Exhibit 10.1

 

 

 

JOINT VENTURE AGREEMENT

between

DANONE DAIRY ASIA

and

WEIGHT WATCHERS ASIA HOLDINGS LTD.

for

the establishment of

WEIGHT WATCHERS DANONE CHINA LIMITED

 

 

Dated as of February 5, 2008

 

 

 

 

 

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Table of Contents

 

          Page

SECTION 1

   DEFINITIONS    1

SECTION 2

   ESTABLISHMENT OF THE COMPANY AND WFOES    12

SECTION 3

   SCOPE OF BUSINESS OPERATIONS    12

SECTION 4

   SHARE CAPITAL AND INCREASE OF SHARE CAPITAL    13

SECTION 5

   TRANSFER OF INTEREST    15

SECTION 6

   CONDITIONS FOR COOPERATION AND RESPONSIBILITIES OF THE PARTIES    20

SECTION 7

   CONFIDENTIAL INFORMATION, PUBLICITY AND INTELLECTUAL PROPERTY RIGHTS    23

SECTION 8

   CORPORATE GOVERNANCE    25

SECTION 9

   MANAGEMENT OF THE COMPANY    33

SECTION 10

   FINANCIAL, ACCOUNTING AND AUDITING SYSTEM    35

SECTION 11

   PROFIT DISTRIBUTIONS    39

SECTION 12

   BUDGETS AND BUSINESS PLAN    39

SECTION 13

   TERM, TERMINATION AND LIQUIDATION    41

SECTION 14

   TERMINATION PURCHASE RIGHT    42

SECTION 15

   MILESTONES    43

SECTION 16

   LIABILITY FOR BREACH OF CONTRACT    44

SECTION 17

   GOVERNING LAW AND DISPUTE RESOLUTION    44

SECTION 18

   REPRESENTATIONS AND WARRANTIES    45

SECTION 19

   EFFECTIVENESS OF THE CONTRACT AND MISCELLANEOUS    47

APPENDIX 1

   CHARTER DOCUMENTS   

APPENDIX 2

   FORM OF SERVICES AGREEMENT   

APPENDIX 3

   DEED OF ADHERENCE   

APPENDIX 4

   FORM OF LICENSE AGREEMENT   

 

(i)

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APPENDIX 5

   FORM OF CONFIDENTIALITY AGREEMENT   

APPENDIX 6

   LIST OF SHANGHAI WFOE APPROVALS   

 

(ii)

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THIS JOINT VENTURE AGREEMENT (this “Agreement”) is made as of the 5th day of
February 2008

BETWEEN:

 

(1) Danone Dairy Asia, a company organized and existing under the laws of
France, with its offices at 17 boulevard Haussmann, 75009 Paris, France (“DAP”);
and

 

(2) Weight Watchers Asia Holdings Ltd., a company organized and existing under
the laws of the Cayman Islands, with its offices at Paget-Brown Trust Company
Ltd., Boundary Hall, Cricket Square, P.O. Box 1111, Grand Cayman KY1-1102,
Cayman Islands (“WTW”).

Each of DAP and WTW is referred to hereinafter as a “Party” and collectively as
the “Parties.”

RECITALS

 

(A) DAP is a wholly-owned subsidiary of Groupe Danone (“GD”), a company
organized and existing under the laws of France and engaged in the business of
manufacturing and distributing food and beverage products.

 

(B) WTW is a wholly-owned subsidiary of Weight Watchers International, Inc.
(“WWI”), a corporation organized and existing under the laws of Virginia, the
United States of America, and engaged in the business of weight management.

 

(C) The Parties intend to combine their strengths by establishing and investing
in a joint venture company (the “Company”) in Hong Kong that will in turn
establish various Subsidiaries (as defined below), including one or more wholly
foreign-owned enterprises in the People’s Republic of China (each, a “WFOE”,
collectively, the “WFOEs”), the initial one shall be established in Shanghai
(the “Shanghai WFOE”) to engage in the Licensed Business (as defined below).

 

(D) The Parties wish to provide for certain matters relating to the management
and operation of the Company and the WFOEs.

AGREEMENT:

SECTION 1

DEFINITIONS

 

1.1 Definitions. In this Agreement, unless the context otherwise requires, the
following terms shall have the following meanings:

“Adjusted Group EBITDA” means the greater of (a) 11.5 times Group EBITDA or
(b) 0, determined on a consolidated basis for the Applicable Period in
accordance with US GAAP.

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“Adjusted Group Revenue” means 3.5 times the gross revenue of the Group on a
consolidated basis for the Applicable Period and determined in accordance with
US GAAP.

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

“Applicable Buyout Price” means an amount equal to the product of (a) the Buyout
Price and (b) a fraction, the numerator of which shall be the number of Shares
held by the Non-Terminating Party and the denominator of which shall be the
total number of Shares outstanding.

“Applicable Period” means the 12-month period ending on the last day of the last
full calendar month preceding the date of termination of this Agreement.

“Approved Lines” has the meaning specified in the License Agreement.

“Artal” means Artal Group S.A., a Luxembourg company and the indirect parent of
WTW.

“Arbitration Rules” means the Arbitration Rules of the United Nations Commission
and International Trade Law.

“Board” means the board of directors of the Company.

“Books” means the records and books of account of the Company and the WFOEs (on
a consolidated basis) (a) in which complete entries have been made in accordance
with US GAAP and IFRS, (b) for which all transactions required to be reflected
by US GAAP and IFRS have been reflected and (c) for which accurate and complete
records of the material properties and assets of the Company and the WFOEs have
been kept in accordance with US GAAP and IFRS.

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

“Business License” means the business license of each WFOE issued by SAIC.

“Buyout Price” means an amount equal to the greater of (a) the amount equal to
(i) the quotient of (1) sum of the Adjusted Group Revenue and the Adjusted Group
EBITDA and (2) 2 minus (ii) the Net Indebtedness as of the date of termination
of this Agreement and (b) the Group Net Asset Value.

 

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“Charter Documents” of the Company means the memorandum and articles of
association of the Company to be adopted by the Company on or prior to the
Company Establishment Date, and in the form attached hereto as Appendix 1.

“CEO” of the Company means the Chief Executive Officer of the Company, who shall
be the most senior executive manager of the Company.

“Company Establishment Date” means the date in which both DAP and WTW subscribe
their Shares of the Company in accordance with Section 4 of this Agreement.

“Competitor” means:

 

  (i) with respect to WTW: Ao Quqing, Atkins, Curves, eDiets, Fernwood Women’s
Health Clubs, Glaxo Smith Kline (Alli), GNC, Great Impression Brand Weight
Reducing Tea, Herbalife, Jenny Craig, Kancura Weight Reducing Tea, Lean Cuisine,
Marie France, Mermaid Fitness, NutriSystem, QuMei, Roche Products (Weight
Awareness/Xenical), Sanofi-Aventis (Accomplia), Sau San Tong, Scent Hill, Shu
Yikang Shake Fat Appliance, Slimfast, South Beach Diet, Slimming World, Sunrana
Slimming Compound, Tesco, Tony Ferguson Weight Loss Program and VT, and their
respective Affiliates (including, without limitation, any parent organizations
such as Nestle in the case of Jenny Craig or Unilever in the case of Slimfast);
and

 

  (ii) with respect to GD: PepsiCo Inc., The Coca Cola Company, Nestle SA, Kraft
Foods Inc., Unilever and their respective Affiliates.

“Confidential Information” means (a) all information disclosed to a Party, its
subsidiaries, employees, directors, officers, Affiliates, consultants,
subcontractors, representatives or advisors (the “Recipient”) by the other
Party, the Company, or in the case where the Recipient is DAP, WWI (in addition
to the other Party and the Company), or in the case where the Recipient is WWI,
GD (in addition to the other Party and the Company), or any of their employees,
directors, officers, Affiliates, consultants, subcontractors, representatives or
advisors (the “Disclosing Party”), including all information concerning the
Disclosing Party’s or any of its Affiliates’ businesses, finances, designs,
advertising, marketing, sales, plans for future developments and internal
processes or systems whether furnished before or after the date hereof, and
whether furnished in oral, written, visual, machine readable or any other form,
and regardless of the manner in which it is furnished (including by fax and any
other form of electronic delivery); and (b) any document or material prepared by
the Recipient or its Representatives based on any confidential information and
all copies, extracts, reproductions, summaries or analyses of any such
information (whether created by the Recipient or any other Person), including
all digital and electronic copies.

 

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“Confidentiality Agreement” means the separate agreement between GD and WWI in
relation to the non-competition and non-disclosure obligations and certain
rights and obligations of each of GD and WWI, executed on the date hereof in the
form attached as Appendix 5.

“Consumer Price Index” means the Consumer Price Index as published by the
National Bureau of Statistics of China, or any successor organization.

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

“DAP Change of Control” means (a) a Transfer by a Person of all or a portion of
the interest or rights that it directly or indirectly holds in, or with respect
to, DAP to another Person such that subsequent to such Transfer, GD shall no
longer Control DAP or (b) a Transfer by the shareholders of GD or an issuance of
new Equity Securities of GD such that subsequent to such Transfer or a new
issuance, any Person or its Affiliates, individually or collectively, own,
directly or indirectly, more than 50% of the Equity Securities of GD on a fully
diluted basis.

“Dispute” means any dispute, controversy or claim arising out of, or relating
to, this Agreement or the performance, interpretation, breach, termination or
validity hereof other than a dispute with respect to a Deadlocked Matter.

“Distributable Profits” means any profits available for distribution in respect
of a given Financial Year (a) after making up all accumulated losses of previous
years of, and taking into account any statutory reserves required to be made by,
the Company, and (b) where the aggregate net income of the WFOEs has been
greater than zero for such Financial Year.

“Electronic Medium” has the meaning specified in the License Agreement.

“Equity Securities” means, with respect to any Person, such Person’s capital
stock, membership interests, partnership interests, registered capital, joint
venture or other ownership interests (including, in the case of the Company,
Shares) or any options, warrants or other securities that are directly or
indirectly convertible into, or exercisable or exchangeable for, such capital
stock, membership interests, partnership interests, registered capital, joint
venture or other ownership interests (whether or not such derivative securities
are issued by such Person).

 

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“Encumbrance” means (a) any mortgage, charge (whether fixed or floating),
pledge, lien, hypothecation, assignment, deed of trust, title retention,
security interest or other encumbrance of any kind securing, or conferring any
priority of payment in respect of, any obligation of any Person, including any
right granted by a transaction that, in legal terms, is not the grant of
security but that has an economic or financial effect similar to the creation of
a security that is legally enforceable under applicable Law, any proxy, power of
attorney, voting trust agreement, interest, option, right of first offer,
negotiation or refusal or transfer restriction in favor of any Person and
(b) any adverse claim as to title, possession or use.

“Examination and Approval Authority” means the Ministry of Commerce of the PRC
or its relevant local counterpart that is legally authorized to approve the
establishment of the WFOEs pursuant to PRC Laws.

“Financial Quarter” means any of the quarterly accounting periods of the
Company, ending March 31, June 30, September 30 and December 31 of each year.

“Financial Year” means the financial year of the Company being January 1 to
December 31.

“Five-Year Business Plan” means a five-year business plan for the operation of
the Company and the WFOEs, which includes the capital and operating budgets for
the Company and the WFOEs for the relevant period as well as KPIs and MPTs for
the Group. The initial Five-Year Business Plan, to be mutually agreed by the
Parties, shall commence six months after the Soft Launch Date.

“Group” means the Company and its Subsidiaries, and a “member of the Group”
means any one of them.

“Group EBITDA” means, for any period with respect to the Group on a consolidated
basis and determined in accordance with US GAAP, the sum of: (a) the net income
(or loss) of the Group for such period (after eliminating any extraordinary
gains and losses determined in accordance with US GAAP), including but not
limited to the sale of businesses, and the impairment of goodwill, plus (b) all
interest expense (less interest income) of the Group for such period, plus
(c) all charges against income of the Group for such period for all income
taxes, plus (d) all depreciation expense of the Group for such period, plus
(e) all amortization expense of the Group for such period.

“Group Net Asset Value” means the difference between (a) the total value of the
assets of the Group (on a consolidated basis) as reflected on the Books as of
the date of termination of this Agreement determined in accordance with US GAAP
and (b) the total value of the liabilities of Group (on a consolidated basis) as
reflected on the Books as of the date of termination of this Agreement
determined in accordance with US GAAP.

 

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“Hong Kong” means Hong Kong Special Administrative Region, PRC.

“HK GAAP” means generally accepted accounting principles prescribed in Hong Kong
in effect from time to time.

“IFRS” means the International Financial Reporting Standards prescribed by the
International Accounting Standards Board and its successors.

“Indebtedness” means, at any time with respect to the Group on a consolidated
basis and determined in accordance with US GAAP and without duplication: (a) all
obligations for borrowed money or advances, (b) all obligations evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations upon which
interest charges are customarily paid or accrued, (d) all obligations under
conditional sale or other title retention agreements relating to property
purchased by the Group, (e) all obligations issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith), (f) all capital lease
obligations, purchase money obligations and synthetic lease obligations to the
extent that such synthetic lease obligations are structured as capital leases,
(g) all obligations for reimbursement of any obligor in respect of letters of
credit, letters of guaranty, and similar credit transactions, (h) all
obligations in respect of Indebtedness of any other Person (including any
partnership in which any member of the Group is a general partner) to the extent
that any member of the Group is liable therefor as a result of its ownership
interest in or other relationship with such Person and that such Indebtedness
has been approved by the Board unanimously, except to the extent that the terms
of such Indebtedness provide that such member of the Group is not liable
therefor and (i) every obligation, contingent or otherwise, guarantying, or
having the economic effect of guarantying or otherwise acting as surety for, any
obligation of a type described in any of clauses (a) through (j) of another
Person, in any manner, whether directly or indirectly.

