assets, financial
condition or operations of Sellers in any manner
which is unlawful.
x. Affiliate Transactions.
Except for employment, consulting and management
service agreements with respect to which Buyer will
not assume any liabilities, Schedule 4.1(x) lists all
contracts,
<PAGE> 24
arrangements or other transactions (i) between or
among any Seller or any of its Affiliates, on the one
hand, and any officers or employees of any Sellers,
on the other hand, or (ii) which Buyer will assume or
become liable with respect to and any Seller or any
of their respective Affiliates will be a party to
such contract, agreement, arrangement or transaction.
y. Compensation of Management Employees
Set forth on Schedule 4.1(y) is a true and complete
listing of (1) the annual compensation, including
bonuses, for each executive officer and senior
manager (collectively, the "Management Employees") of
each Seller for the past three years and (2) the
proposed annual compensation, including bonuses, for
the current fiscal year, including, without
limitation, any "stay" or "retention" bonus payable
to any Management Employee in connection with the
transactions contemplated hereby. No Seller has
agreed to pay any of its employees any "stay" or
"retention" bonus in connection with the transactions
contemplated hereby.
z. Bankruptcy
Sellers have not filed any voluntary petitions in
bankruptcy or insolvency or any petitions for
reorganization under any bankruptcy or similar law;
no involuntary petition in bankruptcy has been filed
against any Seller; no receiver has been appointed
for all or any part of the property of Sellers; and
no court has granted Sellers relief in bankruptcy or
insolvency or approved a petition seeking
reorganization or approving a receiver, trustee or
liquidator of all or any part of the property of
Sellers.
aa. Qualified S Chapter Subsidiaries
WEI has made a valid election to treat WNI and WSI as
"qualified S chapter subsidiaries" under section 1361(a)(3) of
the Code.
2. Representations and Warranties of Buyer and WWI
Each of Buyer and WWI represents and warrants to each Seller
as follows:
a. Due Organization; Good Standing and Power
Each of Buyer and WWI is a corporation duly
organized, validly existing and in good standing
under the laws of the jurisdiction of its
organization. Each of Buyer and WWI has all requisite
corporate and other power and authority to enter into
this Agreement and any other agreement contemplated
hereby and to perform its obligations hereunder and
thereunder.
b. Authorization and Validity.
Each of Buyer and WWI has all requisite power and
authority to execute, deliver and perform its
obligations under this Agreement and any other
agreement contemplated hereby and to consummate the
transactions contemplated hereby and thereby. The
execution, delivery and performance by each of Buyer
and WWI of this Agreement and any other agreements
contemplated hereby and the consummation by each of
Buyer and WWI of the transactions contemplated hereby
and thereby have been duly authorized by its Board of
Directors. No other corporate or stockholder action
is necessary for the authorization, execution,
delivery and performance by Buyer or WWI of this
Agreement and any other agreement contemplated hereby
and the consummation by Buyer and WWI of the
transactions contemplated hereby or thereby. This
Agreement has been duly executed and delivered by
each of Buyer and WWI and constitutes a valid and
legally binding obligation of each of Buyer and WWI,
enforceable against Buyer and WWI in accordance with
its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting
creditors' rights generally, by general equitable
principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law) or
by an implied covenant of good faith and fair
dealing.
c. Governmental Approvals; No Conflict
The execution, delivery and performance of this
Agreement and any other agreements contemplated
hereby by each of Buyer and WWI and the consummation
by each of
<PAGE> 25
Buyer and WWI of the transactions contemplated hereby
and thereby (i) will not conflict with or violate
(with or without the giving of notice or the lapse of
time or both), or require any consent, registration,
declaration, approval, filing or notice under any
provision of any law, statute, ordinance, rule or
regulation, court or administrative order, writ,
judgment or decree of any court or any public
governmental or regulatory body, agency or authority
having jurisdiction over Buyer, WWI or their
respective assets or properties, except for the
requirements of the Antitrust Improvements Act and
except for such conflicts or violations the
occurrence of which, and such consents, approvals,
filings or notices the failure of which to obtain or
make, would not, individually or in the aggregate,
have a material adverse effect on Buyer's or WWI's
ability to perform its obligations hereunder, and
(ii) will not (with or without the giving of notice
or the lapse of time or both) (x) violate or conflict
with, or result in the breach, suspension or
termination of any provision of, or constitute a
default under, or require any consent, approval or
notice under, or result in the acceleration of the
performance of the obligations of Buyer or WWI,
under, or give rise to any right of termination,
purchase, amendment or any other right under,
increase the liability of any party under or (y)
result in the creation of any Lien upon all or any
portion of the properties, assets or business of
Buyer or WWI pursuant to, the charter or by-laws or
any provision of the organizational documents of
Buyer or WWI, or any indenture, mortgage, deed of
trust, lease, agreement, contract or instrument to
which Buyer or WWI is a party or by which Buyer or
WWI or any of their respective assets or properties
is bound, except for such violations, conflicts,
breaches, suspensions, terminations, defaults,
accelerations or Liens which would not, individually
or in the aggregate, have a material adverse effect
on Buyer's or WWI's ability to perform its
obligations hereunder.
d. Brokers' Fees
Neither Buyer, WWI nor any of their respective
officers, directors or employees, on behalf of Buyer
or WWI, has employed any broker or finder or incurred
any other liability for any brokerage fees,
commissions or finders' fees in connection with the
transactions contemplated hereby.
3. Survival of Representations
The representations, warranties, covenants and agreements contained in this
Agreement, and in any agreements, certificates or other instruments delivered
pursuant to this Agreement, shall survive the Closing and shall remain in full
force and effect for the period specified in Section 9.4 hereof, regardless of
any investigations made by or on behalf of any party, but subject to all express
limitations and other provisions contained in this Agreement. No investigation
by or knowledge of any party shall relieve any other party hereto in any manner
with respect to its obligations under the representations, warranties, covenants
and agreements made by such other party hereunder or in any agreement,
certificate or other document delivered pursuant to this Agreement.
5. Agreements
1. Access to Information
Prior to Closing, Sellers agree to (a) give or cause to be given
to Buyer and its Representatives and potential financing sources
full and free access to Richard J. McSorley and such access to
the offices, employees, properties, Assets, contracts, books,
accountants, workpapers and records and all other documents and
data relating to the Assets as Buyer may from time to time
reasonably request, provided, however, in the case of access to
personnel, access to such personnel shall require the prior
consent of Richard J. McSorley (such consent not to be
unreasonably withheld or delayed) and (b) furnish or cause to be
furnished to Buyer such financial and operating data and other
information with respect to the Business and properties and
assets (including the Assets) of Sellers, as Buyer may from time
to time reasonably request. After Closing, Buyer agrees to
provide Sellers with reasonable access to information contained
in the files and records of Sellers transferred to Buyer at
Closing to the extent necessary for Sellers to prepare tax
returns and other government mandated filings and to prosecute,
or defend against, any claims.
