Document:

Exhibit 10.38

 

FORM OF CONTINUITY AGREEMENT

 

This Agreement

(the “Agreement”) is dated as of October 10, 2003 by and between Weight

Watchers International, Inc., a Virginia corporation (the “Company”),

and

                      (the

“Executive”).

 

WHEREAS, the

Company’s Board of Directors (the “Board”) considers the continued

services of key executives of the Company to be in the best interests of the

Company and its stockholders; and

 

WHEREAS, the

Board desires to assure, and has determined that it is appropriate and in the

best interests of the Company and its stockholders to reinforce and encourage

the continued attention and dedication of key executives of the Company to

their duties of employment without personal distraction or conflict of interest

in circumstances which could arise from the occurrence of a change in control

of the Company; and

 

WHEREAS, the

Board has authorized the Company to enter into continuity agreements with

certain key executives of the Company, such agreements to set forth the severance

compensation which the Company agrees to pay such executives under certain

circumstances in connection with a change in control of the Company; and

 

WHEREAS, the

Executive is a key executive of the Company and has been designated by the

Compensation Committee of the Board (the “Committee”) as an executive to

be offered such a continuity compensation agreement with the Company.

 

NOW,

THEREFORE, in consideration of the premises and the mutual covenants and

agreements contained herein and other good and valuable consideration, the

receipt and sufficiency of which is hereby acknowledged, the Company and the

Executive agree as follows:

 

1.                                       Term.  This Agreement shall become effective on the

date hereof and, subject to the Executive’s continued employment by the

Company, remain in effect until the third anniversary thereof; provided,

however, that, on such third anniversary and on each successive one-year

anniversary thereof (each, a “Renewal Date”), this Agreement shall

automatically renew, unless the Company provides to the Executive, in writing,

at least 180 days prior to any Renewal Date, notice that this Agreement shall

not be renewed.  Notwithstanding the

foregoing, in the event that a Change in Control (as hereinafter defined)

occurs at any time prior to the termination or expiration of this Agreement in

accordance with the preceding sentence, this Agreement shall not terminate

until the second anniversary of the Change in Control.

 

2.                                       Change

in Control.  No compensation or

other benefit shall be payable pursuant to Section 4 of this Agreement unless

and until either (i) a Change in Control shall have occurred while the

Executive is an employee of the Company and the Executive’s employment by the

Company thereafter shall have terminated in accordance with Section 3(a)(i) or

(ii) hereof or (ii) the Executive’s employment by the Company shall have

terminated in accordance with Section 3(a)(ii) or (iii) hereof prior to the

occurrence of a Change in Control and thereafter a Change in Control actually

occurs.  For purposes of this Agreement,

a “Change in Control” shall be deemed to have occurred when:

 

 

(a)                                  any

“Person” or “Group,” in each case within the meaning of Section 13(d)(3) or

14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), (other than the Company or any company owned, directly or

indirectly, by the shareholders of the Company in substantially the same

proportions as their ownership of stock of the Company), becomes the

“Beneficial Owner,” within the meaning of Rule 13d-3 promulgated under the

Exchange Act, of 25% or more of the combined voting power of the then

outstanding securities of the Company entitled to vote generally in the

election of members of the Board; excluding, however, any

circumstance in which such beneficial ownership resulted from any acquisition

by an employee benefit plan (or related trust) sponsored or maintained by the

Company or by any Person or Group controlling, controlled by or under common

control with, the Company;

 

(b)                                 a

change in the composition of the Board since the date of this Agreement such

that the individuals who, as of such date, constituted the Board (the “Incumbent

Board”) cease for any reason to constitute at least a majority of such

Board; provided, that any individual, who becomes a member of the Board

subsequent to the date of this Agreement, whose election, or nomination for

election by the Company’s stockholders, was approved by the vote of at least a

majority of the directors then comprising the Incumbent Board, shall be deemed

a member of the Incumbent Board; and provided  further, that any

individual who was initially elected as a member of the Board as a result of an

actual or threatened election contest, as such terms are used in Rule 14a-12 of

Regulation 14A promulgated under the Exchange Act, or any other actual or

threatened solicitation of proxies or consents by or on behalf of any Person or

Group other than the Board shall not be deemed a member of the Incumbent Board;

 

(c)                                  a

reorganization, recapitalization, merger or consolidation (a “Corporate

Transaction”) involving the Company, unless securities representing 51% or

more of the combined voting power of the then outstanding voting securities

entitled to vote generally in the election of directors of the Company or the

entity resulting from such Corporate Transaction (or the parent of such entity)

are held subsequent to such transaction by the Person or Persons who were the

beneficial holders of the outstanding voting securities entitled to vote

generally in the election of directors of the Company immediately prior to such

Corporate Transaction, in substantially the same proportions as their ownership

immediately prior to such Corporate Transaction; or

 

(d)                                 the

sale, transfer or other disposition of all or substantially all of the assets

of the Company or the liquidation or dissolution of the Company;

 

if and only if, as a result of the occurrence

of any of the foregoing events in subsections (a) through (d) above, any Person

or Group other than Artal Luxembourg S.A. or any of its affiliates is or

becomes the Beneficial Owner, directly or indirectly, of securities of the

Company representing 50% or more of the combined voting power of its then

outstanding securities entitled to vote in the election of members of the Board.