“Laws” means all applicable laws, regulations, rules and orders of any
governmental authority, securities exchange or other self-regulatory body,
including any ordinance, statute or other legislative measure and any
regulation, rule, treaty, order, decree or judgment.

“License Agreement” means the Intellectual Property License Agreement between
WWI and the Company, in the agreed form attached hereto as Appendix 4 and
executed on the Company Establishment Date pursuant to Section 4.4, as may be
amended from time to time.

“Licensed Business” has the meaning specified in the License Agreement.

“Lock-Up Period” means the period ending on the fifth anniversary of the WFOE
Establishment Date of the Shanghai WFOE.

“Long Stop Date” means the date that is twelve months from the date of this
Agreement.

 

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“Macau” means Macau Special Administrative Region of the PRC.

“Net Indebtedness” means, at any time with respect to the Group on a
consolidated basis and determined in accordance with US GAAP, the Indebtedness
after deducting the aggregate amount of cash and cash equivalent investments
(being all bonds, notes, certificates of deposit and commercial paper with a
maturity of not more than twelve months) held by any member of the Group.

“Other Agreements” means (a) the Confidentiality Agreement, (b) the Services
Agreement and (c) any other agreements between the Parties or their respective
Affiliates executed on the date hereof.

“Permitted Affiliate” of a Party means a Person with respect to which GD (if
such Party is DAP) or WWI (if such Party is WTW), as the case may be, directly
or indirectly legally or beneficially owns at least 95% of the Equity
Securities.

“Person” means any individual, firm, corporation, joint venture, enterprise,
partnership, trust, unincorporated association, limited liability company,
government (or agency or political subdivision thereof), or other entity of any
kind, whether or not having separate legal personality.

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

“PRC GAAP” means generally accepted accounting principles prescribed in the PRC
in effect from time to time.

“PRC Laws” means the Laws of the PRC.

“SAIC” means the State Administration of Industry and Commerce of the PRC or its
local branches as appropriate to the context.

“Services Agreement” means the Services Agreement between DAP and the Company,
in the agreed form attached hereto as Appendix 2 and executed on the Company
Establishment Date pursuant to Section 4.4, as may be amended from time to time.

“Shanghai” means the municipality of Shanghai as defined by the PRC government.

“Shanghai WFOE Approvals” means such rights, licenses, permits, approvals,
waivers, consents and authorizations that are necessary for the Shanghai WFOE to
engage in the business activities contemplated in this Agreement as set forth in
Appendix 6.

“Shareholders” means (i) DAP and WTW and (ii) any other Person who becomes a
shareholder of the Company in accordance with the terms of this Agreement and
executes a Deed of Adherence substantially in the form attached hereto as
Appendix 3, in each case for so long as such Person remains a shareholder of the
Company, and in the case of any Shareholder that is a

 

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natural person shall be deemed to include the estate of such Shareholder and the
executor, conservator, committee or other similar legal representative of such
Shareholder or such Shareholder’s estate following the death or incapacitation
of such Shareholder.

“Shares” means the ordinary shares, par value HK$1.00, of the Company.

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

“Subsidiary” means any other Person in which the Company directly or indirectly
holds a majority of the ownership interests, or a majority of the voting power,
represented by Equity Securities of such Person, including the WFOEs.

“Territory” means the PRC. For the avoidance of doubt, Taiwan, Hong Kong and
Macau shall not be considered part of the Territory.

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

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

“US GAAP” means generally accepted accounting principles as prescribed by the
Financial Accounting Standards Board of the U.S. in effect from time to time.

“WFOE Establishment Date” means, with respect to each WFOE, the date the
business license for such WFOE is issued by SAIC.

“WTW Buyout Price” means the amount equal to the product of (a) the Buyout Price
and (b) a fraction, the numerator of which shall be the number of Shares held by
DAP and the denominator of which shall be the total number of Shares
outstanding.

“WTW Change of Control” means (a) a Transfer by a Person of all or a portion of
the interest or rights that it directly or indirectly holds in, or with respect
to, WWI to another Person such that subsequent to such Transfer, a Person other
than Artal or its Affiliates Controls WWI or (b) receipt by WTW of a written
notice from Artal that Artal and its Affiliates intend to relinquish Control of
WWI.

 

1.2 Other Terms. The following terms shall have the meanings defined in the
Section indicated:

 

Term

   Section

Acceptance Notice

   5.4(a)

Agreement

   Preamble

Annual Plan

   12.3(a)

 

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Term

   Section

Approved Information

   9.2(a)(iii)

Auditor

   10.2

Buyout Notice

   14.2

CFO

   9.1(a)

Chairman

   8.1(c)

Company

   Recitals

DAP

   Preamble

DAP Change of Control Notice

   5.6

DAP Directors

   8.1(a)

DAP Interest Value

   5.6(a)

DAP Notice

   5.6(a)

DAP Shares

   4.1(a)

Deadline

   12.3(a)

Deadlock Date

   8.10(a)

Deadlock Exercise Notice

   8.10(e)

Deadlock Notice

   8.10(b)

Deadlock Option

   8.10(a)

Deadlock WTW Interest Value

   8.10(e)

Deadlock WTW Notice

   8.10(e)

Deadlocked Matter

   8.10(a)

Disclosing Party

   1.1

Employer

   6.4

Exercise Notice

   5.6(a)

Financial and Accounting System

   9.3(b)

GD

   Recitals

HKIAC AC

   17.2(b)

Independent Auditor

   5.4(a)

Initial Conditions

   4.3(b)

Initial Contribution

   4.3(a)

Invoking Party

   8.10(d)

KPIs

   12.1

Milestones

   15.1

Milestone Buyout Notice

   15.2(a)

Milestone Failure Purchase Right

   15.1

MPTs

   12.1

Non-Invoking Party

   8.10(e)

Non-Terminating Party

   14.1

Offer Period

   5.4(a)

Offer Price

   5.4(a)

Offered Interest

   5.4(a)

Party

   Preamble

Permitted Affiliate Transferee

   5.3(a)

Prohibited Payment

   9.4(b)

Put-Call Option

   5.6(a)

Recipient

   1.1

Representatives

   7.2(a)

Securities Laws Obligations

   10.4(a)

Senior Managers

   9.1(a)

Shanghai WFOE

   Recitals

 

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Term

   Section

SOXA

   10.4(a)

Submission Notice

   17.2(a)

Tag-Along Right

   5.5(b)

Terminating Party

   13.3(c)

Termination Purchase Right

   14.1

Transfer Notice

   5.4(a)

Transferring Party

   5.3(a)

Trigger Notice

   5.6(a)

WFOE

   Recitals

WFOE Term

   13.2(a)

WTW

   Preamble

WTW Change of Control Notice

   5.6

WTW Directors

   8.1(a)

WTW Shares

   4.1(a)

WWI

   Recitals

 

1.3 Interpretation.

 

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

 

  (b) Unless a clear contrary intention appears:

 

  (i) the singular number includes the plural number and vice versa;

 

  (ii) reference to any Person includes such Person’s successors and assigns
but, if applicable, only if such successors and assigns are not prohibited by
this Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;

 

  (iii) reference to any gender includes each other gender;

 

  (iv) reference to any agreement, document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof;

 

  (v) reference to any Law means such Law as amended, modified, codified,
replaced or reenacted, in whole or in part, and in effect from time to time,
including all other Laws promulgated thereunder, and reference to any section or
other provision of any Law means that provision of such Law from time to time in
effect and constituting the substantive amendment, modification, codification,
replacement or reenactment of such section or other provision;

 

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  (vi) references to any government ministry, agency, department or authority
shall be construed as references to the duly appointed successor ministry,
agency, department or authority of such ministry, agency, department or
authority where the context permits;

 

  (vii) “hereunder,” “hereof,” “hereto,” and words of similar import shall be
deemed references to this Agreement as a whole and not to any particular
article, section or other provision hereof;

 

  (viii) headings are included for convenience only and shall not affect the
construction of any provision of this Agreement;

 

  (ix) numbered or lettered articles, sections and subsections herein contained
refer to articles, sections and subsections of this Agreement;

 

  (x) “including” (and with correlative meaning “include”) means including
without limiting the generality of any description preceding such term;

 

  (xi) “or” is used in the inclusive sense of “and/or”;

 

  (xii) references to documents, instruments or agreements shall be deemed to
refer as well to all addenda, exhibits, schedules or amendments thereto;

 

  (xiii) any term in any Schedule or Exhibit hereto shall have the meaning
ascribed to such term in this Agreement, unless otherwise defined therein;

 

  (xiv) reference to dollars or US$ shall be deemed to refer to U.S. Dollars;

 

  (xv) reference to a year or to a quarter means the fiscal year or fiscal
quarter of the Company, respectively, and reference to a month means a calendar
month;

 

  (xvi) if a period of time is specified and dates from a given day or the day
of a given act or event, such period shall be calculated exclusive of that day;
if the day on or by which something must be done is not a Business Day, that
thing must be done on or by the Business Day immediately following such day;

 

  (xvii) references to writing include any mode of reproducing words in a
legible and non-transitory form; and

 

  (xviii) references to a “fully diluted basis” mean that the calculation is to
be made assuming that all options, warrants and other equity securities
convertible into or exercisable or exchangeable for Shares (whether or not by
their terms then currently convertible, exercisable or exchangeable).

 

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

SECTION 2

ESTABLISHMENT OF THE COMPANY AND WFOES

 

2.1 Establishment of the Company. The Parties agree to form, and by this
Agreement do form, the Company for the purposes of conducting the Licensed
Business, directly and/or through its Subsidiaries, including the WFOEs, in
multiple locations in the Territory.

 

2.2 Establishment of WFOEs. The Parties agree to establish WFOEs in various
locations within the Territory as determined by the Board. In this connection,
as soon as reasonably practicable following the Company Establishment Date, the
Company shall establish the Shanghai WFOE. Subject to approval from the relevant
PRC governmental authorities, each WFOE shall have the power to conduct and
operate the Licensed Business in multiple locations throughout the Territory and
shall have the power to conduct other related activities as the Parties may from
time to time agree.

 

2.3 Name. The name of the Company shall be “Weight Watchers Danone China
Limited”. If any Party together with its Affiliates do not own any Shares of the
Company, such Party may, in writing, require the Company and/or its Subsidiaries
to remove any references to such Party from the name(s) of the Company and/or
its Subsidiaries. Upon receipt of such Party’s written request, the other Party
shall cause the Company and/or its Subsidiaries to promptly remove the
requesting Party’s name from the relevant name(s).

 

2.4 Limited Liability. The liability of each Party with respect to the Company
shall be limited to its contribution to the share capital in accordance with
Sections 4.2 and 4.3. Neither Party shall have any liability to any third party
in respect of the debts or obligations of the Company.

 

2.5 Shareholders’ Obligations. Each Party shall comply with the provisions of
this Agreement in relation to its investment in the Company and in transacting
business with the Company and shall exercise its rights and powers in accordance
herewith and so as to give effect to this Agreement.

SECTION 3

SCOPE OF BUSINESS OPERATIONS

 

3.1 Scope of Business. The Parties shall ensure that the Company will conduct
only the Licensed Business and conduct such business solely and strictly in
accordance with this Agreement and the License Agreement.

 

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3.2 WFOE Business. The Parties shall exercise their rights and powers in respect
of the Company and each WFOE so as to ensure that all the activities specified
in this Section 3 conducted by such WFOE shall be conducted within the scope
permitted by the PRC Laws and the License Agreement, and that each WFOE shall,
and the Parties shall provide reasonable assistance to such WFOE such that such
WFOE can, apply for all necessary licenses and permits from the relevant PRC
governmental authorities in order to engage in those activities, whenever such
licenses and permits are required.

SECTION 4

SHARE CAPITAL

AND INCREASE OF SHARE CAPITAL

 

4.1 Authorized Capital of Company and WFOEs.

 

  (a) The authorized share capital of the Company shall be HK$10,000 divided
into 10,000 Shares, par value HK$1.00 each, of which 490 Shares will be issued
to DAP (representing 49% of the ownership interest in the Company) (the “DAP
Shares”) and 510 Shares will be issued to WTW (representing 51% of the ownership
interest in the Company) (the “WTW Shares”).

 

  (b) Prior to the WFOE Establishment Date of each WFOE, the Company shall
determine the total investment in, and the registered capital of, such WFOE.

 

4.2 Subscription of Shares. On the Company Establishment Date, each of DAP and
WTW will simultaneously subscribe and pay for, and the Company will issue and
allot to DAP and WTW, fully paid DAP Shares and WTW Shares, respectively, in the
amount of HK$490 and HK$510, respectively.

 

4.3 Contribution of Capital.

 

  (a) Subject to the fulfillment of the conditions specified in Section 4.3(b),
each of DAP and WTW shall contribute additional capital to the Company in the
form of cash or extend loans to the Company in accordance with the loan
agreements to be entered into by each Party and the Company, where each loan to
be extended by a Party shall bear the same proportion to such Party’s
contribution to share capital and each loan agreement between a Party and the
Company shall have the same terms and conditions mutually agreed to by the
Parties, in the amounts specified in the initial Five-Year Business Plan (the
“Initial Contribution”). Notwithstanding the foregoing, the first fifteen
percent (15%) of the Initial Contributions shall be paid by each of DAP and WTW
within ten (10) days of its receipt of a written request from the Company.