2. Conduct of the Business
Sellers jointly and severally agree that, except as required by
this Agreement or otherwise consented to in writing by Buyer,
during the period commencing on September 30, 2000 and ending
on the Closing Date, Sellers shall:
a. operate the Business only in the ordinary course
of business
<PAGE> 26
consistent with past practice and, to the extent
consistent with such operation, use its
reasonable best efforts to preserve its present
business organization intact, keep available the
services of its present employees (other than
Lola A. Bode and Stanley L. Lipman) and preserve
its goodwill and present business relationships,
including its relationships with its members
participating in its Classes;
b. maintain their books, accounts and records
relating to their business in the ordinary
course of business consistent with past
practice, comply with and perform in all
material respects all laws and contractual and
other obligations applicable to them or their
business;
c. maintain in full force and effect adequate
insurance with respect to the Assets and their
employees covering risks customarily insured by
similar businesses;
d. not increase, reduce or otherwise modify
membership fees, activity fees or rebates except
as set forth in Schedule 5.2(d);
e. not enter into any contract, agreement or other
commitment or series of related contracts,
agreements or commitments which is not
terminable by the parties upon thirty (30) days
notice or less or which involves aggregate
consideration in excess of $20,000 except as set
forth in Schedule 5.2(e)
f. not (i) sell, dispose of or abandon any of the
Assets, other than in the ordinary course of
business consistent with past practice, or (ii)
enter into, amend, change, waive or otherwise
modify any contract, agreement, lease, license
or other document which constitutes part of the
Assets;
g. not (i) permit or allow any of its properties
and assets (including the Assets) to become
subject to any Liens, except for Permitted Liens
and other liens existing on the date hereof,
(ii) waive any claims or rights relating to the
Assets, (iii) except as set forth in Schedule
5.2(g) or with respect to Richard J. McSorley,
grant any increase in the compensation or
benefits of its employees (including any such
increase pursuant to any deferred compensation,
severance, bonus, pension, profit-sharing or
other plan or commitment), (iv) establish, enter
into or adopt any employment agreement or
collective bargaining agreement or other
Employee Benefits Programs or, except as set
forth in Schedule 5.2(g), modify or terminate
any Employee Benefits Programs, or (v) enter
into any agreements giving rise to trade and
barter obligations on the part of Sellers;
h. provide Buyer with reasonable notice prior to
any Seller (i) declaring, setting aside or
paying any dividends on, or making any other
distributions in respect of, any of its capital
stock or (ii) purchasing, redeeming or otherwise
acquiring any shares of capital stock of Sellers
or any other securities thereof or any rights,
warrants or options to acquire any such shares
or other securities;
i. provide Buyer with reasonable notice prior to
any amendment by any Seller of its charter,
by-laws or other organizational documents;
j. provide Buyer with reasonable notice prior to
any Seller acquiring or agreeing to acquire,
merging or consolidating with, or purchasing a
substantial portion of the stock or assets of,
or entering into any similar transaction with
any business or any corporation, partnership,
joint venture, association or other business
organization or division thereof;
k. provide Buyer with reasonable notice prior to
any Seller adopting a plan of complete or
partial liquidation or resolutions providing for
or authorizing such a liquidation or a
dissolution, merger, consolidation,
restructuring, recapitalization or
reorganization;
l. provide Buyer with reasonable notice prior to
any Seller changing any financial reporting
policy or accounting principle;
m. not settle or compromise any litigation (whether
or not commenced prior to the date of this
Agreement) on any terms except for (i) a
settlement of the Montford Center Litigation
pursuant to the provisions of the Carolina
Acquisition Agreement and (ii) a settlement
which only provides for a release of the claim
and the payment of money, if any, and does not
otherwise adversely affect the Business;
provided that Sellers shall provide Buyer with
reasonable prior notice of any such settlement
or compromise;
<PAGE> 27
n. not write down the value of any inventory or any
other asset or sell any amount of its inventory
except in the ordinary course of business
consistent with past practice; and
o. not enter into any transaction that may
reasonably be expected to render any Seller
insolvent; and
p. not authorize any of, or commit or agree to take
any of, the foregoing actions set forth in
clauses (a) through (g) and (m) through (o)
above.
3. Further Actions
Subject to the terms and conditions hereof, including, without
limitation, Section 5.15 hereof, Sellers and Buyer agree to use their
reasonable best efforts to promptly take, or cause to be promptly taken,
all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable best
efforts (without commencement of litigation or the assumption of any
material obligation): (i) to obtain at the earliest practicable date
prior to the Closing Date (pursuant to instruments reasonably
satisfactory to Buyer in form and substance) all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts, licenses or
agreements with Sellers or its Affiliates as are necessary for the
consummation of the transactions contemplated hereby; (ii) to effect all
necessary registrations and filings; (iii) to furnish to each other such
information and assistance as reasonably may be requested in connection
with the foregoing; (iv) to assist Buyer in obtaining prior to the
Closing Date all governmental licenses, permits, consents, approvals,
authorizations, qualifications and orders as are necessary in order to
enable Buyer to conduct the Business of Sellers in the ordinary course
as of and from the opening of business on the Closing Date; (v) upon
request, to assist Buyer in obtaining prior to the Closing Date
sufficient financing to fund the Purchase Price, including, without
limitation, assisting in preparing materials for, providing access to
materials and personnel and attending meetings with potential financing
sources; (vi) upon request, to assist WEI in the acquisition on or prior
to the Closing Date, of the Carolina Franchise from W.W. of North
Carolina, Inc., a North Carolina corporation formerly known as Weight
Watchers of North Carolina, Inc., including, without limitation,
assisting in preparing materials for, providing access to materials and
personnel and attending meetings with representatives of W.W. of North
Carolina, Inc.; provided, however that nothing contained in items (v) or
(vi) of this Section 5.3 shall be interpreted or construed to require
that Sellers provide any financial support, or make any concession, to
Buyer or Buyer provide any financial support, or make any concession to
Sellers in connection with such financing or such acquisition and (vii)
with respect to Sellers, to complete the acquisition of the Carolina
Franchise pursuant to the provisions of the Carolina Acquisition
Agreement.
4. Antitrust Improvements Act
Sellers shall timely and promptly make all filings, which may be
required by it in connection with the consummation of the transactions
contemplated hereby under the Antitrust Improvements Act. Sellers shall
furnish to Buyer such information and assistance as Buyer may reasonably
request in connection with Buyers preparation of any necessary filings
or submissions by it to any governmental agency, including, without
limitation, any filings necessary under the provisions of the Antitrust
Improvements Act. Sellers shall provide Buyer with copies of all
correspondence, filings or communications (or memoranda setting forth
the substance thereof) between Sellers or its representatives, on the
one hand, and the FTC, the Antitrust Division and their staffs, on the
other hand, with respect to this Agreement and the transactions
contemplated hereby. Buyer shall timely and promptly make all filings
that may be required by it in connection with the consummation of the
transactions contemplated hereby under the Antitrust Improvements Act.