 

3.                                       Termination

of Employment; Definitions.

 

(a)                                  The

Executive shall be entitled to the compensation provided for in Section 4 of

this Agreement if:

 

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(i)                                     within

two years following a Change in Control, the Executive’s employment is

terminated by the Company for any reason other than (A) the Executive’s

Disability, (B) the Executive’s Retirement, (C) the Executive’s death, or (D)

for Cause (Disability, Retirement and Cause are hereinafter defined);

 

(ii)                                  in

the event that (A) within three months prior to, but in connection with, the

anticipated occurrence of a Change in Control (and thereafter such Change in

Control actually occurs, in which case Executive’s date of Termination shall be

deemed to have occurred immediately following the Change of Control) or (B)

within two years following a Change in Control, the Executive terminates his or

her employment for Good Reason (as defined in Section 3(e) below) after

providing the Company with a Notice of Termination (as defined below) at least

60 days prior to such termination of employment; or

 

(iii)                               

(A) an agreement is signed which, if consummated, would result in a Change in

Control, (B) between the date on which such agreement is signed but prior to the

actual occurrence of the Change in Control, in connection with such anticipated

Change in Control the Executive’s employment is terminated by the Company for

any reason other than (x) the Executive’s Disability, (y) the Executive’s

Retirement, (z) the Executive’s death, or (D) for Cause and (C) such Change in

Control actually occurs (in which case Executive’s date of Termination shall be

deemed to have occurred immediately following the Change of Control).

 

(b)                                 Disability.  For purposes of this Agreement, “Disability”

shall mean the Executive’s absence from the full-time performance of the

Executive’s duties (as such duties existed immediately prior to such absence),

during the term of this Agreement, for 180 consecutive business days, when the

Executive is disabled as a result of incapacity due to physical or mental

illness, as determined by a physician selected by the Executive and approved by

the Company for such purpose (such approval not to be unreasonably withheld).

 

(c)                                  Retirement.  For purposes of this Agreement, “Retirement”

shall mean the Executive’s voluntary termination of employment, during the term

of this Agreement, pursuant to late, normal or early retirement under a pension

plan sponsored by the Company, as defined in such plan, but only if such

retirement occurs prior to a termination by the Company without Cause (and not

in anticipation of a termination for Cause).

 

(d)                                 Cause.  For purposes of this Agreement, “Cause”

shall mean the occurrence, during the term of this Agreement, of any of the

following:

 

(i)                                     the

willful and continued failure of the Executive to perform substantially all of

his or her duties with the Company (other than any such failure resulting from

incapacity due to physical or mental illness) for a period of 10 days following

a written demand for substantial performance that is delivered to such

Executive by the Board, which specifically identifies the manner in which the

Board believes the Executive has not substantially performed his or her duties;

 

(ii)                                  dishonesty

in the performance of the Executive’s duties with the Company;

 

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(iii)                               the

Executive’s conviction of, or plea of guilty or nolo  contendere

to, a crime under the laws of the United States or any state thereof constituting

(x) a felony or (y) a misdemeanor involving moral turpitude;

 

(iv)                              the

Executive’s willful malfeasance or willful misconduct in connection with the

Executive’s duties with the Company or any act or omission which is injurious

to the financial condition or business reputation of the Company or its

affiliates; or

 

(v)                                 the

Executive’s breach of the provisions of Section 12 of this Agreement.

 

Termination of the Executive

for Cause shall be made by delivery to the Executive of a copy of a resolution

duly adopted by the affirmative vote of not less than a majority of the

non-employee members of the Board (or, after a Change in Control, of the

ultimate parent of the entity which caused the Change in Control (if the

Company has become a subsidiary) to have occurred), at a meeting of such

members called and held for such purpose, which meeting shall be held not less

than 30 days after the Company has provided prior written notice to the

Executive specifying the basis for such termination and the particulars thereof

and a reasonable opportunity for the Executive to cure or otherwise resolve the

behavior in question prior to such meeting, finding that, in the reasonable

judgment of such members, the conduct or event set forth in any of clauses (i)

through (v) above has occurred and that such occurrence warrants the

Executive’s termination.