 

  (b)

Each of DAP and WTW shall pay the remaining eighty-five percent (85%) of the
Initial Contributions only after all of the conditions set forth below (the
“Initial Conditions”) have been satisfied or waived in writing by DAP and WTW.
Payment of such remaining amounts shall

 

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be made by each of DAP and WTW within ten (10) days of its receipt of a written
request from the Company for all or a portion of such remaining amounts, at one
time or at different times, consistent with the Five-Year Business Plan. If any
of the conditions set forth below have not been satisfied or waived in writing
by DAP and WTW by the Long Stop Date, either Party shall have the right to
terminate this Agreement pursuant to Section 13.3(b)(ii). The Initial Conditions
are as follows:

 

  (i) the articles of association of the Shanghai WFOE have been approved by the
Examination and Approval Authority without material substantive amendments
thereto;

 

  (ii) the Business License has been issued to the Shanghai WFOE without
altering in any material respect the Shanghai WFOE’s initial business scope as
set forth in the articles of association of the Shanghai WFOE; and

 

  (iii) the Shanghai WFOE has received all of the Shanghai WFOE Approvals.

 

  (c) All contributions to the share capital of the Company or Shareholders’
loans shall be made by the Parties in accordance with their respective
shareholding percentages in the Company at such time and pursuant to the same
terms and conditions. Except for the Initial Contributions, any required
contributions to the Company shall be subject to the unanimous approval of the
Board as provided in Section 8.9. For the avoidance of doubt, the Parties agree
that in the event the Board approves unanimously the additional contribution to
the capital of the Company by the Parties, such additional contributions shall
be made either in the form of capital contributions or Shareholders’ loans in
the same proportion, and on the same terms and conditions. If the Parties are
unable to agree on the form of such contributions or the terms of the
Shareholders’ loans to be granted by the Parties to the Company, then the
additional contributions shall be made in the form of capital contribution.

 

4.4 Company Establishment Date. On the Company Establishment Date, the Parties
shall:

 

  (a) subscribe their respective Shares and contribute their respective capital
in accordance with Section 4.2;

 

  (b) appoint the initial directors of the Company in accordance with the
Charter Documents and this Agreement;

 

  (c) cause the Company to hold the first Board meeting to authorize the
execution of the License Agreement and the Services Agreement, and to adopt the
Charter Documents, in the form attached hereto as Appendix 1, and approve the
initial Five-Year Business Plan;

 

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  (d) execute the License Agreement in the form attached hereto as Appendix 4;
and

 

  (e) execute the Services Agreement in the form attached hereto as Appendix 2.

 

4.5 Pre-emptive Right. If there is an issuance of new Shares (or any other type
of security that is convertible into Shares) pursuant to the terms and
conditions of this Agreement and applicable Laws, each of the Parties shall have
the right (but not the obligation) to subscribe for such newly issued Shares (or
any other type of security that is convertible into Shares) such that subsequent
to the subscription, each Party will maintain its shareholding percentage at the
shareholding percentage (on an as converted and fully diluted basis) of the
Company that such Party held immediately prior to the relevant issuance of new
Shares (or any other type of security that is convertible into Shares). To the
extent one Party does not elect to subscribe for such issuance of new Shares (or
any other type of security that is convertible into Shares), the other Party
shall have the right (but not the obligation) to subscribe for such unsubscribed
for Shares (or any other type of security that is convertible into such
unsubscribed for Shares).

SECTION 5

TRANSFER OF INTEREST

 

5.1 Restriction on Transfer. No Party shall Transfer any Shares or any right,
title or interest therein or thereto to any third party Transferee or otherwise
create or permit or suffer to be created or exist (whether by operation of law
or otherwise) any Encumbrance over any Shares held by it or any right, title or
interest therein or thereto for the benefit of any third party without the prior
written consent of the other Party, except as expressly permitted by this
Section 5. Any purported Transfer or Encumbrance in violation of this Section 5
shall be null and void, and the Company and the Parties shall not register or
recognize any such Transfer or Encumbrance.

 

5.2 Transfer Conditions. Notwithstanding any other provisions of this Agreement
but subject to Section 5.3 below, no Transfer may be made unless (a) the
Transferee has agreed in writing to be bound by the terms and conditions of this
Agreement and the Charter Documents, which may be amended and restated to the
extent that the Parties and the Transferee agree to such amendments, (b) the
Transfer complies in all respects with the other applicable provisions of this
Agreement and the Charter Documents and (c) the Transferee has entered into a
Deed of Adherence in the form attached hereto as Appendix 3. Notwithstanding any
other provisions of this Agreement, no Transfer may be made to a Competitor of
the Non-Transferring Party.

 

5.3 Transfers to Affiliates.

 

  (a)

Notwithstanding Section 5.4(a), any Party may Transfer all, but not less than
all, of its Shares (the “Transferring Party”) to one or more of its Permitted
Affiliates (the “Permitted Affiliate Transferee”). In such event, the
Transferring Party shall provide written notice to the Board

 

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and the other Party prior to such transfer and provide the other Party documents
supporting the status of the Permitted Affiliate Transferee as a Permitted
Affiliate of the Transferring Party and evidencing that the Permitted Affiliate
Transferee’s ability to perform this Agreement is not less than that of the
Transferring Party.

 

  (b) The Transferring Party and the Permitted Affiliate Transferee shall enter
into a share transfer contract with respect to the Transfer of the relevant
Shares. The Parties shall thereafter amend this Agreement and the Charter
Documents to reflect the respective Shares held by the non-Transferring Party
and the Permitted Affiliate Transferee subsequent to the completion of such
share transfer contract. The Parties shall use their reasonable commercial
efforts to assist the Company to obtain all governmental approvals that may be
required in relation to such transfer of shares. The Parties shall, and shall
cause the Company to, promptly execute all such further documents and perform
all such further acts as the Transferring Party may reasonably require to
constitute the Permitted Affiliate Transferee as the legal and beneficial owner
of the interest Transferred pursuant to the Transfer free from any and all
Encumbrances (other than the Encumbrance created by this Agreement).

 

  (c) If a Transferee pursuant to this Section 5.3 ceases to be a Permitted
Affiliate of the Transferring Party, such Transferee shall Transfer such Shares
back to such Transferring Party.

 

5.4 Right of First Refusal.

 

  (a)

At any time following the Lock-Up Period, and except as provided in Section 5.3,
a Party may Transfer all, but not less than all, of its Shares provided that the
provisions of this Section 5.4 and Section 5.5 have been complied with. The
Transferring Party shall send written notice (the “Transfer Notice”) to the
other Party, which notice shall state (i) the name and address of the proposed
Transferee, (ii) the number of all the Shares proposed to be transferred (the
“Offered Interest”), (iii) the amount and form of the proposed consideration for
the Transfer and (iv) any other terms and conditions of the proposed Transfer.
In the event the proposed consideration for the Transfer includes consideration
other than cash, the Transfer Notice shall include a calculation of the fair
market value of such consideration and an explanation of the basis for such
calculation, further provided that the other Party shall be entitled at any time
after receipt of the Transfer Notice to serve notice on the Transferring Party
requiring a valuation of such consideration by an auditor who is independent
from each Party, is not the Auditor (as defined in Section 10.2 below), is one
of the major international accounting firms and is capable of performing
accounting work meeting both PRC domestic accounting standards and international
standards (the “Independent Auditor”), at the cost of the Transferring Party. If
the aggregate fair market value as so determined by the Independent Auditor
falls short of the amount stated in the Transfer Notice, the shortfall must be
covered in cash and the Transfer

 

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Notice shall be amended accordingly. The total value of the consideration for
the proposed Transfer is referred to as the “Offer Price.” For a period of 30
days after delivery of the Transfer Notice or after completion of the valuation
of consideration by the Independent Auditor (which date shall be no more than 30
days after the date on which the other Party has served notice on the
Transferring Party requiring a valuation) in the event the proposed
consideration for the Transfer includes consideration other than cash (the
“Offer Period”), the other Party shall have the right, exercisable by delivery
of an Acceptance Notice (as defined below), to purchase all, but not less than
all, of the Offered Interests for cash at a purchase price equal to the Offer
Price and upon the other terms and conditions set forth in the Transfer Notice.
The right to purchase the Offered Interest shall be exercisable by delivering
written notice of exercise (an “Acceptance Notice”) within the Offer Period to
the Transferring Party. An Acceptance Notice shall be irrevocable and shall
constitute a binding agreement by the other Party to purchase the Offered
Interest. The failure of the other Party to give an Acceptance Notice within the
Offer Period shall be deemed to be a waiver of such purchase right. Unless the
other Party elects to purchase the entire Offered Interest as provided above,
the Transferring Party may Transfer the Offered Interest to the Transferee
identified in the Transfer Notice on the terms and conditions set forth in the
Transfer Notice; provided that (1) the price for the sale to the Transferee is a
price not less than the Offer Price and the sale is otherwise on terms and
conditions no less favorable to the Transferring Party than those set forth in
the Transfer Notice and (2) the Transfer is made within 60 days after the end of
the Offer Period or such other time period as the Parties may mutually agree. If
such a Transfer does not occur within such time period referred to in Clause
(2) for any reason, the restrictions provided for herein shall again become
effective, and no Transfer may be made by the Transferring Party thereafter
without again making an offer to the other Party in accordance with this
Section 5.4.

 

  (b)

The closing of any purchase of Offered Interest shall be held at the principal
office of the Company at 11:00 a.m. local time on the 60th day after the end of
the Offer Period or at such other time and place as the parties to the
transaction may agree. The said 60 day period shall be extended for an
additional period of up to 30 days if necessary to obtain any regulatory
approvals required for such purchase and payment. At such closing, the
Transferring Party shall deliver certificates representing the Offered Interest,
accompanied by duly executed instruments of transfer and the Transferring
Party’s portion of the requisite transfer taxes, if any. Such Offered Interest
shall be free and clear of any Encumbrance (other than Encumbrances arising
hereunder or attributable to actions by the other Party) and the Transferring
Party shall so represent and warrant and shall further represent and warrant
that it is the beneficial and record owner of such Offered Interest. The other
Party or the Transferee (as the case may be) shall deliver at such closing (or
on such later date or dates as may

 

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be provided in the Transfer Notice with respect to payment of consideration by
the proposed Transferee) payment in full of the Offer Price by wire transfer of
immediately available funds, or duly executed instruments of transfer and all
other documents required in connection with such transfer, and take all actions
necessary for the transfer of rights, title and ownership of the non-cash
consideration (as the case may be). At such closing, all of the parties to the
transaction shall execute such additional documents as may be necessary or
appropriate to effect the sale of the Offered Interest. Any stamp duty or
transfer taxes or fees payable on the transfer of any Offered Interest shall be
borne and paid equally by the Transferring Party and the other Party or the
Transferee (as the case may be).

 

5.5 DAP Tag-Along Right.

 

  (a) If WTW is the Transferring Party in a proposed Transfer other than
pursuant to Section 5.3, the Transfer Notice delivered by WTW as the
Transferring Party pursuant to Section 5.4 shall include, in addition to those
items specified in Section 5.4(a), (i) the number of Shares WTW then owns,
(ii) the expected date of consummation of the proposed Transfer and (iii) a
representation that the proposed Transferee has been informed of the Tag-Along
Rights provided for in Section 5.5(b) and has agreed to purchase all Shares
required to be purchased in accordance with the terms of this Section 5.5.

 

  (b) If DAP does not exercise its right to purchase the Offered Interest of WTW
pursuant to Section 5.4, DAP shall have the right (the “Tag-Along Right”) but
not the obligation to require the Transferee in such Transfer to purchase from
DAP, for the same consideration per Share and upon the same terms and conditions
as to be paid and given to WTW, all of the Shares held by DAP.

 

  (c) Tag-Along Notice. DAP may exercise its Tag-Along Right by delivering a
written notice of such election to WTW before the expiration of the Offer
Period, specifying the number of Shares with respect to which it has elected to
exercise its Tag-Along Right. Such notice shall be irrevocable and shall
constitute a binding agreement by DAP to Transfer such Shares on the terms and
conditions set forth in the Transfer Notice. In order to be entitled to exercise
its Tag-Along Right, DAP must make substantially the same representations,
warranties and indemnities as WTW makes in connection with its Transfer of
Shares and shall bear, on a pro rata basis, all third party costs and expenses
incurred in connection with the sale of the Shares, up to a maximum amount of 4%
of the consideration for the Offered Interest, upon receipt of properly issued
invoices provided by the relevant third party service providers evidencing any
such third party costs and expenses to the extent that any such third party
service providers have provided any properly issued invoices, provided that, WTW
shall use reasonable efforts to procure properly issued invoices from such third
party service providers.

 

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  (d) Consummation. Where DAP has properly elected to exercise its Tag-Along
Right and the proposed Transferee fails to purchase Shares from DAP, WTW shall
not make the proposed Transfer, and if purported to be made, such Transfer shall
be void.