Buyer shall furnish to Sellers such information and assistance as
Sellers may reasonably request in connection with Sellers preparation of
any necessary filings or submissions by it to any governmental agency,
including, without limitation, any filings necessary under the
provisions of the Antitrust Improvements Act. Buyer shall provide
Sellers with copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between Buyer or its
representatives, on the one hand, and the FTC, the Antitrust Division
and their staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby. WWI and Buyer shall be responsible
for the payment of all filing fees in connection with the Antitrust
Improvements Act.
5. Notification
Sellers shall notify Buyer and keep it advised of (i) any litigation or
administrative proceeding pending or, to the best knowledge of Sellers,
threatened against Sellers which
<PAGE> 28
could, if adversely determined, have a Material Adverse Effect; (ii) any
material damage or destruction of any of the Assets; and (iii) any
material adverse change in the condition (financial or other), results
of operations, assets, business or prospects of the Business. Sellers
shall promptly notify Buyer in writing of the occurrence of any event
that would result in the failure of a condition specified in Sections
6.1 or 6.2, and Buyer shall promptly notify Sellers in writing of the
occurrence of any event that would result in the failure of a condition
specified in Section 6.1 or 6.3.
6. No Inconsistent Action
Subject to Sections 8.1 and 8.2, the parties hereto shall not take any
action inconsistent with their obligations under this Agreement or which
could materially hinder or delay the consummation of the transactions
contemplated by this Agreement. None of the parties hereto shall take or
omit to take any action that could result in any of their respective
representations and warranties not being true and correct on the Closing
Date.
7. No Solicitation
From and after the date of this Agreement, until the earlier of the
Closing or 180 days after the termination of this Agreement pursuant to
Section 8.1, Sellers shall not, and shall not permit any of their
respective Affiliates or Representatives, to, directly or indirectly (i)
solicit, initiate or encourage the submission of any inquiries,
indications of interest, proposals or offers from any Person, other than
Buyer (collectively, "Third Parties"), concerning any Acquisition
Proposal, (ii) participate in any discussions or negotiations regarding,
or enter into any agreements or understandings (whether or not in
writing) relating to, any of the foregoing with, or provide any
information concerning any Seller or the Assets to any Third Parties
other than in the ordinary course of business or other than as required
by applicable law or (iii) otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt
by any Third Party to do or seek any of the foregoing, provided,
however, that nothing contained herein shall be interpreted or construed
to require that Sellers retrieve or recall any copy of the Offering
Memorandum previously distributed to any Person or to take any other
action with respect to the Offering Memorandum. As soon as is
practicable after this Agreement has been executed, Sellers will use
their reasonable best efforts to cause the destruction or return of all
non-public, confidential or proprietary information concerning the
Assets provided to potential purchasers of any Seller or the Assets,
other than the Offering Memorandum. Sellers will immediately notify the
Buyer after the receipt by it or any of its Representatives of any
inquiry, indication of interest, proposal or offer with respect to an
Acquisition Proposal by any Third Party and promptly deliver to Buyer
written documentation reflecting the material economic terms thereof.
Each Seller agrees that it and its Representatives shall immediately
cease and cause to be terminated any activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Notwithstanding the foregoing, in the event of the
termination of this Agreement pursuant to Section 8.1 solely as a result
of the failure to satisfy the condition set forth in Section 6.2(k), the
period of one hundred eighty (180) days set forth in the first sentence
of this Section 8.1 shall be reduced to thirty (30) days.
8. Delivery of Financial Statements.
Sellers will use its best efforts to cooperate with the preparation of
the review financial statements of Sellers consisting of review
consolidated balance sheets of Sellers for the period from December 26,
1999 to September 30, 2000 and the related review consolidated
statements of income and retained earnings and consolidated statements
of cash flows for the nine month period ended on such date, reviewed by
PricewaterhouseCoopers, and prepared in accordance with GAAP ("Review
Financials"). WWI and Buyer shall bear all cost and expense of the
preparation of the Review Financials.
9. Franchise Agreements
Each of the Sellers hereby agrees to pay WWI when due all amounts,
fees and payments accrued or owing under the Franchise Agreements
("Franchise Fees") as of the close of business on the business day prior
to the Closing Date by wire transfer (to an account previously
designated in writing by WWI) of immediately available funds. Any
payment required to be made pursuant to this Section 5.9 and not so paid
shall bear interest from the tenth business day after the date on which
such payment shall be due through the date of payment at a rate of
interest equal to 13% per annum, and the amount of interest shall be
added to the amount to be paid pursuant to this Section 5.9.
10. No Solicitation of Employees
<PAGE> 29
Sellers shall not, and shall cause their respective Affiliates not to,
within a period of three years after the Closing Date, directly or
indirectly, solicit or hire any person who is a senior managerial
employee of any of the Sellers as of the date hereof or on the Closing
Date (each a "Manager"); provided that the foregoing shall not prohibit
Sellers or any of their respective Affiliates from hiring any Manager
whose employment has been terminated by the Buyer.
11. Payment of Annual Compensation and Bonuses
On the date of the next regularly scheduled payroll date immediately
following the Closing Date and in no event later than 15 business days
following the Closing Date, Sellers shall pay all annual compensation,
including bonuses, payable to any Management Employee or any other
employee of any Seller and any severance payments or bonuses which
Sellers may pay to certain employees in anticipation of, or upon the
consummation of, the transactions contemplated hereby.
12. Interim Financial Statements
Within 21 calendar days of the end of the month, beginning with
November 30, 2000, until the Closing Date Sellers shall deliver to Buyer
interim financial statements for the month then ended presenting the
consolidated financial condition of Sellers as at such dates, and the
consolidated results of their operations.
13. Covenant Not to Compete
(a) The Sellers shall not engage in the Protected Business for a
period of four (4) years after the Closing Date; provided, however, that
nothing herein shall preclude Sellers from (i) acquiring or operating
the British Columbia Company, or any successor to the business and
assets thereof, (ii) acquiring or operating any other Franchises in
Canada or (iii) acquiring an equity interest in, any person (an
"Acquired Person") which, together with its subsidiaries, derives 10% or
less but not more than $1.0 million of its consolidated revenues from
the Protected Business and continuing the business operations of such
Acquired Person. Each of Buyer and WWI only intend to limit Sellers or
its subsidiaries current or future business activities as expressly set
forth in this Section 5.13 but not otherwise. For purposes of this
Section 5.13, the term "Protected Business" means the weight loss and
weight control industry, including, without limitation, the provision of
classes for weight reduction and control and the sale of related
products and publications.