 

(e)                                  Good

Reason.  For purposes of this

Agreement, “Good Reason” shall mean the occurrence, during the term of this

Agreement, of any of the following, without the Executive’s express written

consent:

 

(i)                                     Any

diminution in the Executive’s duties, titles or responsibilities with the

Company from those in effect immediately prior to a Change in Control (or in

the event that the Executive alleges that Good Reason has occurred prior to but

in connection with a Change in Control, from those in effect prior to the date

that is three months prior to the Change in Control); provided, however,

that no such diminution shall be deemed to exist solely because of changes in

the Executive’s duties, titles or responsibilities as a consequence of the

Company ceasing to be a company with publicly traded securities or becoming a

wholly owned subsidiary of another Person or Group;

 

(ii)                                  Any

reduction in the Executive’s annual base salary and annual cash bonus

percentage target established under the Company’s annual incentive plan (the “Bonus

Plan”) (together, the “Compensation”) from the Executive’s

Compensation in effect immediately prior to a Change in Control (or in the

event that the Executive alleges that Good Reason has occurred prior to but in

connection with a Change in Control, from such Compensation in effect prior to

the date that is three months prior to the Change in Control);

 

(iii)                               any

relocation of the Executive’s principal work place to a location that is East

of the Nassau County-Suffolk County border; or

 

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(iv)                              any

failure by the Company to obtain from any successor to the Company an

agreement, reasonably satisfactory to the Executive, to assume and perform this

Agreement, as contemplated by Section 10(a) hereof.

 

Notwithstanding the foregoing,

in the event that the Executive provides the Company with a Notice of

Termination (as defined below) referencing this Section 3(e) within 60 days

after the occurrence of an event giving rise to Good Reason, the Company shall

have 30 days thereafter in which to cure or resolve the behavior otherwise

constituting Good Reason.

 

(f)                                    Notice

of Termination.  Any purported

termination of the Executive’s employment (other than on account of the

Executive’s death) shall be communicated by a Notice of Termination to the

Executive, if such termination is by the Company, or to the Company, if such

termination is by the Executive.  For

purposes of this Agreement, “Notice of Termination” shall mean a written

notice which shall indicate the specific termination provision in this

Agreement relied upon and shall set forth in reasonable detail the facts and

circumstances claimed to provide a basis for termination of the Executive’s

employment under the provisions so indicated.  For purposes of this Agreement,

no purported termination of Executive’s employment with the Company shall be

effective without such a Notice of Termination having been given.

 

4.                                       Compensation

Upon Termination of Employment.  If

the Executive’s employment by the Company shall be terminated in accordance

with Section 3(a) (the “Termination”), the Executive shall be entitled

to the following payments and benefits:

 

(a)                                  Severance.  The Company shall pay, or cause to be paid,

to the Executive a cash severance payment in an amount equal to  the product of  three  times the

sum of (i) the Executive’s annual base salary on the date of the Change in

Control (or, if higher, the annual base salary in effect immediately prior to

the giving of the Notice of Termination) and (ii) the Executive’s target annual

bonus (“Target Bonus”) in respect of the fiscal year of the Company (a “Fiscal

Year”) in which the Termination occurs (or, if higher, the average annual

bonus actually earned by the Executive in respect of the three full Fiscal

Years prior to the year in which the Notice of Termination is given) under the

Bonus Plan. This cash severance amount shall be payable in a lump sum,

calculated without any present value discount, within 10 business days after

the Executive’s date of Termination.

 

(b)                                 Additional

Payments and Benefits.  The

Executive shall also be entitled to:

 

(i)                                     a

lump sum cash payment equal to the sum of (A) the Executive’s accrued but

unpaid base salary through the date of Termination, (B) the unpaid portion, if

any, of bonuses previously earned by the Executive pursuant to the Bonus Plan,

(C) in respect of the Fiscal Year in which the date of Termination occurs, the

higher of (x) the pro rata portion of the Executive’s Target Bonus and (y) if

the Company is exceeding the performance targets established under the Bonus

Plan for such Fiscal Year as of the date of Termination, the Executive’s actual

annual bonus payable under the Bonus Plan based upon such achievement (such pro

rata portion in either case calculated from January 1 of such year through the

date of Termination) (such payment, the “Pro Rata Bonus”), and (D) any

other compensation previously deferred (excluding qualified plan deferrals by

the Executive under or into benefit plans of the Company), and (E) an amount

 

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representing

the Executive’s accrued but unused vacation days, if any, in each case for

subsections (A) through (E) above, in full satisfaction of the Executive’s

rights thereto;

 

