WeightWatchers 2008 Annual Report Download - page 32

outstanding debt primarily from our operations. Our ability to meet our expenses and debt service obligations
thus depends on our future performance, which may be affected by financial, business, economic, demographic
and other factors, such as attitudes toward weight management and pressure from our competitors. If we do not
have enough money to pay our debt service obligations, we may be required to refinance all or part of our
existing debt, sell assets, borrow more money or raise equity. In such an event, we may not be able to refinance
our debt, sell assets, borrow more money or raise equity on terms acceptable to us or at all. Also, our ability to
carry out any of these activities on favorable terms, if at all, may be further impacted by the current financial and
credit crisis which has limited access to the credit markets and increased the cost of capital.
Our credit facilities contain customary covenants, including covenants that in certain circumstances restrict
our ability to incur additional indebtedness, pay dividends on and redeem capital stock, make other restricted
payments, including investments, sell our assets and enter into consolidations, mergers and transfers of all or
substantially all of our assets. Our credit facilities also require us to maintain specified financial ratios and satisfy
financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our
control and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants,
ratios, tests or restrictions could result in an event of default under the credit facilities. If an event of default
exists under the credit facilities, the lenders could elect to cease making loans and declare all amounts
outstanding thereunder to be immediately due and payable. If the lenders under the credit facilities accelerate the
payment of the indebtedness, our assets may not be sufficient to repay in full that indebtedness and our other
indebtedness that would become due as a result of any acceleration.
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 NYSE 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 NYSE 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 NYSE 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
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