(b) The parties agree that the terms of the covenant contained in this
Section 5.13 are fair and reasonable in light of Buyers and WWIs plans
for the Protected Business and are necessary to accomplish the full
transfer of the goodwill and other intangible assets contemplated
hereby. If, as a result of a dispute between the parties as to this
covenant, a court refuses to enforce this covenant not to compete for
any reason, the parties shall request such court to reform this covenant
(for purposes of application only in the jurisdiction in which such
dispute arises) to the extent necessary to permit its enforcement.
14. Employment Matters
In the event that Buyer intends to engage the services of any
employees of Sellers from and after the Closing, including without
limitation Richard J. McSorley, no later than five (5) business days
prior to the Closing, Buyer shall submit to Sellers a list of such
employees whom Buyer intends to engage; and Buyer shall have the right
to solicit the employment of such employees under such wages, hours and
working conditions as Buyer shall determine, from and after, and
effective upon, the Closing. Nothing construed in this Agreement,
nevertheless, shall be interpreted or construed to impose upon Sellers,
or any of them, any obligations for such wages, hours and working
conditions, including without limitation vacation pay or other benefits,
provided by Buyer from and after the Closing regardless of whether, for
the purposes thereof, any such employees shall be credited with service
prior to the Closing.
15. Leases and Service Contracts
(a) Except as set forth in Section 5.15(b), Buyer hereby agrees to
assume and agrees to pay, perform and discharge Sellers' obligations
under the contracts, agreements, leases and commitments listed in
Schedule 2.5(a), which are assigned by Sellers to Buyer and as to which
Buyer succeeds to the rights of Sellers, but, only to the extent of
liabilities and obligations that arise thereunder after the opening of
business on the Closing Date.
<PAGE> 30
(b) To the extent that any consent or approval is not obtained with
respect to any contract, lease, license or agreement as contemplated
herein and the failure to obtain such consent or approval is not a
result of the default by Buyer thereunder (except if such default
results from a violation of the transfer and assignment provisions
contained therein as a result of the transactions contemplated hereby),
this Agreement shall not constitute an assignment or an attempted
assignment thereof. In each such case, Sellers agree to cooperate with
Buyer in any reasonable arrangement designed to (i) provide for Buyer
the benefits under any such contract, lease, license or agreement,
including enforcement at the cost and for the account of Buyer of any
and all rights of Sellers against the other party or otherwise and (ii)
insure performance by Buyer of Sellers' obligations thereunder to the
extent Buyer receives such benefits. If and to the extent that such
arrangement cannot be made, Buyer shall not have any obligation with
respect to any such contract, lease, license or agreement.
(c) WWI and Buyer hereby agree to bear all expenses in connection with
seeking the consent or approval to the assignment of any contract,
agreement, lease or commitment listed in Schedule 2.5(a) from any Seller
to Buyer.
16. Carolina Acquisition Agreement.
Each Seller hereby agrees that it will not amend the Carolina Acquisition
Agreement without the prior written consent of WWI and Buyer.
6. Conditions Precedent.
1. Conditions Precedent to Obligations of Parties
The respective obligations of the parties hereto to consummate
the transactions contemplated by this Agreement shall be subject
to the satisfaction at or prior to the Closing Date of the
following conditions:
a. No Injunction, etc.
No preliminary or permanent injunction or other
order issued by any federal or state court of
competent jurisdiction in the United States or
by any United States federal or state
governmental or regulatory body nor any statute,
rule, regulation or executive order promulgated
or enacted by any United States federal or state
governmental authority which restrains, enjoins
or otherwise prohibits any of the transactions
contemplated hereby shall be in effect.
b. Antitrust Matters
Any filings required to be made by WWI and
Buyer and Sellers under the Antitrust
Improvements Act shall have been made, and the
specified waiting periods thereunder (and any
extensions thereof) shall have expired or been
terminated without the receipt of any objections
from the appropriate governmental agency.
2. Conditions Precedent to Obligations of Buyer
The obligations of Buyer and WWI to consummate the transactions
contemplated by this Agreement are subject to the satisfaction
(or waiver by Buyer and WWI) at or prior to the Closing Date of
each of the following conditions:
a. Accuracy of Representations and Warranties
All representations and warranties of Sellers
contained herein or in any certificate,
instrument or other document delivered to Buyer
or WWI pursuant hereto shall be true and correct
on and as of the date of this Agreement and the
Closing Date, with the same force and effect as
though such representations and warranties had
been made on and as of the Closing Date, except
to the extent that any such representation and
warranty is made as of a specified date, in
which case such representation and warranty
shall have been true and correct as of such
date.
b. Performance of Obligations
Sellers shall have performed and complied with
all obligations and agreements, and complied
with all covenants and conditions, contained in
this Agreement to be performed or complied with
by them prior to or at the Closing Date.
c. Officer's Certificate
<PAGE> 31
Buyer and WWI shall have received a
certificate, dated the Closing Date, of the
President of each Seller certifying that the
conditions specified in clauses (a) and (b)
above have been fulfilled.
d. Absence of Certain Changes
Except as set forth in Schedule 6.2(d), since
September 30, 2000, there shall not have been
any material adverse change in the condition
(financial or other), results of operations,
assets, Business or prospects of the Business.
e. Opinions
Buyer and WWI shall have received (i) an
opinion dated the Closing Date from the Law
Offices of Alan H. Finegold, counsel to Sellers,
in substantially the form attached as Exhibit D
and (ii) an opinion dated the Closing Date from
special New York counsel to Sellers reasonably
satisfactory to WWI and Buyer, in substantially
the form attached as Exhibit E.
f. Escrow Agreement
Sellers and the Escrow Agent shall each have
delivered an executed counterpart to the Escrow
Agreement, substantially in the form of Exhibit
A hereto.
g. Non-Competition Agreement
D. Grant Peacock shall have delivered an
executed counterpart to the Non-Competition
Agreement, substantially in the form of Exhibit
F hereto.
h. British Columbia Amendment
WEI shall have caused the British Columbia
Company to deliver an executed counterpart to
the British Columbia Amendment, substantially in
the form of Exhibit J hereto.
i. Review Financials
Buyer shall have received the Review
Financials in form and substance satisfactory to
Buyer.
j. No Litigation
No litigation or proceeding shall have been
commenced or threatened by any Person (other
than WWI or the Buyer or any of their
Affiliates) for the purpose of enjoining or
otherwise preventing the consummation of any of
the transactions contemplated hereby or which
could have a Material Adverse Effect.
k. Funding
Buyer shall have received sufficient financing
to fund the Purchase Price on terms and
conditions satisfactory to Buyer.
l. Lien Search
Buyer and WWI shall have received satisfactory
results of Lien searches with respect to the
Assets reflecting no Liens on the Assets other
than the security interests of PNC Bank,
National Association, WWGWS, Inc. and landlords
or lessors under the Leases (collectively, the
"Section 6 Liens").
m. Consents, etc.