(ii)                                  continued

medical, dental, vision, and life insurance coverage (excluding accidental

death and disability insurance) (“Welfare Benefit Coverage”) for the

Executive and the Executive’s eligible dependents or, to the extent Welfare

Benefit Coverage is not commercially available, such other Welfare Benefit

Coverage reasonably acceptable to the Executive, on the same basis as in effect

prior to the Executive’s Termination, for a period ending on the earlier of (A)

the third anniversary of the date of Termination (the “Continuation Period”)

and (B) the commencement of comparable Welfare Benefit Coverage by the

Executive with a subsequent employer;

 

(iii)                               continued

provision of the perquisites the Executive enjoyed prior to the date of

Termination for a period ending on the earlier of (A) the end of the

Continuation Period and (B) the receipt by the Executive of comparable

perquisites from a subsequent employer;

 

(iv)                              immediate

100% vesting of all outstanding stock options, stock appreciation rights,

phantom stock units and restricted stock granted or issued by the Company prior

to, on or upon the Change in Control (to the extent not previously vested on or

following the Change in Control);

 

(v)                                 additional

Company contributions under the Company’s qualified defined contribution plan

and any other retirement plans in which the Executive participated prior to the

date of Termination during the Continuation Period; provided, however,

that where such contributions may not be provided without adversely affecting

the qualified status of such plan or where such contributions are otherwise

prohibited by any such plans, the Executive shall instead receive an additional

lump sum payment equal to the contributions that would have been made during

the Continuation Period if the Executive had remained employed with the Company

during such period; and

 

(vi)                              all

other accrued or vested benefits in accordance with the terms of any applicable

Company plan, which vested benefits shall include the Executive’s otherwise

unvested account balances in the Company’s qualified defined contribution plan,

which shall become vested as of the date of Termination (the “Accrued

Benefits”) (with an offset for any amounts paid under Section 4(b)(i)(D),

above).

 

All lump sum payments under

this Section 4(b) shall be paid within 10 business days after the Executive’s

date of Termination.

 

(c)                                  Outplacement.  If so requested by the Executive,

outplacement services shall be provided by a professional outplacement provider

selected by the Executive; provided, however, that such

outplacement services shall be provided to the Executive at a cost to the

Company of not more than $30,000.

 

(d)                                 Legal

Expenses.  The Company shall pay or

reimburse the Executive for reasonable legal fees (including without

limitation, any and all court costs and attorneys’ fees and expenses) incurred

by the Executive in connection with or as a result of any claim, action or

 

6

 

proceeding brought by the

Company or the Executive with respect to or arising out of this Agreement or

any provision hereof; provided, however, that the Company shall

have no obligation to pay or reimburse any such legal fees if (i) in the case

of an action brought by the Executive, the Company is successful in

establishing with the court that the Executive’s action was taken in bad faith

or was frivolous or otherwise without a reasonable legal or factual basis, or

(ii) in the case of any action, the action is materially decided in favor of

the Company.

 

5.                                       Compensation

Upon Termination for Death, Disability, Retirement.  If the Executive’s employment is terminated

by reason of Death, Disability or Retirement prior to any other Termination

(other than in anticipation of a termination for Cause by the Company), the

Executive will receive:

 

(a)                                  the

sum of (i) the Executive’s accrued but unpaid base salary through the date of

Termination, (ii) the Pro Rata Bonus, and (iii) any compensation previously

deferred (excluding any qualified plan deferrals) by the Executive under or

into benefit plans of the Company and an amount representing the Executive’s

accrued but unused vacation days, if any, in each case, in full satisfaction of

the Executive’s rights thereto; and

 

(b)                                 the

Accrued Benefits (with an offset for any amounts paid under Section 5(a)(iii),

above).

 

6.                                       Compensation

Upon Termination by the Company for Cause. 

If the Executive’s employment is terminated by the Company for Cause,

the Executive will receive the sum of the Executive’s accrued but unpaid salary

through the date of Termination and an amount representing the Executive’s

accrued but unused vacation days, if any, in each case, in full satisfaction of

the Executive’s rights thereto.

 

7.                                       Excess

Parachute Excise Tax. 