 

5.6 Change of Control. If at any time DAP becomes aware that a DAP Change of
Control has or is about to occur, DAP shall immediately deliver a notice to WTW
(the “DAP Change of Control Notice”). If at any time WTW becomes aware that a
WTW Change of Control has or is about to occur, WTW shall immediately deliver a
notice to DAP (the “WTW Change of Control Notice”) . If a WTW Change of Control
or a DAP Change of Control occurs, WTW may elect to invoke the following
put-call option:

 

  (a) The “Put-Call Option” shall consist of the following: WTW may invoke the
Put-Call Option by delivering a written notice to DAP (the “Trigger Notice”):
(A) within 30 days after WTW receives the DAP Change of Control Notice or
(B) within 6 months after WTW delivers the WTW Change of Control Notice. Within
30 days of DAP receiving the Trigger Notice, DAP shall deliver to WTW a notice
(the “DAP Notice”) setting forth its determination of the value of its interest
in the Company (the “DAP Interest Value”). Upon receipt thereof, WTW shall have
the right, exercisable by written notice (the “Exercise Notice”) to DAP
delivered within six months following receipt of the DAP Notice, to either
purchase the entire interest of DAP at a price equal to the DAP Interest Value
or to sell its entire interest in the Company to DAP at a price equal to the
product of (i) the DAP Interest Value, and (ii) a fraction, the numerator of
which shall be the number of Shares held by WTW and the denominator of which
shall be the number of Shares held by DAP. The Exercise Notice shall be
irrevocable and, together with the DAP Notice, shall constitute a binding
agreement by the Parties to purchase and sell the applicable interest of the
selling Party in the Company. The closing of the sale of the interest in the
Company of DAP or WTW, as applicable, shall occur on a date to be determined by
WTW, but in any event not later than 90 days following delivery to DAP of the
Exercise Notice. At such closing, the selling Party shall deliver such duly
executed instruments of transfer and other documents required in connection with
such transfer and the purchasing Party shall deliver payment in full by wire
transfer of immediately available funds. The interests being transferred shall
be free and clear of any Encumbrance (other than Encumbrances arising under this
Agreement) and the selling Party shall so represent and warrant, and shall
further represent and warrant that it is the beneficial and record owner of such
interest being transferred.

 

  (b) For the avoidance of doubt, WTW confirms that if it exercises its Put-Call
Option to sell its entire interest in the Company to DAP in accordance with this
Section 5.6 the License Agreement shall continue to be in force (save for
termination due to any breach of the License Agreement by the Company
thereunder).

 

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5.7 Avoidance of Restrictions. The Parties agree that the Transfer restrictions
in this Agreement and in the Charter Documents shall not be capable of being
avoided by the holding of Shares indirectly through a Person that can itself be
sold in order to dispose of an interest in Shares free of such restrictions. Any
Transfer or other disposal of any Shares (or other interests) resulting in any
change in the Control of a Shareholder or of any Person having Control over that
Shareholder shall be treated as being a Transfer of the Shares held by that
Shareholder, and the provisions of this Agreement and the Charter Documents that
apply in respect of the Transfer of Shares shall thereupon apply in respect of
the Shares so held; provided however, any Transfer or other disposal of shares
of WWI or GD by any of their respective shareholders shall not be subject to
this provision or any restriction or limitation, except however, if any such
Transfer or other disposal of shares of WWI or GD results in a WTW Change of
Control or a DAP Change of Control, as the case may be, the provisions set forth
in Section 5.6 shall apply.

 

5.8 Transfer of Convertible Securities. Any Transfer of Equity Securities
exercisable or convertible into or exchangeable for Shares will be deemed for
the purposes of this Section 5 to be a Transfer of Shares.

 

5.9 Notice of Transfer. Within five Business Days after registering any Transfer
of Shares or other Equity Securities on its Books, the Company shall send a
notice to each Shareholder stating that such Transfer has taken place and
setting forth the name of the Transferor, the name of the Transferee and the
number and class of Equity Securities involved.

SECTION 6

CONDITIONS FOR COOPERATION AND

RESPONSIBILITIES OF THE PARTIES

 

6.1 Responsibilities of DAP. In addition to its responsibilities set forth
elsewhere in this Agreement, DAP shall perform the following duties:

 

  (a) make its contributions to the share capital of the Company in the form and
manner and at the times required by this Agreement and the Charter Documents;

 

  (b) fulfill its obligations, and ensure that its Affiliates fulfill their
obligations, if any, as set forth in the Services Agreement and the Other
Agreements to which DAP or any of its Affiliates is a party;

 

  (c) take all actions necessary jointly with WTW to establish the Company in
Hong Kong and procure that the Company establish the Shanghai WFOE as soon as
practicable and all other WFOEs as and when determined by the Board, including
preparing and filing the Charter Documents and the articles of association of
such WFOEs (which shall be in English and Chinese) in accordance with the
provisions of this Agreement and the Charter Documents, and obtaining all WFOE
Approvals for such WFOEs;

 

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  (d) cause its representatives on the Board to implement the Five-Year Business
Plan approved by the Board and to perform and take all actions in accordance
with this Agreement, the Charter Documents, the License Agreement, the Services
Agreement, the Other Agreements and the intent of the Parties;

 

  (e) together with WTW, jointly assist the Company in obtaining and maintaining
in force all WFOE Approvals and agreements that are necessary for the Company
and the WFOEs to achieve their respective goals and business objectives and
cause the Company to conduct the business of the Company (through any WFOE and
otherwise) in accordance with the terms of this Agreement, the Charter
Documents, the License Agreement, and the Other Agreements;

 

  (f) use reasonable efforts to leverage the governmental relations expertise in
the Territory of DAP, its Affiliates, and the Danone Institute to facilitate the
Company’s access to relevant public and private sector individuals and
organizations, including in the nutritional area (WTW acknowledging the Danone
Institute are independent of DAP and its Affiliates); and

 

  (g) assist the Company in other matters as reasonably requested by the Board.

 

6.2 Responsibilities of WTW. In addition to its responsibilities set forth
elsewhere in this Agreement, WTW shall perform the following duties:

 

  (a) make its contributions to the share capital of the Company in the form and
manner and at the times required by this Agreement and the Charter Documents;

 

  (b) fulfill its obligations, and ensure that its Affiliates fulfill their
obligations, set forth in the License Agreement and Other Agreements to which
WTW or any of its Affiliates is a party;

 

  (c) take all actions necessary jointly with DAP to establish the Company in
Hong Kong and procure that the Company establish the Shanghai WFOE as soon as
practicable and all other WFOEs as and when determined by the Board, including
preparing and filing the Charter Documents and the articles of association of
such WFOEs (which shall be in English and Chinese) in accordance with the
provisions of this Agreement and the Charter Documents, and obtaining all WFOE
Approvals for such WFOEs;

 

  (d) cause its representatives on the Board to implement the Five-Year Business
Plan approved by the Board, and to perform and take all actions in accordance
with this Agreement and the Charter Documents, the License Agreement, the
Services Agreement, the Other Agreements and the intent of the Parties;

 

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  (e) together with DAP, jointly assist the Company in obtaining and maintaining
in force all WFOE Approvals and agreements that are necessary for the Company
and the WFOEs to achieve their respective goals and business objectives and
cause the Company to conduct the business of the Company (through any WFOE and
otherwise) in accordance with the terms of this Agreement, the Charter
Documents, the License Agreement, and the Other Agreements;

 

  (f) nominate one Person to serve as the Company’s initial CEO; and

 

  (g) assist the Company in other matters as reasonably requested by the Board.

 

6.3 Non-Competition.

 

  (a) During the period commencing on the date hereof and ending on the later of
(i) June 20, 2011 and (ii) three years after the earliest date that neither DAP
nor any of its Affiliates own any interests in the Company, DAP shall not, and
shall ensure that its Affiliates shall not, (1) compete, either directly or
indirectly, with the Approved Lines within or outside the Territory or
(2) provide services to the general public (either directly or indirectly) in
relation to encouraging or monitoring weight management through meetings,
classes, one-on-one instruction or paid Electronic Medium subscriptions within
or outside the Territory, provided that, nothing in this Section 6.3 shall
restrict DAP’s and its Affiliates’ right to: (x) produce and sell any food and
beverage products, including any such products in the weight loss/healthy living
industry and (y) create, own, manage or otherwise engage in activities in
relation to gym clubs, sports clubs, spas and other establishments of a similar
nature.

 

  (b) During the period commencing on the date hereof and ending on the later of
(i) the earliest date that neither WTW nor any of its Affiliates own an interest
in the Company and (ii) the earliest date that the License Agreement is no
longer in effect, WTW shall not, and shall ensure that its Affiliates shall not,
compete, either directly or indirectly, with the Approved Lines within the
Territory; provided that WTW and its Affiliates may engage in any activity in
the Territory in relation to any rights reserved by WTW and not granted to the
Company under the License Agreement.

 

6.4

Non-Solicitation. Each of the Parties shall not, and shall cause the Company and
Affiliates not to (a) directly or indirectly induce or attempt to induce or
otherwise counsel, advise, ask or encourage any person who is at the time, or
was at any time within the preceding six (6) months, employed by the other Party
or any of its Affiliates (the “Employer”), to leave the employ of such Employer
or to accept employment with another employer or as an independent contractor or
(b) offer employment to or retain the services of such person, other than with
the consent of the Employer. This Section 6.4 shall not apply to an employee who
becomes employed by a Party or by the Company as a result of a response by that
employee to a public advertisement

 

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or normal recruitment procedures and not as a result of being approached or
targeted by such Party or the Company. The obligations of this Section 6.4 shall
continue to survive for eighteen (18) months after the expiration or termination
of this Agreement.

SECTION 7

CONFIDENTIAL INFORMATION,

PUBLICITY AND INTELLECTUAL PROPERTY RIGHTS

 

7.1 Confidential Information. The Recipient of any Confidential Information
while this Agreement is in effect shall:

 

  (a) keep the Confidential Information confidential;

 

  (b) keep the Confidential Information secure so as to prevent unauthorized
access by any third party, and not make any copies or reproduce the Confidential
Information except for the purpose of disclosing such Confidential Information
in accordance with this Section 7.

 

  (c) not disclose the Confidential Information to any Person other than with
the prior written consent of the Company or the Party that disclosed such
Confidential Information, as the case may be, or in accordance with Sections
7.4; and

 

  (d) not use the Confidential Information for any purpose other than the
performance of its obligations under this Agreement.

 

7.2 Disclosure of Information.

 

  (a) The Recipient may disclose the Confidential Information to its directors,
officers, employees, agents, consultants and advisors (collectively, the
“Representatives”), who are actually engaged in, and need to know, the
Confidential Information for the purposes expressly set forth in this Agreement,
who have been informed of the confidential nature of the Confidential
Information, who have been advised that such information is to be kept
confidential and who have entered into enforceable written confidentiality
agreements with the Recipient agreeing that the Confidential Information shall
not be used for any other purpose. The Recipient agrees that it shall (i) cause
its Representatives to observe all terms of this Section 7 of and (ii) be
responsible for any breach of this Section 7 by any of its Representatives.

 

  (b)

The Parties agree that Confidential Information shall not include information
that: (i) is already known to the Recipient without restriction on use or
disclosure prior to receipt of such information from the Disclosing Party or its
Affiliates; (ii) is or becomes part of the public domain other than by breach of
this Agreement, or other wrongful act, by the Recipient; (iii) is developed by
the Recipient independently of and without reference to any Confidential
Information; or (iv) is received by the Recipient from a third party who

 

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is not under any obligation to maintain the confidentiality of such information.
The Recipient shall have the obligation of demonstrating that such an exception
to the definition of Confidential Information exists.

 

7.3 Specific Performance. The Recipient acknowledges and agrees that the
Disclosing Party would be irreparably damaged by any unauthorized disclosure or
use of any Confidential Information in violation of this Section 7. Without
prejudice to the rights and remedies otherwise available to the Disclosing
Party, the Recipient, therefore, agrees that the Disclosing Party shall be
entitled, without the requirement of posting a bond or other security, to
equitable relief, including an injunction or specific performance, in the event
of any breach or threatened breach of the provisions of this Section 7 by the
Recipient or its Representatives. Such remedies shall not be deemed to be
exclusive remedies but shall be in addition to all other remedies available at
law or equity to the Disclosing Party.

 

7.4 Conditions for Disclosure. In the event that the Recipient or any of its
Representatives become legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigation, demand, order or other legal
process) to disclose any of the contents of the Confidential Information, the
Recipient shall, to the extent that it does not violate any applicable Law,
(i) promptly notify the Disclosing Party prior to any such disclosure to the
extent practicable and (ii) cooperate with the Disclosing Party in any attempts
it may make to obtain a protective order or other appropriate assurance that
confidential treatment shall be afforded the Confidential Information.

 

7.5 Return of Information. Upon the expiration or termination of this Agreement
for whatever reason, the Recipient shall, at its own expense:

 

  (a) return to the Disclosing Party all Confidential Information (including all
copies thereof) received by it or its Representatives prior to the termination
of this Agreement, provided that, to the extent that it is impractical to return
any Confidential Information described in this Section 7.5(a), such Confidential
Information (including all copies thereof) may be destroyed;

 

  (b) use its commercially reasonable efforts to delete any Confidential
Information from any computer, word processor or other similar device, provided
that, this Section 7.5(b) shall not reduce the obligations of the Recipient in
relation to Confidential Information hereunder; and

 

  (c) certify in writing to the Disclosing Party that it has destroyed, deleted
or returned all Confidential Information (including all copies thereof),
provided that the Recipient may retain one copy of the Confidential Information
to the extent required by law or any applicable governmental or regulatory
authority, so long as such requirement is described in reasonable detail by
written notice to the Disclosing Party and the Recipient protects the
confidentiality of the Confidential Information with the same degree of care as
the Recipient normally uses in the protection of its own confidential and
proprietary information but in no case with any less than reasonable care.