All licenses, permits, consents, approvals,
authorizations and orders of governmental
authorities and other third parties (other than
with respect to Leases and Service Contracts)
necessary for the consummation of the
transactions contemplated hereby shall have been
obtained.
n. Carolina Franchise
<PAGE> 32
WEI shall have completed the acquisition
of the Carolina Franchise in accordance with
the provisions of the Carolina Acquisition
Agreement.
o. Release of Liens
The Assets shall have been released from
and shall be free and clear of all Liens,
including, without limitation, all Section 6
Liens, except, however, for the liens of
landlords or lessors under the Leases.
p. Actions and Proceedings
All corporate actions, proceedings,
instruments and documents of Sellers and
their Affiliates required to carry out the
transactions contemplated by this Agreement
or incidental thereto and all other related
legal matters shall be reasonably
satisfactory to Robert W. Hollweg, General
Counsel of Buyer and WWI, and Simpson
Thacher & Bartlett, counsel for Buyer and
WWI, and such counsel shall have been
furnished with such certified copies of such
corporate actions and proceedings and such
other instruments and documents as it shall
have reasonably requested, including,
without limitation, incumbency certificates
from the Secretary of each Seller and
certified copies of the resolutions of the
Board of Directors of each Seller and
evidence of the stockholders of each Seller
authorizing and approving this Agreement and
the transactions contemplated hereby.
q. Closing Deliveries
Sellers shall have delivered to Buyer and
WWI all deliveries to be made to them
pursuant to Section 2.3.
3. Conditions Precedent to the Obligations of Sellers
The obligations of Sellers to consummate the
transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by Sellers) at
or prior to the Closing Date of each of the following
conditions:
a. Accuracy of Representations and Warranties
All representations and warranties of
Buyer and WWI contained herein or in any
certificate, instrument or other document
delivered to Sellers pursuant hereto shall
be true and correct on and as of the date of
this Agreement and the Closing Date, with
the same force and effect as though such
representations and warranties had been made
on and as of the Closing Date, except to the
extent that any such representation and
warranty is made as of a specified date, in
which case such representation and warranty
shall have been true and correct as of such
date.
b. Performance of Obligations
Each of Buyer and WWI shall have performed
and complied with all obligations and
agreements, and complied with all covenants
and conditions, contained in this Agreement
to be performed or complied with by it prior
to or at the Closing Date.
c. Officer's Certificate
Sellers shall have received a certificate,
dated the Closing Date, of the President or
any Vice President of Buyer and the
President or any Vice President of WWI
certifying that the conditions specified in
paragraphs (a) and (b) above have been
fulfilled.
d. Actions and Proceedings
All corporate actions, proceedings,
instruments and documents of Buyer and WWI
required to carry out the transactions
contemplated by this Agreement or incidental
thereto and all other related legal matters
shall be reasonably satisfactory to Law
Offices of Alan H. Finegold, counsel for
Sellers, and such counsel shall have been
furnished with such certified copies of such
corporate actions and proceedings and such
other instruments and documents as it shall
have reasonably requested.
e. Opinions
Sellers shall have received (i) an opinion
dated the Closing Date from Robert W.
<PAGE> 33
Hollweg, General Counsel of WWI and Buyer,
in substantially the form attached as
Exhibit G, (ii) an opinion dated the Closing
Date from Simpson Thacher & Bartlett,
counsel to WWI and Buyer, in substantially
the form attached as Exhibit H and (iii) an
opinion dated the Closing Date from Hunton &
Williams, special Virginia counsel to WWI,
in substantially the form attached as
Exhibit I.
f. Escrow Agreement
Buyer and the Escrow Agent shall each have
delivered an executed counterpart to the
Escrow Agreement, substantially in the form
of Exhibit A hereto.
g. Non-Competition Agreement
WWI shall have delivered an executed
counterpart to the Non-Competition
Agreement, substantially in the form of
Exhibit E hereto.
h. British Columbia Amendment.
WWI shall have delivered an executed
counterpart to the British Columbia
Amendment, substantially in the form of
Exhibit J hereto.
i. Closing Deliveries
Each of Buyer and WWI shall have delivered
to Sellers all deliveries to be made
pursuant to Section 2.5.
j. No Litigation
No litigation or proceeding shall have been
commenced or threatened by any Person (other
than Sellers or an of their Affiliates) for
the purpose of enjoining or otherwise
preventing the consummation of any of the
transactions contemplated hereby.
k. Carolina Franchise
WEI shall have completed the acquisition of the Carolina Franchise in
accordance with provisions of the Carolina Acquisition Agreement so
long as the failure to complete the acquisition of the Carolina
Franchise is not a result of a violation of or breach by any Seller of
the Carolina Acquisition Agreement.
7. Employees and Employee Benefits
1. Offer of Employment
Buyer shall not be required to offer employment to any
employee employed by Sellers. Sellers shall indemnify and hold
harmless Buyer against any loss as a result of any claim by
any employees of Sellers (or, following the Closing Date,
employees of Buyer) or any one or more of them on account of
such terms of wages, hours, working conditions or other
benefits, including but not limited to vacation benefits and
severance, under which such employees have been employed by
Sellers or any claim for notification or otherwise under the
Worker Adjustment and Retraining Notification Act; provided,
however that nothing contained herein shall be interpreted or
construed to impose any liability or obligation on Sellers for
any wages or other compensation or benefits, including without
limitation, vacation benefits provided or granted by Buyer to
any such employee, including, without limitation, Robert J.
McSorley, hired by Buyer and employed thereby at any time from
and after the Closing.
8. Termination
1. Termination of Agreement
This Agreement may be terminated and the transactions
contemplated herein abandoned (a) by mutual written consent of
Buyer, WWI and Sellers, (b) by Buyer and WWI, if there has
been a material breach of Sellers' covenants and agreements
hereunder or if the conditions contained in Section 6.2 cannot
be fulfilled on or before April 30, 2001, (c) by Sellers, if
there has been a material breach of WWI's or Buyers' covenants
and agreements hereunder or if the conditions contained in
Section 6.3 cannot be fulfilled on or before April 30, 2001,
(d) by any party by notice to the other parties in the event
that the Closing Date shall not have occurred on or before
April 30, 2001; provided, however, that if the Closing shall
not have occurred, on or before April 30, 2001 due to the act
or failure of one of the parties, that party may not, and if
such party is one of the Sellers, none of the Sellers may, or
if such party is Buyer or WWI, neither Buyer nor WWI may,
terminate the Agreement, or (e) by any party upon the
occurrence of any of the adverse events described in Section
6.1(a) which has become a nonappealable final order, decree or
judgment.
<PAGE> 34
2. No Liabilities in Event of Termination
In the event of any termination of this Agreement pursuant to
Section 8.1, written notice thereof shall forthwith be given
to the other parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall
forthwith become void and of no further force and effect, and
no party hereto shall have any liability to the other parties
or their respective Affiliates, directors, officers or
employees, except for the obligations set forth in Sections
5.7, 10.1, 10.2, 10.3, 10.4, 10.5, 10.11 and 10.16 and this
Section 8.2 hereof, which shall survive such termination;
provided nothing in this Section 8.2. shall relieve any party
from any liability for any breach of such party's covenants or
agreements contained in this Agreement prior to such
termination or, to the extent of reimbursement of the other
party's expenses, for any breach of such party's
representations and warranties under this Agreement.