Notwithstanding any other provision of this Agreement,

 

(a)                                  If

it is determined (as provided in Section 7(c), below) that the payments and

benefits provided under Section 4(a) and Sections 4(b)(i), (ii) and (iii), in

the aggregate (a “Payment”), would be subject to the excise tax imposed

under Section 4999 (or any successor provision thereto) of the Internal Revenue

Code of 1986, as amended (the “Code”) by reason of being “contingent on

a change in ownership or control” of the Company, within the meaning of Section

280G of the Code (or any successor provision thereto) or to any similar tax

imposed by state or local law, or any interest or penalties with respect to

such excise tax (such tax or taxes, together with any such interest and penalties,

are hereafter collectively referred to as the “Excise Tax”), and the

aggregate value of the Payment exceeds 3.0 times the Executive’s “base amount,”

as defined in Section 280G(b)(3) of the Code (the (“Base Amount”) by

five percent (5%) or less, then the Payment shall be reduced to the extent

necessary so that the aggregate value of the Payment is equal to 2.99 times the

Base Amount (the “Reduced Amount”); provided, however,

that if the aggregate value of the Payment exceeds the Base Amount by more than

five percent (5%), then the Executive shall be entitled to receive an

additional payment or payments (a “Gross-Up Payment”) in an amount such

that, after payment by the Executive of all taxes (including any interest or

penalties imposed with respect to such taxes), including any Excise Tax,

imposed upon the Gross-Up Payment, the Executive retains an amount of the

Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

 

7

 

(b)                                 If

the determination made pursuant to Section 7(a) results in a reduction of the

payments that would otherwise be paid to the Executive except for the

application of Section 7(a)(i) hereof, the Executive may then elect, in his

sole discretion, which and how much of any particular entitlement shall be

eliminated or reduced and shall advise the Company in writing of his election

within 10 days of the determination of the reduction in payments.  If no such election is made by the Executive

within such 10-day period, the Company may elect which and how much of any

entitlement shall be eliminated or reduced and shall notify the Executive

promptly of such election.  Within 10

days following such determination and the elections hereunder, the Company

shall pay to or distribute to or for the benefit of the Executive such amounts

as are then due to the Executive under this Agreement and shall promptly pay to

or distribute to or for the benefit of the Executive in the future such amounts

as become due to the Executive under this Agreement.

 

(c)                                  Subject

to the provisions of Section 7(a) hereof, all determinations required to be

made under this Section 7, including whether an Excise Tax is payable by the

Executive and the amount of such Excise Tax and whether a Gross-Up Payment is

required and the amount of such Gross-Up Payment, shall be made by the

nationally recognized firm of certified public accountants (the “Accounting

Firm”) used by the Company prior to the Change in Control (or, if such

Accounting Firm declines to serve, the Accounting Firm shall be a nationally

recognized firm of certified public accountants selected by the

Executive).  The Accounting Firm shall

be directed by the Company or the Executive to submit its preliminary

determination and detailed supporting calculations to both the Company and the

Executive within 15 calendar days after the date of Termination, if applicable,

and any other such time or times as may be requested by the Company or the

Executive.  If the Accounting Firm determines

that the aggregate value of the Payment exceeds the Base Amount by more than 5%

such that an Excise Tax is payable by the Executive, the Company shall pay the

required Gross-Up Payment to, or for the benefit of, the Executive within five

business days after receipt of such determination and calculations.  If the Accounting Firm determines that no

Excise Tax is payable by the Executive, it shall, at the same time as it makes

such determination, furnish the Executive with an opinion that he has substantial

authority not to report any Excise Tax on his/her federal, state, local income

or other tax return.  Any determination

by the Accounting Firm as to the amount of the Gross-Up Payment shall be

binding upon the Company and the Executive absent a contrary determination by

the Internal Revenue Service or a court of competent jurisdiction; provided,

however, that no such determination shall eliminate or reduce the

Company’s obligation to provide any Gross-Up Payment as a result of such

contrary determination.  As a result of

the uncertainty in the application of Section 4999 of the Code (or any

successors provision thereto) and the possibility of similar uncertainty

regarding state or local tax law at the time of any determination by the

Accounting Firm hereunder, it is possible that Gross-Up Payments that will not

have been made by the Company should have been made (an “Underpayment”),

consistent with the calculations required to be made hereunder.  In the event that the Company exhausts or

fails to pursue its remedies pursuant to Section 7(e) hereof and the Executive

thereafter is required to make a payment of any Excise Tax, the Executive shall

direct the Accounting Firm to determine the amount of the Underpayment that has

occurred and to submit its determination and detailed supporting calculations

to both the Company and the Executive as promptly as possible. Any such

Underpayment shall be promptly paid by the Company to, or for the benefit of,

the Executive within five business days after receipt of such determination and

calculations.