 

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For the avoidance of doubt, the provisions of this Section 7.5 shall not be
applicable to financial statements of the Company provided to each Party
pursuant to the terms of this Agreement.

 

7.6 No Publicity. No Party shall, and each Party shall cause each of its
Affiliates and the Company not to, make any announcement about the Company, any
Subsidiary, this Agreement or the other Party in relation to the Company, this
cooperation or the business of the Company or any Subsidiary without the prior
written consent of the other Party. Notwithstanding the foregoing, either of the
Parties may at any time make announcements: (a) that are required by Laws
applicable to such Party or any of its Affiliates, so long as the Party so
required to make the announcement, promptly upon learning of such requirement,
notifies in writing the other Party of such requirement and, to the extent
practicable, discusses with the other Party in good faith the exact wording of
any such announcement and takes precautionary measures to prevent disclosure of
Confidential Information to the maximum extent permitted, (b) of information
that has been previously announced by either Party in accordance with this
Section 7.6 or (c) of any Approved Information.

 

7.7 Ownership. The Confidential Information of the Disclosing Party shall remain
the property of the Disclosing Party and the disclosure of any Confidential
Information by the Disclosing Party shall not confer on the Recipient any right
over such Confidential Information unless otherwise specified hereunder.

 

7.8 No Representation. Unless otherwise specified hereunder, the Disclosing
Party shall have no responsibility or liability resulting from the Recipient’s
receipt or use of any Confidential Information, and makes no representation or
warranty, express or implied, in respect of any Confidential Information or the
accuracy, completeness or reasonableness thereof or that such Confidential
Information will remain unchanged.

SECTION 8

CORPORATE GOVERNANCE

 

8.1 Board of Directors.

 

  (a) Number and Composition. The number of directors constituting the entire
Board shall initially be five. Each Shareholder shall vote its Shares at any
Shareholders’ meeting called for the purpose of filing positions on the Board or
in any written consent of Shareholders executed for such purpose to elect, and
shall take all other actions necessary to ensure the election to the Board of,
(i) three nominees of WTW (the “WTW Directors”) and (ii) two nominees of DAP
(the “DAP Directors”). The term of office of the directors shall be three years,
renewable upon reappointment by the appointing Party.

 

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  (b) Renewal and Replacement of Director.

 

  (i) Each Party shall have the right, at any time, to remove with or without
cause and replace any director appointed by it, before the expiration of his or
her term. If a director is removed, becomes incapacitated, dies, resigns or
otherwise ceases to be a director, the Party that appointed such director shall
appoint a new director to serve for the remainder of the term of office of such
former director.

 

  (ii) Subject to Section 8.1(a), each Party shall have the right to appoint
such directors to the Board that is directly proportionate to its percentage
ownership interest of the Company, in each case including in such calculation of
percentage ownership interest any Shares held by their respective Permitted
Affiliate Transferees, rounded to the nearest whole number. If there is a change
in percentage ownership interest of either Party (together with its Permitted
Affiliate Transferees) affecting the number of directors such Party has the
right to appoint to the Board, the Party whose percentage ownership interest is
reduced shall remove, or procure the resignation of, the appropriate number of
directors appointed by such Party in accordance with its decreased percentage
interest, and the Party whose percentage ownership interest is increased shall
have the right to appoint an additional number of directors in accordance with
its increased percentage interest.

 

  (c) Chairman. So long as WTW owns a majority of the interests in the Company,
WTW shall have the right to appoint the chairman of the Board (the “Chairman”)
from among WTW Directors, and shall have the right to appoint the chairman of
the board of directors of each WFOE.

 

  (d) No Compensation of Directors. Directors of the Company shall not receive a
salary from the Company. The Company, however, shall pay all reasonable expenses
incurred by the directors in attending Board meetings or carrying out any
actions authorized by the Board, including travel expenses and accommodation.

 

  (e) Indemnification of Directors. The Company shall indemnify each director
against all claims and liabilities incurred by reason of his being a director of
the Company, provided that the director’s acts or omissions giving rise to such
claim or liability did not constitute gross negligence, intentional or willful
misconduct or fraud.

 

  (f) Directors’ Access. Each director shall be entitled to examine the Books
and shall have free access, at all reasonable times and with prior written
notice, to any and all properties and facilities of the Group. The Company shall
provide such information relating to the business affairs and financial position
of the Group as any director may reasonably require. Any director may provide
such information to a Shareholder.

 

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8.2 Authority of the Board. The Board shall be the highest authority of the
Company and shall direct the overall supervision and control of the business of
the Company. The Board shall be required to make all major decisions of the
Company as well as all decisions outside the day-to-day business of the Company
(including those referred to in Section 8.9); provided that the Board shall
delegate certain of its authority over day-to-day operational and managerial
matters to the CEO. The resolutions of the Board shall be adopted in accordance
with this Agreement, the Charter Documents and applicable Laws.

 

8.3 Frequency and Location of Board Meetings.

 

  (a) Regular meetings of the Board shall be convened on a monthly basis during
the first year following the Company Establishment Date and, thereafter shall be
convened on a quarterly basis. Meetings shall be held in a location approved by
a majority of the directors, and convened and presided over as provided in the
Charter Documents. Special meetings of the Board shall be held in a location
approved by a majority of the directors, and convened by the Chairman at any
time on his own motion or on the motion of any two directors.

 

  (b) The reasonable costs of attendance of directors at Board meetings shall be
borne by the Company.

 

8.4 Quorum. The number of directors constituting at least two-thirds of the
total number of directors elected to the Board; provided that at least one
director is from each of WTW and DAP, present in person or by proxy throughout
the entire meeting, shall constitute a quorum for all meetings of the Board. If
such a quorum is not present within one hour after the time appointed for the
commencement of the meeting, the meeting shall be adjourned to such place and
time (which is at least ten days later or such earlier date as shall be agreed
by all the directors) as the directors who did attend shall decide. If a quorum
is not present within one hour after the time appointed for the commencement of
such adjourned meeting, any number of directors present shall constitute a
quorum.

 

8.5 Proxy. If a director is unable to attend any Board meeting, such director
may appoint a proxy to represent such director at such meeting and to vote on
such director’s behalf. Every appointment of a proxy shall be made in writing,
signed by the director by whom it is made, and shall be sent or delivered to the
chairman of the meeting for which it is given at, or prior to, the commencement
of such meeting. Delivery of a proxy by facsimile shall be effective for this
purpose. A proxy need not be a director of the Company. A director may be
appointed as proxy for another director, and the same Person may be appointed as
proxy for more than one director. A proxy shall have one vote for each director
whom he represents, and shall also be entitled to cast one vote in his own
behalf if he is, in addition, a director in his own right.

 

8.6 Written Resolutions. Any action to be taken at any Board meeting may be
taken without a meeting if all directors consent to such action in writing.

 

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8.7 Telephonic Participation. Board meetings may be held by telephone, video
conferencing or any other means of contemporaneous communication, so long as all
directors taking part in a meeting so held are able to hear each other at the
same time. Participation by such means shall be deemed to constitute presence in
person at a Board meeting. The minutes of all Board meetings shall be kept on
file by the Company.

 

8.8 Notice. A meeting may be called by the Chairman or any two other directors
giving notice in writing to the secretary of the Company specifying the date,
time and agenda for such meeting. The secretary of the Company shall upon
receipt of such notice give a copy of such notice to all directors of such
meeting, accompanied by a written agenda specifying the business of such meeting
and copies of all papers relevant for such meeting. Not less than 14 days’
notice shall be given to all directors; provided, however, that such notice
period (i) shall not apply in the case of an adjourned meeting pursuant to
Section 8.4 and (ii) may be reduced with the written consent of all of the
directors.

 

8.9 Voting. At any Board meeting, each director may exercise one vote. Decisions
with respect to all matters that require approval of the Board (other than those
set forth in this Section 8.9) shall be adopted if they receive the affirmative
vote of a simple majority of the directors present and voting in person or by
proxy. Notwithstanding any other provision of this Agreement, (i) decisions with
respect to those matters that are required by the Laws of Hong Kong at the time
the relevant resolution is adopted to be approved by unanimous approval of the
Board shall require the unanimous approval of the Board and (ii) the following
actions set forth in this Section 8.9 may not be taken by the Company or any
Subsidiary without the unanimous approval of the directors present at a duly
constituted meeting of the Board or the unanimous written consent of all members
of the Board:

 

  (a) any agreement to make any capital expenditure in excess of US$2 million;

 

  (b) any single transaction or series of related transactions pursuant to which
the Company or any Subsidiary would incur any financial commitments or
indebtedness in excess of US$2 million;

 

  (c) any material purchase, supply or marketing contract involving aggregate
payments in excess of US$2 million;

 

  (d) the entering into of any related party transaction by the Company or any
Subsidiary with either Party or any Affiliate of a Party (including the entering
into of any Shareholder’s loans between any Party and the Company, but not
including the entering into of the License Agreement, the Services Agreement and
the Other Agreements, or any transactions entered into with a related party
contemplated by and/or for the purposes of implementing the License Agreement ,
the Services Agreement or any Other Agreement);

 

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  (e) the appointment or change of auditors of the Company or any Subsidiary,
provided that the Parties agree to change auditors as necessary to comply with
applicable Laws;

 

  (f) any distribution of profits of the Company or any Subsidiary by way of
dividend, capitalization of reserves or otherwise, except as provided in
Section 11;

 

  (g) any change to the accounting policies of the Company;

 

  (h) any settlement, compromise or resolution of material litigation,
arbitration, mediation or other material dispute resolution procedures (and, for
this purpose, in considering whether the matter is “material,” any effect such
litigation, arbitration, mediation or other dispute resolution procedures may
have on WTW or its Affiliates and licensees within and outside the Territory
shall be considered);

 

  (i) any change to the size of the Board or the board of directors of any
Subsidiary;

 

  (j) the appointment (but not the removal) of the chief financial officer (or
its equivalent) of the Company or any Subsidiary;

 

  (k) any determination of compensation (including cash and stock option
compensation) of the top five executives of the Company or any Subsidiary, if
the amount of compensation exceeds the range specified in the guidelines
provided by WTW and agreed by both Parties, other than annual increases to
compensation based on changes in the Consumer Price Index;

 

  (l) any amendment, modification, waiver or termination of the License
Agreement;

 

  (m) any material change in the scope or nature of the business or activities
of the Company or any Subsidiary;

 

  (n) the entry by the Company or any Subsidiary into or termination of any
partnership or joint venture agreement or the acquisition of or merger with any
other business;

 

  (o) the disposal of any material part of the Licensed Business or assets of
the Company involving aggregate payments in excess of US$2 million;

 

  (p) the termination or dissolution of, or the entering into of bankruptcy,
insolvency or receivership by, the Company or any Subsidiary;

 

  (q) any approval or amendment of any Five-Year Business Plan, including the
KPIs and MPTs, or the Annual Plan as set forth in Section 12.3;

 

  (r) the calling of capital contributions for the Company or any Subsidiary
(excluding any firm capital commitments for the establishment of any Subsidiary
or any mandatory requirements to make capital contributions as required under
applicable Laws);

 

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  (s) any issuance, purchase or redemption of any Shares of the Company or
equity interest of any Subsidiary, or any securities that can be converted into
Shares or equity interest of any Subsidiary of the Company, or any change of the
share capital structure of the Company or in the registered capital or share
capital structure of any Subsidiary;

 

  (t) any amendment to the Charter Documents or the articles of association of
any Subsidiary;

 

  (u) the public offering of securities of the Company or any Subsidiary; and

 

  (v) the appointment, removal or replacement of the CEO (or its equivalent).

 

8.10 Deadlock.

 

  (a) If the Board is unable to reach an agreement on any matter requiring Board
approval set forth in clauses (m) through (v) of Section 8.9 in any two
successive meetings of the Board or within 30 days after such matter is first
raised at a meeting of the Board, whichever is less (or if Section 8.13(b) is
applicable with respect to such matter and the requisite Shareholder approval is
not obtained within 30 days after the matter giving rise to the disagreement has
been raised) (the “Deadlock Date”), except as otherwise provided in
Section 12.3(b), the disagreement with respect to such matter (the “Deadlocked
Matter”) shall be resolved pursuant to the procedures set forth in this
Section 8.10.

 

  (b) Within 14 days after the Deadlock Date, either Party may deliver a
deadlock notice (the “Deadlock Notice”) to the other Party stating that it has
elected to invoke the escalation procedures with respect to the relevant
Deadlocked Matter.

 

  (c) The chief executive officer (or the Person holding the most senior
management position) of each Party’s ultimate parent company, which in the case
of DAP is GD and WTW is WWI, shall meet with each other, either in person or by
telephone, and attempt to resolve the relevant Deadlocked Matter within 30 days
after the date of delivery of a Deadlock Notice.

 

  (d) If, after negotiation in good faith, the chief executive officers are
unable to reach an agreement on the relevant Deadlocked Matter within a period
of 30 days after the date on which the Deadlock Notice is delivered, either
Party (the “Invoking Party”) may elect to invoke the Deadlock Option within 14
days thereafter in accordance with the procedures set forth in Section 8.10(e).