3. Return of Documents
In the event of the termination of this Agreement pursuant to this
Section 8, Buyer and WWI agree, upon request of Sellers, to return or
destroy all documents of Sellers containing Confidential Information
that have been previously provided to Buyer and WWI.
9. Indemnification
1. Sellers Indemnity
Sellers jointly and severally agree to indemnify, defend and
hold Buyer, WWI and their respective Affiliates harmless
against and in respect of (i) all obligations and liabilities
of Sellers or any of their Affiliates, whether accrued,
absolute, fixed, contingent or otherwise, not expressly
assumed by Buyer pursuant to the Assumption Agreement; (ii)
any claim, cost, loss, liability, charge, action, suit,
proceeding, deficiency, damage and expense, interest, award,
judgment and penalty (including, without limitation,
reasonable legal costs and expenses) (collectively, "Losses")
imposed on, incurred, sustained or suffered by Buyer, WWI or
any of their respective Affiliates arising out of or as a
result of (A) any misrepresentation or breach of warranty by
Sellers or (B) a breach by Sellers of any covenant or other
agreement contained herein; (iii) liabilities for sales, use,
income and other taxes arising at any time out of the
operation of the business of Sellers and their Affiliates
prior to the opening of business on the Closing Date and not
provided for in Section 10.3 hereof; (iv) any claim, cost,
loss, liability or damage incurred or sustained by Buyer, WWI
or their respective Affiliates as a result of the operation of
the business of Sellers and their Affiliates prior to the
opening of business on the Closing Date and (v) all reasonable
costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Buyer, WWI or their respective
Affiliates in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters
indemnified against in this Section 9.1; provided, however
that Sellers shall have no liability or obligation for
consequential or punitive damages other than any such damages
awarded to any person who is not a party hereto or is not an
Affiliate of a party hereto.
2. Buyer and WWI Indemnity
Buyer and WWI jointly and severally agree to indemnify, defend
and hold Sellers and their respective Affiliates harmless
against and in respect of (i) all obligations and liabilities
of Sellers or any of their Affiliates, whether accrued,
absolute, fixed, contingent or otherwise, expressly assumed by
Buyer pursuant to the Assumption Agreement; (ii) any Losses
imposed on, incurred, sustained or suffered by Sellers or any
of their respective Affiliates arising out of or as a result
of (A) any misrepresentation or breach of warranty by WWI or
Buyer, or (B) a breach by WWI or Buyer of any covenant or
other agreement contained herein; (iii) liabilities for sales,
use, income and other taxes arising at any time out of the
operation of the business of Buyer and its Affiliates
following the opening of business on the Closing Date and not
provided for in Section 10.3 hereof; (iv) any claim, costs,
loss, liability or damage incurred or sustained by Sellers or
their respective Affiliates as a result of the operation of
the business of Buyer and its Affiliates following the opening
of business on the Closing Date; and (v) all reasonable costs
and expenses (including reasonable attorneys' fees and
disbursements) incurred by Sellers or their Affiliates in
connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters
indemnified against in this Section 9.2; provided however,
that neither Buyer nor WEI shall have any liability or
obligation for consequential or punitive damages other than
any such damages awarded to any person who is not a party
hereto or is not an Affiliate of a party hereto.
3. Procedures for Indemnification
<PAGE> 35
For the purposes of this Section 9.3, the term "Indemnitee"
shall refer to the Person indemnified, or entitled, or
claiming to be entitled to be indemnified, pursuant to the
provisions of Section 9.1 or 9.2, as the case may be; and the
term "Indemnitor" shall refer to the Person having the
obligation to indemnify pursuant to such provisions.
a. An Indemnitee shall give written notice (a
"Notice of Claim") to the Indemnitor
(including a Third Party Claim, as
hereinafter defined) which an Indemnitee has
determined has given or could reasonably be
expected to give rise to a right of
indemnification under this Agreement. No
failure to give such Notice of Claim shall
affect the indemnification obligations of
the Indemnitor hereunder, except to the
extent the Indemnitor can demonstrate such
failure materially prejudiced such
Indemnitor's ability to successfully defend
the matter giving rise to the claim. The
Notice of Claim shall state the nature of
the claim, the amount of the Loss, if known
and the method of computation thereof, all
with reasonable particularity and containing
a reference to the provisions of the
Agreement in respect of which such right of
indemnification is claimed or arises.
b. The obligations and liabilities of an
Indemnitor under this Article 9 with respect
to Losses arising from claims of any third
party that are subject to the
indemnification provisions provided for in
this Section 9 ("Third Party Claims") shall
be governed by and contingent upon the
following additional terms and conditions:
The Indemnitee at the time it gives a Notice
of Claim to the Indemnitor of the Third
Party Claim shall advise the Indemnitor that
Indemnitor shall be permitted, at its
option, to assume and control the defense of
such Third Party Claim at its expense and
through counsel of its choice if it gives
written notice of its intention to do so to
the Indemnitee within twenty (20) days of
its receipt of the Notice of Claim. In the
event the Indemnitor exercises its right to
undertake the defense against any such Third
Party Claim as provided above, the
Indemnitee shall cooperate with the
Indemnitor in such defense and make
available to the Indemnitor all witnesses,
pertinent records, materials and information
in its possession or under its control
relating thereto as is reasonably required
by the Indemnitor, and the Indemnitee may
participate by its own counsel and at its
own expense in defense of such Third Party
Claim; provided, however, that if the
defendants in any Action shall include both
the Indemnitee and the Indemnitor and such
Indemnitee shall have reasonably concluded
in good faith that counsel selected by the
Indemnitor has a conflict of interest
because of the availability of different or
additional defenses to such Indemnitee, such
Indemnitee shall have the right to select
separate counsel to participate in the
defense of such Action on its behalf, at the
expense of the Indemnitor; provided,
further, that such Indemnitor shall not, in
connection with any one such action or
separate but substantially similar or
related actions, be liable for the
reasonable fees and expenses of more than
one separate firm of attorneys (in addition
to any local counsel). Notwithstanding the
foregoing, the Indemnitee, during the period
the Indemnitor is determining whether to
elect to assume the defense of a matter
covered by this Section 9.3, may take such
reasonable actions as it deems necessary to
preserve any and all rights with respect to
the matter, without such actions being
construed as a waiver of the Indemnitee's
rights to defense and indemnification
pursuant to this Agreement. Similarly, in
the event the Indemnitee is, directly or
indirectly, conducting the defense against
any such Third Party Claim, the Indemnitor
shall cooperate with the Indemnitee in such
defense and make available to it all such
witnesses, records, materials and
information in its possession or under its
control relating thereto as is reasonably
required by the Indemnitee and the
Indemnitor may participate by its own
counsel and at its own expense in the
defense of such Third Party Action. Except
for the settlement of a Third Party Claim
which involves the payment of money only, no
Third Party Claim may be settled or judgment
entered by consent by the Indemnitor without
the written consent of the Indemnitee, which
consent shall not be unreasonably withheld
or delayed. No Third Party Claim may be
settled or
<PAGE> 36
judgment entered by consent by the
Indemnitee without the written consent of
the Indemnitor, which consent shall not be
unreasonably withheld or delayed.