 

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(d)                                 The

federal, state and local income or other tax returns filed by the Executive (or

any filing made by a consolidated tax group that includes the Company) shall be

prepared and filed on a consistent basis with the determination of the

Accounting Firm with respect to the Excise Tax payable by the Executive.  The Executive shall make proper payment of

the amount of any Excise Tax, and at the request of the Company, provide to the

Company true and correct copies (with any amendments) of his/her federal income

tax return as filed with the Internal Revenue Service and corresponding state

and local tax returns, if relevant, as filed with the applicable taxing

authority, and such other documents reasonably requested by the Company,

evidencing such payment.  If, prior to

the filing of the Executive’s federal income tax return, or corresponding state

or local tax return, if relevant, the Accounting Firm determines that the amount

of the Gross-Up Payment should be reduced, the Executive shall within 10

business days pay to the Company the amount of such reduction.

 

(e)                                  (i)

In the event that the Internal Revenue Service claims that any payment or

benefit received under this Agreement constitutes an “excess parachute payment,”

within the meaning of Section 280G(b)(1) of the Code (or any successor

provision thereto), the Executive shall notify the Company in writing of such

claim.  Such notification shall be given

as soon as practicable but no later than 10 business days after the Executive

is informed in writing of such claim and shall apprise the Company of the

nature of such claim and the date on which such claim is requested to be

paid.  The Executive shall not pay such

claim prior to the expiration of the 30 day period following the date on which

the Executive gives such notice to the Company (or such shorter period ending

on the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in

writing prior to the expiration of such period that it desires to contest such

claim, the Executive shall (i) give the Company any information reasonably

requested by the Company relating to such claim; (ii) take such action in

connection with contesting such claim as the Company shall reasonably request

in writing from time to time, including without limitation, accepting legal

representation with respect to such claim by an attorney reasonably selected by

the Company and reasonably satisfactory to the Executive; (iii) cooperate with

the Company in good faith in order to effectively contest such claim; and (iv)

permit the Company to participate in any proceedings relating to such claim; provided,

however, that the Company shall bear and pay directly all costs and

expenses (including, but not limited to, additional interest and penalties and

related legal, consulting or other similar fees) incurred in connection with

such contest and shall indemnify and hold the Executive harmless, on an

after-tax basis, for and against any Excise Tax or other tax (including

interest and penalties with respect thereto) imposed as a result of such

representation and payment of costs and expenses.

 

(ii)                                  The

Company shall control all proceedings taken in connection with such contest

and, at its sole option, may pursue or forgo any and all administrative

appeals, proceedings, hearings and conferences with the taxing authority in

respect of such claim and may, at its sole option, either direct the Executive

to pay the tax claimed and sue for a refund or contest the claim in any

permissible manner, and the Executive agrees to prosecute such contest to a

determination before any administrative tribunal, in a court of initial

jurisdiction and in one or more appellate courts, as the Company shall

determine; provided, however, that if the Company directs the

Executive to pay such claim and sue for a refund, the Company shall advance the

amount of such payment to the Executive on an interest-free basis, and shall

indemnify and hold the Executive harmless, on an after-tax basis, from any

Excise Tax or other tax (including interest and penalties with respect

 

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thereto)

imposed with respect to such advance or with respect to any imputed income with

respect to such advance; and provided, further, that if the

Executive is required to extend the statute of limitations to enable the

Company to contest such claim, the Executive may limit this extension solely to

such contested amount.  The Company’s

control of the contest shall be limited to issues with respect to which a

corporate deduction would be disallowed pursuant to Section 280G of the Code

and the Executive shall be entitled to settle or contest, as the case may be,

any other issue raised by the Internal Revenue Service or any other taxing

authority.  In addition, no position may

be taken nor any final resolution be agreed to by the Company without the

Executive’s consent if such position or resolution could reasonably be expected

to adversely affect the Executive (including any other tax position of the

Executive unrelated to matters covered hereby).

 

(iii)                             If,

after the receipt by the Executive of an amount advanced by the Company in

connection with the contest of the Excise Tax claim, the Executive becomes

entitled to receive any refund with respect to such claim, the Executive shall

promptly pay to the Company the amount of such refund (together with any

interest paid or credited thereon after taxes applicable thereto); provided,

however, if the amount of that refund exceeds the amount advanced by the

Company or it is otherwise determined for any reason that additional amounts

could be paid to the Executive without incurring any Excise Tax, any such

amount will be promptly paid by the Company to the named Executive.  If, after the receipt by the Executive of an

amount advanced by the Company in connection with an Excise Tax claim, a

determination is made that the Executive shall not be entitled to any refund

with respect to such claim and the Company does not notify the Executive in

writing of its intent to contest the denial of such refund prior to the

expiration of 30 days after such determination, such advance shall be forgiven

and shall not be required to be repaid and shall be deemed to be in

consideration for services rendered after the date of the Termination.

 

(f)                                    The

Company and the Executive shall each provide the Accounting Firm access to and

copies of any books, records and documents in the possession of the Company or

the Executive, as the case may be, reasonably requested by the Accounting Firm,

and otherwise cooperate with the Accounting Firm in connection with the

preparation and issuance of the determination contemplated by Section 7(c)

hereof.

