WeightWatchers 2002 Annual Report Download - page 46

WeightWatchers.com Warrant Agreements
Under the warrant agreements that we entered into with WeightWatchers.com, we have received
warrants to purchase an additional 6,394,997 shares of WeightWatchers.com’s common stock in
connection with the loans that we made to WeightWatchers.com under the note described above. These
warrants will expire from November 24, 2009 to September 10, 2011 and may be exercised at a price of
$7.14 per share of WeightWatchers.com’s common stock until their expiration. We own 19.9% of the
outstanding common stock of WeightWatchers.com, or approximately 38% on a fully diluted basis
(including the exercise of all options and all the warrants we own in WeightWatchers.com).
Collateral Assignment and Security Agreement
In connection with the WeightWatchers.com note, we entered into a collateral assignment and
security agreement whereby we obtained a security interest in the assets of WeightWatchers.com. Our
security interest in those assets will terminate when the note has been paid in full.
WeightWatchers.com Intellectual Property License
We have entered into an amended and restated intellectual property license agreement with
WeightWatchers.com that governs WeightWatchers.com’s right to use our trademarks and materials
related to the Weight Watchers program.
The amended and restated license agreement grants WeightWatchers.com the exclusive right to
(1) use any of our trademarks, service marks, logos, brand names and other business identifiers as part
of a domain name for a website on the Internet; (2) use any of the domain names we own; (3) use any
of our trademarks on the Internet and any other similar or related forms of interactive digital
transmission that now exists or may be developed later (provided that we and our affiliates, franchisees,
and licensees other than WeightWatchers.com can continue using the trademarks in connection with
online advertising and promotion of activities conducted offline); and (4) use any materials related to
the Weight Watchers program, including any text, artwork and photographs, and advertising, marketing
and promotional materials on the Internet. The license agreement also grants WeightWatchers.com a
non-exclusive right to (1) use any of our trademarks to advertise any approved activities that relate to
its online weight-loss business; and (2) create derivative works. All rights granted to
WeightWatchers.com must be used solely in connection with the conduct of its online weight-loss
business.
Beginning in January 2002, WeightWatchers.com began paying us a royalty of 10% of the net
revenues it earns through its online activities. For fiscal 2002, the amount of this royalty was
$4.2 million.
We retain exclusive ownership of all of the trademarks and materials that we license to
WeightWatchers.com and of the derivative works created by WeightWatchers.com.
All of the rights granted to WeightWatchers.com in the license agreement are subject to our
pre-existing agreements with third parties, including franchisees.
The license agreement provides us with control over the use of its intellectual property. We have
the right to approve any e-commerce activities, any materials, sublicenses, communication to
consumers, products, privacy policy, strategies, marketing and operational plans WeightWatchers.com
intends to use or implement in connection with its online weight-loss business. WeightWatchers.com is
obligated to adhere to strict quality standards, usage guidelines and business criteria provided to
WeightWatchers.com by us.
WeightWatchers.com and we will jointly own user data collected through the website and both
parties are required to adhere to the site’s privacy policy.
39