4. Additional Agreements
The indemnities provided in this Article 9 shall survive the
Closing, except that: (i) Sellers shall not be liable for any
indemnification claim hereunder with respect to a
misrepresentation or a breach of any warranty contained in (1)
Section 4.1(n), unless notice of such claim shall have been
delivered in accordance with this Section 9 on or before the
third anniversary of the Closing Date, (2) Section 4.1(t),
unless notice of such claim shall have been delivered in
accordance with this Section 9 on or before the expiration of
the longest statute of limitations applicable to claims
against Sellers by any relevant taxing authority and (3) any
provision of Section 4.1 (other than Section 4.1(n) and (t)),
unless notice of such claim shall have been delivered in
accordance with this Section 9 within eighteen months of the
Closing Date; and (ii) Buyer shall not be liable for any
indemnification claim hereunder with respect to a
misrepresentation or a breach of any warranty contained in
Section 4.2, unless notice of such claim shall have been
delivered in accordance with this Article 9 within eighteen
months of the Closing Date.
a. The parties agree that any indemnification
payments made pursuant to this Agreement
shall be treated for tax purposes as an
adjustment to the Purchase Price, unless
otherwise required by applicable law.
b. Any party receiving notice of any claim by
any taxing authority that such party owes or
may in the future owe Taxes shall, if the
claim to which such notice relates could, if
resolved against such party, reasonably be
expected to have adverse consequences for
other parties to this Agreement, notify all
other parties of such notice. Any party may,
at its own expense, be entitled to
participate as an observer in the
proceedings with respect to any such claim.
5. Limits on Indemnification
Notwithstanding the provisions of Section 9.1(ii)(A),
Sellers shall have no obligation to indemnify WWI or Buyer or
any of their respective Affiliates pursuant to Section
9.1(ii)(A) except to the extent that the indemnification
obligations thereunder shall exceed Two Hundred Twelve
Thousand Five Hundred Dollars ($212,500) (the "Basket Amount")
in the aggregate; provided if Seller indemnification
obligations pursuant to Section 9.1(ii)(A) exceed the Basket
Amount, WWI, Buyer and their respective Affiliates shall be
entitled to receive indemnification with respect to the entire
amount of such Losses, subject to the provisions of the next
sentence. Furthermore, the aggregate indemnification
obligations of Sellers pursuant to Section 9.1(ii)(A) shall
not exceed Twenty-Five Million Dollars ($25,000,000);
provided, however, that any indemnification claim by Buyer
with respect to a misrepresentation or breach of any
representation or warranty by any Seller contained in Sections
4.1(d) or (e) shall not be subject to the limitation of
Twenty-Five Million Dollars ($25,000,000) set forth in this
Section 9.5. The aggregate indemnification obligations of WWI
and Buyer pursuant to Section 9.2(ii)(A) shall not exceed
Twenty-Five Million Dollars ($25,000,000).
10. Miscellaneous
1. Public Announcements
All public announcements relating to this Agreement or the
transactions contemplated hereby shall be made at such time
and in such manner as the parties hereto shall mutually agree,
except that nothing in this Agreement shall prevent a party
hereto from making any disclosure in connection with the
transactions contemplated by this Agreement to the extent
required by law provided that prior notice of such disclosure
is given to the other parties.
2. Expenses
Unless otherwise specified in this Agreement, whether or not
the transactions contemplated by this Agreement are completed,
each of the parties hereto shall pay the fees and expenses
incurred by it in connection with the negotiation,
preparation, execution and performance of this Agreement,
including, without limitation, attorneys' and accountants'
fees. The foregoing shall not affect the legal right, if any,
that any party hereto may have to recover expenses from any
other party that breaches its obligations hereunder.
3. Transfer Taxes and Recording Expenses
Buyer shall assume and pay and shall indemnify Sellers
against all sales, motor vehicle or transfer taxes and
recording expenses, if any, required to be paid in connection
with the transfer of the Assets (including any interest charge
or penalty with respect thereto) up to an
<PAGE> 37
amount not to exceed $50,000. If any such sales, motor vehicle
or transfer taxes and recording expenses required to be paid
in connection with the transfer of the Assets exceeds $50,000,
the payment of such taxes and expenses shall be equally borne
by Sellers, on the one hand, and Buyer, on the other hand. The
parties shall cooperate in providing each other appropriate
resale exemption certificates and other appropriate tax
documentation.
4. Notices
All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given if
delivered personally or telecopied or mailed, first class
mail, postage prepaid, return receipt requested, as follows:
If to Sellers:
Weighco Enterprises, Inc.
25 East Court Street
Suite 301
Greenville, South Carolina 29601
Telephone No. (864) 250-4440
Telecopy No. (864) 250-4413
Attention: Mr. D. Grant Peacock
with a copy to:
Law Offices of Alan Finegold
Six PPG Place, Suite 1150
Pittsburgh, Pennsylvania 15222-5406
Telephone No. (412) 471-2548
Telecopy No. (412) 562-1613
Attention: Alan H. Finegold, Esq.
If to WWI or Buyer:
Weight Watchers International, Inc.
175 Crossways Park West
Woodbury, New York 11797-2055
Telephone No. (516) 390-1754
Telecopy No. (516) 390-1795
Attention: Robert W. Hollweg
with a copy to:
The Invus Group, Ltd.
135 East 57th Street
New York, New York 10022
Telephone No.: (212) 371-1717
Telecopy No.: (212) 371-1829
<PAGE> 38
Attention: Raymond Debbane
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone No. (212) 455-2000
Telecopy No. (212) 455-2502
Attention: Robert Spatt, Esq.
or to such other address or to the attention of such other
person as any party shall have specified by notice in writing
to the other parties; provided that notice to WEI shall
constitute notice to each of the other Sellers. All such
notices, requests, demands and communications shall be deemed
to have been received on the date of personal delivery or on
the third business day after the mailing thereof.
5. Entire Agreement
This Agreement (including the Exhibits and Schedules hereto)
and the agreements specifically referred to herein or
delivered pursuant hereto constitute the entire agreement
between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings,
oral and written, between the parties hereto with respect to
the subject matter hereof, including, without limitation, the
letter agreement, dated September 29, 2000 (the "Letter of
Intent"), among Sellers and WWI; provided nothing in this
Section 10.5 shall relieve any party from any liability for
any breach of such party's covenants or agreements contained
in the Letter of Intent prior to such termination.