 

(g)                                 The

fees and expenses of the Accounting Firm for its services in connection with

the determinations and calculations contemplated by Section 7(c) hereof shall

be borne by the Company.  If such fees

and expenses are initially advanced by the Executive, the Company shall

reimburse the Executive the full amount of such fees and expenses within five

business days after receipt from the Executive of a statement therefor and

reasonable evidence of his or her payment thereof.

 

8.                                       Obligations

Absolute; Non-Exclusivity of Rights; Joint and Several Liability.

 

(a)                                  The

obligations of the Company to make the payment to the Executive, and to make

the arrangements, provided for herein shall be absolute and unconditional and

shall not be reduced by any circumstances, including without limitation any

set-off, counterclaim,

 

10

 

recoupment, defense or other

right which the Company may have against the Executive or any third party at

any time.

 

(b)                                 Nothing

in this Agreement shall prevent or limit the Executive’s continuing or future

participation in any benefit, bonus, incentive or other plan or program

provided by the Company and for which the Executive may qualify (other than any

change in control or other severance plan or policy), nor shall anything herein

limit or reduce such rights as the Executive may have under any agreements with

the Company.  Amounts which are vested

benefits or which the Executive is otherwise entitled to receive under any plan

or program of the Company shall be payable in accordance with such plan or

program, except as explicitly modified by this Agreement.

 

(c)                                  Any

successors or assigns of the Company shall be joint and severally liable with

the Company under this Agreement.

 

9.                                       Entire

Agreement; Not an Employment Agreement; No Duplication of Payments or Benefits.

 

(a)                                  This

Agreement constitutes the entire agreement of the parties hereto and supersedes

all prior and contemporaneous agreements and understandings (including term

sheets), both written and oral, between the parties hereto, or either of them,

with respect to the subject matter hereof. 

No agreements or representations, oral or otherwise, express or implied,

with respect to the subject matter hereof have been made by either party which

are not expressly set forth in this Agreement.

 

(b)                                 This

Agreement is not, and nothing herein shall be deemed to create, a contract of

employment between the Executive and the Company. The Company may terminate the

employment of the Executive by the Company at any time, subject to the terms of

this Agreement and/or any employment agreement or arrangement between the

Company and the Executive that may then be in effect.

 

(c)                                  To

the extent, and only to the extent, a payment or benefit that is paid or

provided under Section 4 would also be paid or provided under the terms of another

Company plan, program or arrangement (a “Company Plan”), (i) in the event that

such payment or benefit is first paid or provided under the terms of a Company

Plan prior to the date such payment or benefit is paid or provided under

Section 4, such payment or benefit shall offset any corresponding payment or

benefit that is paid or provided under Section 4, and (ii) in the event that

such payment or benefit is first paid or provided under Section 4, such Company

Plan will be deemed to have been satisfied by the corresponding payment or

benefit made or provided under Section 4.

 

10.                                 Successors;

Binding Agreement, Assignment.

 

(a)                                  The

Company shall require any successor (whether direct or indirect, by purchase,

merger, consolidation or otherwise) to all or substantially all of the business

of the Company, by agreement to expressly, absolutely and unconditionally

assume and agree to perform this Agreement in the same manner and to the same

extent that the Company would be required to perform it if no such succession

had taken place. As used in this Agreement,

 

11

 

“Company” shall mean (i) the

Company as hereinbefore defined, and (ii) any successor to all the stock of the

Company or to all or substantially all of the Company’s business or assets

which executes and delivers an agreement provided for in this Section 10(a) or

which otherwise becomes bound by all the terms and provisions of this Agreement

by operation of law, including any parent or subsidiary of such a successor.

 

(b)                                 This

Agreement shall inure to the benefit of and be enforceable by the Executive’s

personal or legal representatives, executors, administrators, successors,

heirs, distributees, devisees and legatees. If the Executive should die while

any amount would be payable to the Executive hereunder if the Executive had

continued to live, all such amounts, unless otherwise provided herein, shall be

paid in accordance with the terms of this Agreement to the Executive’s estate

or designated beneficiary.  Neither this

Agreement nor any right arising hereunder may be assigned or pledged by the

Executive.

 

11.                                 Notice.  For purpose of this Agreement, notices and

all other communications provided for in this Agreement or contemplated hereby

shall be in writing and shall be deemed to have been duly given when personally

delivered, delivered by a nationally recognized overnight delivery service or

when mailed United States certified or registered mail, return receipt

requested, postage prepaid, and addressed, in the case of the Company, to the

Company at:

 

Weight

Watchers International, Inc.

