WeightWatchers 2006 Annual Report Download - page 30

Artal controls us and may have conflicts of interest with other shareholders in the future.
Artal controls us and is able to control the election and removal of our directors and determine our corporate
and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, the
amendment of our articles of incorporation or bylaws and other significant corporate transactions. This
concentration of our ownership may delay or deter possible changes in control of our company, which may
reduce the value of an investment in our common stock. Even if Artal beneficially owns less than 50% but 10%
or more of our common stock, Artal will have the right pursuant to an agreement with us to nominate directors to
our Board of Directors in proportion to its stock ownership. The interests of Artal may not coincide with the
interests of other holders of our common stock.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a
result, qualify for exemptions from certain corporate governance requirements.
Artal controls a majority of the voting power of our outstanding common stock. Under the New York Stock
Exchange rules, a listed company of which more than 50% of the voting power is held by another person or
group of persons acting together is a “controlled company” and such a company may elect not to comply with
certain New York Stock Exchange corporate governance requirements, including (1) the requirement that a
majority of the Board of Directors consist of independent directors, (2) the requirement that the nominating and
corporate governance committee be composed entirely of independent directors with a written charter addressing
the committee’s purpose and responsibilities, (3) the requirement that the compensation committee be composed
entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities
and (4) the requirement for an annual performance evaluation of the nominating and corporate governance and
compensation committees. We have elected to be treated as a “controlled company.” Accordingly, our
shareholders may not have the same protections afforded to shareholders of companies that are subject to all of
the New York Stock Exchange corporate governance requirements.
Our articles of incorporation and bylaws and Virginia corporate law contain provisions that may
discourage a takeover attempt.
Provisions contained in our articles of incorporation and bylaws and the laws of Virginia, the state in which
we are incorporated, could make it more difficult for a third party to acquire us, even if doing so might be
beneficial to our shareholders. Provisions of our articles of incorporation and bylaws impose various procedural
and other requirements, which could make it more difficult for shareholders to effect certain corporate actions.
For example, our articles of incorporation authorize our Board of Directors to determine the rights, preferences,
privileges and restrictions of unissued series of preferred stock, without any vote or action by our shareholders.
Thus, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights
that could adversely affect the voting or other rights of holders of our common stock. These rights may have the
effect of delaying or deterring a change of control of our company. In addition, a change of control of our
company may be delayed or deterred as a result of our having three classes of directors or as a result of the
shareholders’ rights plan adopted by our Board of Directors. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We are currently headquartered in New York, New York in leased office space. We also have small regional
offices within NACO, typically under short term leases. Each of our foreign country operations generally has
leased office space.
We typically hold our classes in third-party locations (typically meeting rooms in well-located civic or other
community organizations) or space leased in retail centers (typically leased spaces in strip malls for short terms,
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