 

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  (e) The “Deadlock Option” shall consist of the following: By written notice to
the other Party (the “Non-Invoking Party”), the Invoking Party shall give notice
that it is invoking the Deadlock Option. Within 30 days of WTW sending such
notice (if WTW is the Invoking Party) or within 30 days of WTW receiving such
notice (if DAP is the Invoking Party), WTW shall deliver to DAP a notice (the
“Deadlock WTW Notice”) setting forth its determination of the value of its
interest in the Company (the “Deadlock WTW Interest Value”). Upon receipt
thereof, DAP must, by written notice (the “Deadlock Exercise Notice”) to WTW
delivered within 30 days following receipt of the Deadlock WTW Notice, either
purchase the entire interest of WTW at a price equal to the Deadlock WTW
Interest Value or sell its entire interest in the Company to WTW at a price
equal to the product of (i) the Deadlock WTW Interest Value, and (ii) a
fraction, the numerator of which shall be the number of Shares held by DAP and
the denominator of which shall be the number of Shares held by WTW. The Exercise
Notice shall be irrevocable and, together with the Deadlock WTW Notice, shall
constitute a binding agreement by the Parties to purchase and sell the
applicable interest of the selling Party in the Company. The closing of the sale
of the interest in the Company of DAP or WTW, as applicable, shall occur on a
date to be determined by DAP, but in any event not later than 90 days following
delivery to WTW of the Deadlock Exercise Notice. At such closing, the selling
Party shall deliver such duly executed instruments of transfer and other
documents required in connection with such transfer and the purchasing Party
shall deliver payment in full by wire transfer of immediately available funds.
The interests being transferred shall be free and clear of any Encumbrance
(other than Encumbrances arising under this Agreement) and the selling Party
shall so represent and warrant, and shall further represent and warrant that it
is the beneficial and record owner of such interest being transferred.

 

  (f) For the avoidance of doubt, WTW confirms that if following the exercise of
the Deadlock Option in accordance with this Section 8.10, WTW transfers its
entire interest in the Company to DAP, the License Agreement shall not be deemed
to be terminated and shall continue to be in effect in accordance with its terms
and conditions.

 

  (g) For avoidance of doubt, if neither Party delivers a Deadlock Notice within
14 days after the Deadlock Date in accordance with Section 8.10(a) above with
respect to any Deadlocked Matter or the Deadlock Option is not exercised by any
Party pursuant to Section 8.10(d) within the 14-day period specified therein,
then such Deadlocked Matter shall be deemed disapproved by the Board and no
further action shall be taken by the Board or any Party hereunder.

 

8.11 Subsidiary Board and Committee.

 

  (a)

The Company shall cause each committee of the Board, and the board of directors
of each Subsidiary (including each WFOE) and each committee thereof, to include
directors nominated by DAP and WTW

 

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in the same proportion as each such Party is represented on the Board. The right
of nomination of each such Party shall also carry the right to remove or replace
the director so nominated.

 

  (b) The Company shall cause the quorum and voting arrangements and other
procedures with respect to each Subsidiary and its board of directors, as well
as other corporate governance matters, to be the same as those set forth in this
Section 8 with respect to the Board and the Company. For the avoidance of doubt,
the decisions requiring unanimous approval of the Board as set forth in
Section 8.9 shall apply to the board of directors of each Subsidiary with
respect to actions to be taken by such Subsidiary.

 

  (c) The Parties shall cause the articles of association of each Subsidiary to
provide that unanimous vote of all of the directors of such Subsidiary shall be
required for such Subsidiary to take any of the actions or omit to take any
action that would have the effect of any of the actions specified in
Section 8.9. Each Party shall cause its designees on the board of directors of
each Subsidiary to vote with respect to all matters as determined by the Board
in accordance with this Section 8.

 

8.12 Shareholders Vote. Only matters that are required by applicable Laws of
Hong Kong as amended from time to time, to be decided by the Shareholders shall
be finally decided by the Shareholders after and only after the approval of the
Board is obtained with respect to such matters. All other matters in relation to
the Company shall be finally decided by the Board without any requirement of
Shareholder approval.

 

8.13 Shareholders Meeting.

 

  (a) General. From the Company Establishment Date, each Shareholder shall vote
its Shares at any regular or special meeting of Shareholders, and shall take all
other actions necessary, to give effect to the provisions of this Agreement and
to ensure the inclusion in the Charter Documents of the rights and privileges of
the Shareholders included in this Agreement. In addition, each Shareholder shall
vote its Shares at any Shareholders’ meeting, upon any matter submitted for
action by the Shareholders or with respect to which such Shareholder may vote,
in conformity with the specific terms and provisions of this Agreement and the
Charter Documents.

 

  (b) Quorum and Voting. The quorum for a Shareholders’ meeting shall be two
Shareholders, being DAP and WTW. Decisions with respect to all matters that
require approval of Shareholders shall be adopted if they receive the
affirmative vote of the Shareholders holding a simple majority of the Shares,
provided that, to the extent that any of the actions specified in Section 8.9
are required by the laws of Hong Kong to be approved by Shareholders, then, in
addition to the unanimous approval of the Board, such actions shall also require
the unanimous approval of the Shareholders.

 

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SECTION 9

MANAGEMENT OF THE COMPANY

 

9.1 Management Structure.

 

  (a) The management organization of the Company shall consist of the following
senior managers (the “Senior Managers”): one CEO, one Chief Financial Officer
(the “CFO”) and such other officers that the Board may designate from time to
time as being necessary for the operation of the Company.

 

  (b) The initial CEO shall be nominated by WTW and appointed by unanimous
approval of the Board as provided in Section 8.9. All subsequent CEOs shall be
nominated and appointed by unanimous approval of the Board as provided in
Section 8.9. The CFO shall be nominated and appointed by the unanimous approval
of the Board as provided in Section 8.9. The remaining Senior Managers shall be
appointed by the CEO.

 

  (c) The Board shall have the right to dismiss, remove and replace the CEO for
any reason, by unanimous approval as provided in Section 8.9. The CEO shall have
the right to dismiss any other Senior Manager for any reason at any time. If the
CEO or any of the other Senior Managers resigns, is dismissed or dies or becomes
incapacitated, his successor shall be nominated and appointed in the same manner
as stated in Section 9.1(b).

 

9.2 CEO.

 

  (a) Subject to the direction and control of the Board, the CEO shall work full
time and shall be responsible for the Company’s day-to-day operations. The CEO
shall exercise the rights and responsibilities conferred upon him or her by this
Agreement, the Charter Documents or the Board and shall implement the
resolutions of the Board. Without limiting the foregoing (but subject to
Section 12.2), the CEO shall:

 

  (i) prepare and submit to the Board for approval the Five-Year Business Plans
and, at least 30 days prior to the beginning of each Financial Year, the Annual
Plan for the Group;

 

  (ii) prepare and submit to the Board financial statements regarding the
Group’s operations in accordance with the provisions of Section 10.1(f) and in
accordance with the policies of the Group developed by the Board; and

 

  (iii) prepare a list of information relating to the Group which can be
disclosed by the Parties or their respective Affiliates to the public, for
approval by the Parties within 30 days after the last day of each Financial
Quarter (the list after being approved by the Parties, the “Approved
Information”).

 

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  (b) Subject to Section 8.9(k), the Board shall make all decisions with respect
to the general compensation guidelines of Senior Managers, and the CEO shall
determine the amount of such compensation for management personnel within the
set guidelines. The Company shall be responsible for all costs relating to the
compensation of management personnel.

 

  (c) All the Senior Managers (other than the CEO) shall be under the leadership
of, and report to, the CEO. The CEO shall determine the rights and
responsibilities of each Senior Manager in addition to those set forth in this
Agreement or the Charter Documents.

 

9.3 CFO.

 

  (a) The CFO shall assist the CEO in managing the financial and accounting work
of the Company and shall examine and sign the financial plans, credit plans,
accounting reports, and major expenditures of the Group. The CFO shall keep true
and accurate records and accounts and prepare quarterly financial reports for
the Board and other periodic financial statements as required by the Board, the
CEO, any Party or applicable Laws. Such reports and statements shall be prepared
in accordance with (i) US GAAP, IFRS and the rules and regulations promulgated
by the U.S. Securities and Exchange Commission in effect from time to time, and
in accordance with the respective forms and guidelines required by DAP and WTW
in relation to the reports and statements prepared for such Party, (ii) HK GAAP
for the Company if required for the statutory filings in HK and (iii) PRC GAAP
for each PRC Subsidiary.

 

  (b) The CFO shall also be in charge of examining and checking the financial
receipts and payments, accounts and other information of the Group to verify
that formalities are complied with, records are accurate, revenue and
expenditures are balanced and reasonable, the financial and accounting system of
the Group (the “Financial and Accounting System”) is adhered to, and shall
report on such matters to the CEO and the Board.

 

9.4 Corporate Governance.

 

  (a) Each of the Parties agrees that the Company shall be managed in accordance
with the highest international business ethical standards and that no director
of the Board, Senior Manager or other personnel of the Company will be permitted
to engage in any act which violates applicable Law relating to corruption,
bribery, fraudulent behavior or any other criminal activity.

 

  (b)

The Company and its Representatives shall engage only in legitimate business and
ethical practices in commercial operations and in relation to government
authorities. Neither the Company nor any of its Representatives shall make any
payments or transfers of value which have the purpose or effect of public or
commercial bribery, or

 

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acceptance of or acquiescence in kickbacks or other unlawful or improper means
of obtaining business. Neither the Company nor any of its Representatives shall
pay, offer, promise or authorize the payment, directly or indirectly, of any
funds or anything of value to any government official or employee or any
political party for the purpose of influencing any act or decision of such
official or of the government to obtain or retain business, or direct business
to any Person (any such act, a “Prohibited Payment”). A Prohibited Payment does
not include the payment of reasonable and bona fide expenditures, such as travel
and lodging expenses, that are directly related to the promotion, demonstration
or explanation of products or services, or the execution or performance of a
contract with a government authority or agency thereof, provided that such
payments are permissible under Law and the internal policies and guidelines of
the Company. Without limiting the generality of the foregoing, neither the
Company nor any of its Representatives shall engage in any activities or
practices that are in violation of the U.S. Foreign Corrupt Practices Act of
1977, as amended, or any other anti-corruption or anti-bribery Laws applicable
to the Parties or the Company.

 

  (c) Each Party hereby represents and undertakes to the other Party that, in
connection with the performance of its obligations under this Agreement, such
Party and its Representatives, have not, and will not, pay, offer, promise or
authorize, directly or indirectly, any Prohibited Payment.

 

  (d) The Company shall ensure that all of the management provisions set forth
in this Section 9 shall apply with respect to the management of each Subsidiary.

SECTION 10

FINANCIAL, ACCOUNTING AND AUDITING SYSTEM

 

10.1 Financial System and Reporting.

 

  (a) The Financial and Accounting System of the Group shall be formulated and
adopted by the Board based on the recommendations of the CEO, which shall be
prepared based on suggestions of the CFO, and shall be in accordance with any
applicable Laws, the particular circumstances of the Company and those methods
and principles that are consistent with (i) US GAAP, IFRS and the rules and
regulations promulgated by the U.S. Securities and Exchange Commission in effect
from time to time, (ii) HK GAAP in relation to the Company if required for the
statutory filings in HK, (iii) PRC GAAP in relation to the PRC Subsidiaries, and
(iv) the operating and financial procedures and requirements of DAP and WTW in
relation to the preparation of the financial reports and statements required by
such Party.

 

  (b) The Financial and Accounting System shall be implemented by the CFO after
being approved by the Board.

 

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  (c) The Company shall use HK$ as its accounting unit. The PRC Subsidiaries
shall use RMB as their accounting unit and the non-PRC Subsidiaries shall also
use HK$ as their accounting unit. Cash, bank deposits and funds in other
currencies, as well as outstanding claims and debts, gains, expenses and so
forth in other currencies, shall be recorded in the actual currency in which
they are acquired, incurred, received or disbursed, and converted into HK$ for
Company accounting purposes. The conversion of foreign currencies into or from
HK$ for accounting purposes shall be calculated according to the average of the
buying and selling rates quoted by the Hong Kong and Shanghai Banking
Corporation for the relevant currency on the date of the relevant transaction,
unless the Board approves the use of another exchange rate for such conversions.

 

  (d) The Company shall open bank accounts with financial institutions approved
by the Board.

 

  (e) The Company shall adopt the internationally used accrual basis and debit
and credit accounting system, and other methods that are consistent with
US GAAP, IFRS and the rules and regulations promulgated by the U.S. Securities
and Exchange Commission in effect from time to time, in the keeping of accounts,
and in relation to the Company, also consistent with the HK GAAP for statutory
filings purposes and in relation to the PRC Subsidiaries, the PRC GAAP.

 

  (f) The financial statements prepared for the Company shall be prepared on a
consolidated basis, which shall consist of the balance sheets, the statement of
operations, the statement of changes in shareholders equity, and the statement
of cash flow. All financial statements shall be prepared in English, in
accordance with both US GAAP and IFRS, shall be true and complete and shall
fairly represent the financial position of the Group as of the date of each such
statement and the results of operations and cash flow for the financial period
covered thereby, subject in the case of unaudited statements to normal year-end
audit adjustments.