6. Binding Effect
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
assigns.
7. Bulk Sales Law
The parties agree to waive compliance with the provisions of
the bulk sales law of any jurisdiction. Sellers agree to
indemnify and hold harmless Buyer from and against any and all
liabilities that may be asserted by third parties against
Buyer as a result of such noncompliance; provided, however,
that nothing contained in this Section 10.7 shall be
interpreted or construed to relieve Buyer of any liability or
responsibility for any Assumed Liability or to provide for
indemnification against any Assumed Liability.
8. Assignability
This Agreement shall not be assignable, in whole or in part,
by any party hereto without the prior written consent of the
other parties hereto; provided that without the consent of
Sellers Buyer may assign any or all its rights, interests and
obligations hereunder to any of its Affiliates and to a lender
in connection with the financing of all or any portion of the
Purchase Price.
9. No Third Party Beneficiaries
Nothing herein expressed or implied shall confer upon any of
the employees of Sellers, Buyer, WWI or any of their
Affiliates, any rights or remedies, including, without
limitation, any right to employment, or continued employment
for any specified period, of any nature or kind under or by
reason of the Agreement. Nothing in this Agreement, expressed
or implied, is intended to confer on any Person other than the
parties hereto or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by
reason of this Agreement.
10. Amendment; Waiver
<PAGE> 39
This Agreement may be amended, supplemented or otherwise
modified only by a written instrument executed by the parties
hereto. No waiver by any party of any of the provisions hereof
shall be effective unless explicitly set forth in writing and
executed by the party so waiving. Except as provided in the
preceding sentence, no action taken pursuant to this
Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained
herein, or in any documents delivered or to be delivered
pursuant to this Agreement or in connection with the Closing
hereunder. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
11. Confidentiality.
(a) Except as and to the extent required by law or otherwise
permitted pursuant to the Franchise Agreements, Buyer and WWI
agree not to disclose or use, and will direct their
Representatives not to disclose or use, at any time prior to
the Closing Date to the detriment of Sellers any Confidential
Information with respect to Sellers furnished or to be
furnished by Sellers or any of their respective
Representatives to Buyer, WWI or their Representatives at any
time or in any manner other than in connection with the
evaluation by Buyer or WWI of the transactions contemplated
pursuant to this Agreement. For the purposes hereof,
"Confidential Information" means any information about Sellers
stamped "confidential" or identified in writing as such to
Buyer and WWI by Sellers promptly following its disclosure,
unless such data or information (a) is already known to Buyer
or WWI or their Representatives or to others not bound by any
duty of confidentiality or such information is publicly
available through no fault of Buyer, WWI or their
Representatives, (b) the use of such information is necessary
or appropriate in making any filing or obtaining any consent
or approval required for the consummation of the transactions
contemplated pursuant to this Agreement or (c) the furnishing
or use of such information is required by or necessary or
appropriate in connection with legal proceedings.
(b) Except as and to the extent required by law, Sellers agree
not to disclose or use, and will direct its Representatives
not to disclose or use, at any time on or after the Closing
Date any confidential information with respect to the Assets
or any other aspect of the Business of Sellers. For the
purposes hereof, "confidential information" shall not include
any data or information (a) publicly available through no
fault of any Seller or its Representatives, or (b) the
furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings
or required by law.
12. Schedules.
Any item disclosed in the Schedules attached hereto, under any
specific Schedule number hereof, shall be deemed to have been
disclosed only for purposes of such Schedule. Disclosure of
any fact or item in any Schedule hereto shall not necessarily
mean that such fact or item is material.
13. Section Headings; Table of Contents
The section headings contained in this Agreement and the Table
of Contents to this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement.
14. Severability
If any provision of this Agreement shall be declared by any
court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall
not be affected and shall remain in full force and effect.
15. Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same
instrument.
16. APPLICABLE LAW; JURISDICTION; VENUE
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING RELATING
<PAGE> 40
TO THIS AGREEMENT OR TO THE TRANSACTIONS CONTEMPLATED HEREBY
("PROCEEDINGS"), EACH PARTY IRREVOCABLY (I) SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY; AND (II) WAIVES ANY OBJECTION
WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
PROCEEDINGS BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT
SUCH PROCEEDINGS HAVE BEEN BROUGHT IN AN INCONVENIENT FORUM
AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH
PROCEEDINGS, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER
SUCH PARTY.
17. Further Assurances
Each of the parties hereto agrees that, from and after the
Closing, upon the reasonable request of any other party hereto
and without further consideration, such party will promptly
execute, acknowledge and deliver to such other party such
documents and further assurances and will take such other
actions (without cost to such party) as such other party may
reasonably request in order to carry out the purpose and
intention of this Agreement.
18. Other Franchise Agreements
Except as otherwise provided in Section 3.7, no provision of
this Agreement shall amend or waive any provision of any
franchise agreement relating to the Weight Watchers business
between WWI, on the one hand, and any Seller or any of their
respective Affiliates, on the other hand, including, without
limitation, WWI's right of first refusal with respect to any
such franchise.
19. Time of Essence
Time shall be of the essence with respect to the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
WEIGHT WATCHERS INTERNATIONAL, INC.
By: /S/ Linda Huett
-------------------
Name: Linda Huett
Title: President
WEIGHT WATCHERS NORTH AMERICA, INC.
By: /S/ Linda Huett
-------------------
Name: Linda Huett
Title: President
WEIGHCO ENTERPRISES, INC.
By: /S/ D. Grant Peacock
---------------------------
Name: D. Grant Peacock
Title: Chairman
WEIGHCO OF SOUTHWEST, INC.
By: /S/ D. Grant Peacock
---------------------------
Name: D. Grant Peacock
Title: Chairman
WEIGHCO OF NORTHWEST, INC.
By: /S/ D. Grant Peacock
---------------------------
Name: D. Grant Peacock
Title: Chairman
<PAGE> 41
SCHEDULES TO
ASSET PURCHASE AGREEMENT
Schedule 3.2
Purchase Price Allocation
The portion of the Purchase Price allocated to inventories and supplies will be
the Book Value thereof as of the Closing.
The portion of Purchase Price allocated to furniture, fixtures and equipment
will be one hundred fifty percent (150%) of the Book Value thereof, net of
depreciation, as of the Closing.
The portion of the Purchase Price allocated to leasehold improvements will be
twenty-five percent (25%) of the Book Value thereof, net of depreciation, as of
the Closing.
The portion of the Purchase Price allocated to the remainder of the Assets,
including real estate leases, the trade names, the Franchises and goodwill will
be the remainder of such consideration or purchase price.
For purposes of this Schedule 3.2, "Book Value" consists of the amount shown on
the books and records of account of Sellers maintained in accordance with GAAP.