 

  (g) The Company shall submit quarterly financial statements to the Board
within 30 days after the last day of each Financial Quarter. Within 45 days
after the last day of the second Financial Quarter, the Auditor will perform an
interim review and submit the results thereof to the Board. The Company shall
submit annual financial statements, including the Auditor’s report of its audit
of such statements, to the Board within 45 days after the last day of each
Financial Year. The Parties agree that the Company shall use reasonable efforts
to submit monthly financial statements to the Board within 30 days after the
last day of each monthly accounting period, commencing after such date as the
Company determines that it has staff and resources such that it is reasonably
practicable for it to do so.

 

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  (h) Within 45 days after the last day of each Financial Year, the Company
shall deliver to the Parties such financial reports and information regarding
the activities and operations of the Company and each Subsidiary (including each
WFOE) with respect to the preceding Financial Year as reasonably requested by
the Parties. This information shall be supplemented by timely delivery to the
Parties of such additional financial information, and access to personnel, as
may be reasonably requested by the Parties.

 

10.2 Audit. The independent auditor of the Company (the “Auditor”) shall be
selected by the Board and shall be one of the four major international
accounting firms with an office established in the PRC who is capable of
performing accounting work meeting both PRC domestic accounting standards and
international standards and the procedures and requirements of the Parties,
including those specified in Section 10.1(a). The initial Auditor shall be
PricewaterhouseCoopers. If the Board determines that the Auditor is unable to
meet or perform its duties according to such standards, procedures or
requirements, it may, subject to Section 8.9(e), replace such Auditor or retain
another auditor, at the Company’s expense, to supplement or adjust the work of
the Auditor or to perform specific accounting or auditing tasks.

 

10.3 Taxation.

 

  (a) The Company shall pay taxes in accordance with applicable Law. The Parties
agree to negotiate in good faith any cooperative arrangements that would result
in the maximization of the tax benefits available to each of the Parties and the
Company, and that any such cooperative arrangement may be varied based on good
faith negotiations between the Parties if such variation is required to so
maximize such tax benefits; provided that, any such cooperative arrangement
shall not be varied if it may result in any taxation or other financial
consequence that is disadvantageous to either DAP, WTW, the Company or any of
their respective Affiliates, provided further that, the Company shall seek to
minimize the overall tax burden of the Group irrespective of any deduction or
credit permitted under the License Agreement against royalties paid to WWI with
respect to withholding or business taxes that may be imposed on royalties paid
by any Subsidiary of the Company to the Company. In furtherance of the
foregoing, the Parties agree, upon the request of WTW, to consent to join in and
to permit the Company and/or its Subsidiaries to make “check the box” elections
to treat the Company or any of its Subsidiaries as fiscally transparent for U.S.
federal income tax purposes.

 

  (b) The Parties shall assist the Company in applying to obtain the benefits
for the Company, the Parties and all of their personnel of all of the applicable
tax exemptions, reductions, privileges and preferences that are now or in the
future become available under applicable Laws and under any applicable treaties
or international agreements to which Hong Kong may now be or may hereafter
become a party.

 

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10.4 Securities Laws Compliance.

 

  (a) The Company shall cooperate with WTW and its Representatives to provide
WTW access to such information related to the internal controls and the
disclosure controls and procedures of the Company as may be needed by WTW to
comply with its (ii) obligations to file any certifications required under the
Sarbanes-Oxley Act of 2002 (“SOXA”) and any reports on internal controls over
financial reporting required under SOXA for each Financial Year during the term
of this Agreement and (ii) its other obligations under the rules and regulations
promulgated by the U.S. Securities and Exchange Commission in effect from time
to time and the rules promulgated by the New York Stock Exchange in effect from
time to time (collectively, the “Securities Laws Obligations”). The costs and
expenses associated with access to such information, including the cost of
copying any documents or records permitted by the Company to be copied, shall be
borne by WTW.

 

  (b) Upon the written request of WTW, the Company shall request that the
Auditor prepare and deliver to WTW any other documents or reports required for
WTW to satisfy any Securities Law Obligation. The out-of-pocket costs incurred
by the Company (including the cost of the Auditor) as a result of the
preparation and delivery of such document or report shall be borne by WTW.

 

10.5 Insurance. The Company shall, and shall ensure that each Subsidiary shall,
keep insured at all times and maintain insurance policies in a sufficient amount
and with such coverage as are generally maintained by responsible companies in
the same industry. Such policies shall be sufficient to cover liabilities to
which the Group may reasonably be considered at risk in the course of their
respective businesses. Without limiting the generality of the foregoing, the
Company shall, and shall ensure that each Subsidiary shall, (i) keep insured up
to the replacement value thereof (including surveyor’s and architect’s fees) all
its properties as are of an insurable nature against fire, theft, lighting,
explosion, earthquake, riot, strike, civil commotion, storm, tempest, flood,
marine risks, erection risks, war risks and such other risks and shall duly pay
all premia and other sums payable for those purposes and (ii) maintain a
directors and officers insurance policy of a scope and type reasonably
acceptable to the Shareholders and for the insured amount of at least
US$5,000,000. Such insurance shall be taken in the name of the Company or
Subsidiary, as applicable, and any other Person having an insurable interest in
the property of the Company or the Subsidiary, as the case may be. The Company
agrees that in the event of failure on the part of the Company or any Subsidiary
to insure the properties or to pay the insurance premia or other sums referred
to above, any Shareholder may (but shall not be obliged to) cause the properties
to be insured or pay the insurance premia or other sums referred to above, as
the case may be, and the Company shall promptly reimburse any expense incurred
by such Shareholder in taking such action.

 

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SECTION 11

PROFIT DISTRIBUTIONS

 

11.1 Dividends.

 

  (a) Subject to the other provisions of this Section 11, the Company shall
distribute to the Parties by way of a dividend at least 50% of the Distributable
Profits of the Group in respect of each Financial Year, and unless a different
percentage is agreed to by the Board on a unanimous basis.

 

  (b) The Board shall make such plans as it deems desirable for the
accumulation, distribution or investment of profits remaining after paying
income tax and making allocations to any relevant reserve funds in accordance
with any applicable Laws.

 

  (c) The Company may not distribute profits until the losses of the previous
Financial Years have been made up and the due and payable principal of and
accrued interest on all Shareholders’ loans, if any, have been repaid in full.

 

  (d) Undistributed profits from previous Financial Years may be distributed
together with the profits of the current Financial Year.

SECTION 12

BUDGETS AND BUSINESS PLAN

 

12.1 Five-Year Plan. The activities and operations of the Group shall be
conducted in accordance with a Five-Year Business Plan, which shall be subject
to the approval of the Board on a unanimous basis as provided in Section 8.9.
Each Five-Year Business Plan shall include a set of key performance indicators
(“KPIs”) and, except for the initial Five-Year Business Plan, a set of minimum
performance thresholds (“MPTs”). The KPIs shall reflect the key financial,
operating and performance statistics, criteria or indicators that the Five-Year
Business Plan is targeting for the performance of the Group each year. The MPTs
shall reflect the minimally acceptable key financial, operating and performance
statistics, criteria or indicators for the time period covered by the Five-Year
Business Plan. Upon the approval of the applicable Five-Year Business Plan, the
KPIs and the MPTs included therein shall also be deemed approved.

 

12.2 Initial and Updated Five-Year Plans. Each Party shall cause the directors
appointed by it to vote at the first meeting of the Board to adopt a resolution
approving the initial Five-Year Business Plan that was mutually agreed by the
Parties. Not later than three months prior to the end of the period covered by
the then-current Five-Year Business Plan or such other time as agreed by the
Parties, the CEO shall submit an updated Five-Year Business Plan to the Board
for its approval. In the event that the updated Five-Year Business Plan is not
approved by the end of the period covered by the then-current Five-Year Business
Plan, the Group shall continue to operate in accordance with the annual budget
of the last approved Annual Plan until the disagreement with respect to the
updated Five-Year Business Plan is finally resolved in accordance with the
procedures described in Section 8.10.

 

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12.3 Annual Plans.

 

  (a) An annual financial and operating plan for the Group, including an annual
budget for each Financial Year (the “Annual Plan”) based on the Five-Year
Business Plan shall be submitted by the CEO to the Board for its approval not
later than the end of the second week of the last calendar month (“Deadline”) of
the immediately preceding Financial Year.

 

  (b) If the proposed Annual Plan for the Financial Year is projected to fail to
meet or exceed any of the KPIs or MPTs (if any) for such year, such Annual Plan
shall not be adopted without the unanimous approval of the Board. However, if
such projected failure is due solely to the failure to satisfy any of the KPIs
and, as a result, the Annual Plan is not unanimously approved by the Board, DAP
shall not have the right to exercise the Deadlock Option under Section 8.10, but
instead the matter shall be resolved by the chief executive officer or the chief
operating officer of WWI. For the avoidance of doubt, if the proposed Annual
Plan for the Financial Year is projected to fail to meet or exceed any of the
MPTs for such year (regardless of whether the Annual Plan meets or exceeds the
KPIs), such Annual Plan shall not be adopted without the unanimous approval of
the Board and the Deadlock Option will apply if such approval is not obtained.

 

  (c) If the actual performance of the Group during any Financial Year fails to
meet or exceed any of the MPTs for such year (based on numbers available on the
Deadline and the projected numbers for the period starting from the Deadline and
ending on the last day of the Financial Year), the Annual Plan for the following
Financial Year shall not be adopted without the unanimous approval of the Board,
and DAP’s right to exercise the Deadlock Option under Section 8.10 shall apply
if such approval is not obtained unless the failure to meet or exceed any of the
MPTs was contemplated when the applicable Annual Plan was unanimously approved
by the Board. Nothing in this Section 12.3(c) shall preclude DAP from exercising
its rights under Section 15 with respect to the Milestones to be reached.

 

  (d) If the Board has not approved the applicable Annual Plan by the Deadline,
the annual budget (as set forth in the last approved Annual Plan) shall continue
to apply for the first three (3) months of the subsequent Financial Year. In the
event that such Annual Plan is not approved within the first three months of the
subsequent Financial Year, DAP’s right to exercise the Deadlock Option under
Section 8.10 shall apply, provided that, prior to the final resolution of the
deadlock provisions and procedures in accordance with Section 8.10, the Company
and each WFOE shall be able to operate its business in accordance with the
annual budget of the last approved Annual Plan.

 

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SECTION 13

TERM, TERMINATION AND LIQUIDATION

 

13.1 Company Term. This Agreement shall enter into effect on the date hereof
and, unless terminated by the written agreement of the Parties, shall continue
for so long as two or more Shareholders continue to hold interests in the
Company. This Agreement shall be terminated with respect to any Shareholder who
has Transferred all of its Equity Securities in the Company to a third party.

 

13.2 WFOE Term.

 

  (a) The term of operations of each WFOE (as extended from time to time, each a
“WFOE Term”) shall initially be 30 years commencing on the WFOE Establishment
Date of such WFOE and shall be extended for successive 30 year periods in
accordance with the articles of association of such WFOE unless earlier
terminated pursuant to this Section 13.

 

  (b) An application for extension of the WFOE Term for each WFOE shall be filed
with the Examination and Approval Authority not later than six months prior to
the expiration of the WFOE Term for such WFOE for the extension of the WFOE Term
for such WFOE, and the Parties shall, and shall ensure that their Affiliates
will extend the terms of the License Agreement and Other Agreements to which
they are parties for the same number of years as the WFOE Term for such WFOE
will be extended, subject in each case to the termination provisions thereof.

 

13.3 Termination.

 

  (a) This Agreement shall automatically terminate upon one Party owning all of
the Equity Securities of the Company.

 

  (b) The Company may be dissolved according to the terms of the Charter
Documents and this Agreement terminated upon the motion of the Party indicated
below if any of the conditions or events set forth below shall occur and be
continuing:

 

  (i) upon the motion of either Party, should the Parties mutually agree to
dissolve the Company; or

 

  (ii) upon the motion of either Party, if any of the Initial Conditions has not
been satisfied on or prior to the Long Stop Date.

 

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  (c) The Company may be dissolved according to the terms of the Charter
Documents, and this Agreement terminated, upon the motion of the Party indicated
below (the “Terminating Party”) if (1) any of the conditions or events set forth
below shall occur and be continuing and (2) the Terminating Party does not
exercise its Termination Purchase Right:

 

  (i) upon the motion of the solvent Party, should the other Party become
bankrupt or insolvent or file a petition seeking protection under any
bankruptcy, reorganization or insolvency Law;

 

  (ii) upon the motion of the non-breaching Party, should the other Party breach
any of its material obligations under this Agreement, and if such breach is
capable of being remedied, such breach is not remedied within 30 days after the
date on which a notice of such breach is delivered by the non-breaching Party to
the breaching Party; or

 

  (iii) upon the motion of any Party, in the event of a material breach of the
Confidentiality Agreement by the Affiliate of the other Party who is a party to
the Confidentiality Agreement, and if such breach is capable of being remedied,
such breach is not remedied within the time period specified in the
Confidentiality Agreement.

 

  (d) Subject to Section 14.4, this Agreement shall terminate in the event of
termination of the License Agreement, in which case either Party shall have the
right to make a motion to dissolve the Company.

 

  (e) If either Party makes a motion to dissolve the Company pursuant to a right
granted to it in Section 13.3(b), 13.3(c), 13.3(d) or elsewhere in this
Agreement, each Party shall cause the directors appointed by it to adopt a
resolution in favor of the dissolution of the Company.

SECTION 14

PURCHASE UPON TERMINATION

 

14.1 Termination Buyout Right. If the termination of this Agreement arises as a
result of any event described in Section 13.3(c), the Terminating Party shall
have the right (the “Termination Purchase Right”) to purchase the entire equity
interest in the Company of the other Party (the “Non-Terminating Party”) in
accordance with this Section 14.

 

14.2

Exercise of Buyout Right. The Termination Purchase Right shall be exercised as
follows: The Terminating Party shall, by written notice (the “Buyout Notice”) to
the Non-Terminating Party, notify the Non-Terminating Party that it elects to
purchase the entire interest of the Non-Terminating Party in the Company at a
price equal to the Applicable Buyout Price and otherwise in accordance with this
Section 14. The Buyout Notice shall be irrevocable and, upon delivery of same to
the Non-Terminating Party, shall constitute a binding agreement by the Parties
to purchase and sell the interest of the Non-Terminating Party in the Company.
The closing of the sale of the interest in the Company shall occur on a date to
be determined by the Terminating Party, but in any event not later than two
(2) months following delivery of the Buyout Notice. At such closing, the
Non-Terminating Party shall deliver such duly executed instruments of transfer
and other documents required in connection with such transfer and the
Terminating Party shall deliver payment

 

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in full by wire transfer of immediately available funds. The interests being
transferred shall be free and clear of any Encumbrance (other than Encumbrances
arising under this Agreement) and the Non-Terminating Party shall so represent
and warrant, and shall further represent and warrant that it is the beneficial
and record owner of such interest being transferred.

 

14.3 License Agreement to Remain in Effect. For the avoidance of doubt, WTW
confirms that if DAP exercises its Termination Purchase Right in accordance with
Section 14.1 and purchases WTW’s entire interest in the Company, the License
Agreement shall not be deemed to be terminated and shall continue to be in
effect in accordance with its terms and conditions.

 

14.4 DAP Termination Right. If the termination of this Agreement arises as a
result of the termination of the License Agreement, WTW must purchase the entire
interest of DAP in the Company at a price equal to the WTW Buyout Price. The
closing of the sale of the interest in the Company shall occur on a date to be
determined by WTW, but in any event not later than two (2) months following the
termination of the License Agreement. At such closing, DAP shall deliver such
duly executed instruments of transfer and other documents required in connection
with such transfer and WTW shall deliver payment in full by wire transfer of
immediately available funds. The interests being transferred shall be free and
clear of any Encumbrance (other than Encumbrances arising under this Agreement)
and DAP shall so represent and warrant, and shall further represent and warrant
that it is the beneficial and record owner of such interest being transferred.

SECTION 15

MILESTONES

 

15.1 Milestone Buyout Right. The Parties have agreed on achieving certain
milestones, to be set forth in the initial Five-Year Business Plan (the
“Milestones”). With respect to the second and third Milestones, within 30 days
of the end of the relevant Milestone period, the Company shall instruct the
Auditor to verify in writing whether the Milestones have been reached by the
WFOEs. In the event such Milestones are not reached by the WFOEs (as determined
by the Auditor, where applicable), DAP shall have the right (the “Milestone
Failure Purchase Right”) to sell its entire interest in the Company to WTW in
accordance with this Section 15.

 

15.2 Exercise of Buyout Right.

 

  (a)

The Milestone Failure Purchase Right shall be exercised as follows. Within 30
days of receiving the Company’s notice of the Milestone failure, DAP shall have
the right, by written notice (the “Milestone Buyout Notice”) to WTW, to notify
WTW that it elects to sell the entire interest of DAP in the Company to WTW at a
price equal to the WTW Buyout Price and otherwise in accordance with this
Section 15. The Milestone Buyout Notice shall be irrevocable and, upon delivery
of same to WTW, shall constitute a binding agreement by the Parties to purchase
and sell the interest of DAP in the Company. The closing of the sale of DAP’s
interest in the Company shall occur on a date to be

 

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determined by WTW, but in any event not later than two (2) months following
delivery of the Milestone Buyout Notice. At such closing, DAP shall deliver such
duly executed instruments of transfer and other documents required in connection
with such transfer and WTW shall deliver payment in full of the WTW Buyout Price
by wire transfer of immediately available funds. The interests being transferred
shall be free and clear of any Encumbrance (other than Encumbrances arising
under this Agreement) and DAP shall so represent and warrant, and shall further
represent and warrant that it is the beneficial and record owner of such
interest being transferred.

 

  (b) Notwithstanding the above, in the event that the failure to reach any of
the Milestones was contemplated by the Annual Plan and the Annual Plan was
approved by the Board on a unanimous basis, DAP shall not have the right to sell
DAP’s interests in the Company as provided in this Section 15.

SECTION 16

LIABILITY FOR BREACH OF CONTRACT

 

16.1 Liability. Subject to the provisions of this Section 16, a Party shall be
in breach of this Agreement or any Other Agreement to which it is a party (a) if
it fails to perform, or suspends its performance of, its obligations under this
Agreement or such Other Agreement to which it is a party, and if it does not
commence correction of such failure within 30 days, and complete such correction
within 60 days, following receipt of written notice of such failure from the
other Party or the Company, which notice must specify the nature of the alleged
breach in reasonable detail; or (b) if any of the representations and warranties
made by such Party hereunder or in any of the Other Agreements to which it is a
party is untrue or inaccurate in any material respect.

SECTION 17

GOVERNING LAW AND DISPUTE RESOLUTION

 

17.1 Governing Law. This Agreement and all claims (including claims based in
contract, statute or tort) arising out of or relating to this Agreement, its
interpretation, validity and enforcement shall be (a) governed by, and construed
and interpreted in accordance with, the laws of Hong Kong and (b) resolved
solely pursuant to binding arbitration.

 

17.2 Dispute Resolution.

 

  (a) The Parties shall attempt to resolve any Dispute through friendly
consultation. Such consultation shall begin immediately after one Party has
delivered to the other Party a written request for such consultation stating
specifically the nature of the Dispute. If within 30 days following the date on
which such notice is given the Dispute cannot be resolved, the Dispute shall be
referred to, and finally resolved by, arbitration upon the request of any Party
with notice (the “Submission Notice”) to the other Party. Any dispute related to
a Deadlocked Matter shall be resolved in accordance with the principles and
procedures set forth in Section 8.10 and Section 12.2, respectively, and shall
not be subject to the provisions of this Section 17.2.

 

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  (b) The arbitration shall be conducted in Hong Kong under the auspices of the
Hong Kong International Arbitration Centre (“HKIAC”) and in accordance with the
Arbitration Rules as at present in force save as modified in this Agreement.
There shall be three arbitrators. DAP shall select one arbitrator, and WTW shall
select one arbitrator. All selections shall be made within 30 days after the
selecting Party gives or receives the demand for arbitration. Such arbitrators
shall be freely selected, and each Party shall not be limited in its selection
to any prescribed list. The third arbitrator shall be jointly selected by the
arbitrators selected by DAP and WTW. If the arbitrators selected by DAP and WTW
fail to select the third arbitrator within 30 days after the date on which the
arbitrators for both DAP and WTW have been selected, the HKIAC shall select the
third arbitrator.

 

  (c) The arbitration proceedings shall be conducted in English. The arbitration
tribunal shall apply the Arbitration Rules as are in force at the time of the
arbitration. However, if such rules are in conflict with the provisions of this
Section 17, the provisions of this Section 17 shall prevail. The award of the
arbitration tribunal shall be final and binding upon the Parties, and the
winning Party may apply to any court of competent jurisdiction for enforcement
of such award. In order to preserve its rights and remedies, any Party shall be
entitled to seek preservation of property in accordance with any applicable Law
in any court of competent jurisdiction or from the arbitration tribunal pending
the final decision or award of the arbitration tribunal. During the period when
the Dispute is being resolved, except for the matters being disputed, the
Parties shall in all other respects continue their implementation of this
Agreement, provided that, the Dispute does not relate to a matter under
Section 13.3.

 

  (d) Each Party irrevocably consents to the service of process, notices or
other papers in connection with or in any way arising from the arbitration or
the enforcement of any arbitral award, by use of any of the methods and to the
addresses stipulated in Section 19.11. Nothing contained herein shall affect the
right of any Party to serve such process, notices or other papers in any other
manner permitted by applicable Law.

SECTION 18

REPRESENTATIONS AND WARRANTIES

Each Party represents and warrants to the other Party, with respect to itself,
as of the date of this Agreement and as a continuing representation during the
period that the Party owns an interest in the Company, as follows:

 

  (a) Such Party is a company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has the
corporate power and lawful authority to own or possess, lease and operate its
assets and to carry on its business as now being and as previously conducted.

 

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  (b) Such Party has the full legal right, power and authority required to enter
into this Agreement and to perform fully its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by such Party and,
assuming the due authorization, execution and delivery by the other Party,
constitutes the valid and binding obligation of such Party enforceable against
it in accordance with its terms.

 

  (c) Except as otherwise set forth in this Agreement, no filings with, notices
to, or license, permits, consents, authorizations, qualifications, orders or
other approvals of any governmental authority or any other Person are necessary
to be obtained by such Party for its execution, delivery and performance of this
Agreement or for the establishment of the Company.

 

  (d) Such Party is, has been and will continue to be in compliance in all
material respects with all applicable Laws of its jurisdiction of incorporation
and does not know of any circumstances that would be a breach of any such Laws.

 

  (e) Neither the execution of this Agreement, nor the performance of such
Party’s obligations hereunder, will conflict with, or result in a breach of, or
constitute a default under, any provision of the memorandum and articles of
association (or similar organizational documents), business license or bylaws of
such Party, as the case may be, or any applicable Laws or of any contract or
agreement to which such Party is a party or is subject.

 

  (f) As of the date of this Agreement, there is no lawsuit, arbitration or
legal, administrative or other proceeding or governmental investigation pending
or, to the best knowledge of such Party, threatened against such Party with
respect to the subject matter of this Agreement or that would affect in any way
such Party’s ability to enter into or perform this Agreement, and if any such
lawsuit, arbitration or legal, administrative or other proceeding or
governmental investigation should come to the knowledge of either Party after
the date of this Agreement it shall promptly notify the other Party and provide
the other Party with detailed information with respect to such matter.

 

  (g)

There is no document, statement or information of, or derived from, any
governmental body in the possession of such Party that has not been disclosed to
the other Party, which if disclosed, would materially adversely affect such
other Party’s decision to enter into this Agreement or to consummate the
transactions contemplated herein. Furthermore, all material documents,
statements and information, which have a material impact on the business,
operations or affairs of the Group will be promptly disclosed to the other Party
to the extent that they first come to the attention to such Party after the date
of this

 

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Agreement. The documents previously provided by such Party to the other Party,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements contained
therein not misleading.

SECTION 19

EFFECTIVENESS OF THE CONTRACT AND MISCELLANEOUS

 

19.1 Binding Effect. This Agreement shall be binding upon the permitted
successors and assigns of the Parties.

 

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

 

19.3 Entire Agreement. This Agreement, together with the License Agreement, the
Charter Documents and the Other Agreements, constitutes the entire agreement
between the Parties with respect to the subject matter hereof.

 

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

 

19.5 Waiver. No delay on the part of any Party in exercising any right hereunder
shall operate as a waiver thereof, nor shall any waiver, express or implied, by
any Party of any right hereunder or of any failure to perform or breach hereof
by any other Party constitute or be deemed a waiver of any other right hereunder
or of any other failure to perform or breach hereof by the same or any other
Party, whether of a similar or dissimilar nature. Failure of a Party to exercise
any of its rights under this Agreement shall in no way be considered a waiver of
the right to so exercise at any later time.

 

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

 

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

 

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

 

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

 

19.10  Survival. The agreements of the Party contained in Sections 7, 16 and 17,
and this Section 19 shall continue to survive after the expiration or
termination of this Agreement and the dissolution of the Company.

 

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

 

If to the Company:

  12/F, Ruttonjee House, 11 Duddell Street,   Central, Hong Kong   Attention:   
Chief Executive Officer   Facsimile:    (852) 2845 9198

If to DAP:

 

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

 

19th Floor, Kerry Center

 

1515 Nanjing Road (W)

 

Shanghai 200040, PRC

  Attention:    David Flavell, General Counsel   Facsimile:    86-21-5298-6800

with a copy to:

 

Baker & McKenzie

 

Unit 1601, Jin Mao Tower

 

88 Century Avenue

 

Pudong, Shanghai 200121

  Attention:    Howard H. Wu   Facsimile:    86-21-5047-0020

If to WTW:

 

11 Madison Avenue, 17th Floor

 

New York, NY 10010

  Attention:    David Kirchhoff, CEO   Facsimile:    (212) 589-2859

with a copy to:

 

11 Madison Avenue, 17th Floor

 

New York, NY 10010

  Attention:    Jeffrey Fiarman, General Counsel   Facsimile:    (212) 589-2601

 

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with a copy to:

 

Paul, Weiss, Rifkind, Wharton & Garrison

 

12th Floor, Hong Kong Club Building

 

3A Chater Road Central

 

Hong Kong

  Attention:    Jeanette K. Chan   Facsimile:    852-2536-9622

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

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Parties have caused their respective representatives to
execute this Agreement as of the date first above written.

 

DANONE DAIRY ASIA By:   /s/ Thomas Rondot   Name:   Thomas Rondot   Title:  
WEIGHT WATCHERS ASIA HOLDINGS LTD. By:   /s/ David P. Kirchhoff   Name:   David
P. Kirchhoff   Title:   President

 

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