175 Crossways

Park West

Woodbury, New

York 11797

Attention:  Board of Directors

 

and in the case of the

Executive, to the Executive at the address set forth on the execution page at

the end hereof.

 

Either party may designate a

different address by giving notice of change of address in the manner provided

above, except that notices of change of address shall be effective only upon

receipt.

 

12.                                 Confidentiality.  The Executive shall retain in confidence any

and all confidential information concerning the Company, its shareholders,

officers, directors and customers and its respective business which is now

known or hereafter becomes known to the Executive, except as otherwise required

by law and except information (i) ascertainable or obtained from public

information, (ii) received by the Executive at any time after the Executive’s

employment by the Company shall have terminated, from a third party not

employed by or otherwise affiliated with the Company or (iii) which is or

becomes known to the public by any means other than a breach of this Section

12.  Upon the Termination of employment,

the Executive will not take or keep any proprietary or confidential information

or documentation belonging to the Company.

 

13.                                 Miscellaneous.

 

(a)                                  Amendments.  No provision of this Agreement may be

amended, altered, modified, waived or discharged unless such amendment,

alteration, modification, waiver or

 

12

 

discharge is agreed to in

writing signed by the Executive and such officer of the Company as shall be

specifically designated by the Committee or by the Board.

 

(b)                                 Waivers.  No waiver by either party, at any time, of

any breach by the other party of, or of compliance by the other party with, any

condition or provision of this Agreement to be performed or complied with by

such other party shall be deemed a waiver of any similar or dissimilar

provision or condition of this Agreement or any other breach of or failure to

comply with the same condition or provision at the same time or at any prior or

subsequent time.  No agreements or

representations, oral or otherwise, express or implied, with respect to the

subject matter hereof have been made by either party which are not expressly

set forth in this Agreement.

 

14.                                 Severability.  If any one or more of the provisions of this

Agreement shall be held to be invalid, illegal or unenforceable, the validity,

legality and enforceability of the remaining provisions of this Agreement shall

not be affected thereby. To the extent permitted by applicable law, each party

hereto waives any provision of law that renders any provision of this Agreement

invalid, illegal or unenforceable in any respect.

 

15.                                 Governing

Law; Venue.  The validity,

interpretation, construction and performance of this Agreement shall be

governed on a non-exclusive basis by the laws of the State of New York without

giving effect to its conflict of laws rules. 

For purposes of jurisdiction and venue, the Company hereby consents to

jurisdiction and venue in any suit, action or proceeding with respect to this

Agreement in any court of competent jurisdiction in the state in which the

Executive resides at the commencement of such suit, action or proceeding and

waives any objection, challenge or dispute as to such jurisdiction or venue

being proper.

 

16.                                 Counterparts.  This Agreement may be executed in two or

more counterparts, each of which shall be an original and all of which shall be

deemed to constitute one and the same instrument.

 

[Signatures on next page.]

 

13

 

IN WITNESS

WHEREOF, the parties hereto have executed this Agreement as of the date first

above written.

 

 

	

   

  	

   

  	

  WEIGHT

  WATCHERS INTERNATIONAL, INC.:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  	

  Raymond Debbane

  
	

   

  	

   

  	

  Title:

  Chairman of the Board

  
	

   

  	

   

  	

   

  
	

  EXECUTIVE:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Address:

  	

   

  	

   

  
					

 

14Exhibit 10.39

 

FORM OF CONTINUITY AGREEMENT

 

This

Agreement (the “Agreement”) is dated as of October 10, 2003 by and

between Weight Watchers International, Inc., a Virginia corporation (the “Company”),

and

             (the “Executive”).

 

WHEREAS,

the Company’s Board of Directors (the “Board”) considers the continued

services of key executives of the Company to be in the best interests of the

Company and its stockholders; and

 

WHEREAS,

the Board desires to assure, and has determined that it is appropriate and in

the best interests of the Company and its stockholders to reinforce and

encourage the continued attention and dedication of key executives of the

Company to their duties of employment without personal distraction or conflict

of interest in circumstances which could arise from the occurrence of a change

in control of the Company; and

 

WHEREAS,

the Board has authorized the Company to enter into continuity agreements with

certain key executives of the Company, such agreements to set forth the

severance compensation which the Company agrees to pay such executives under

certain circumstances in connection with a change in control of the Company;

and

 

WHEREAS,

the Executive is a key executive of the Company and has been designated by the

Compensation Committee of the Board (the “Committee”) as an executive to

be offered such a continuity compensation agreement with the Company.

 

NOW,

THEREFORE, in consideration of the premises and the mutual covenants and

agreements contained herein and other good and valuable consideration, the

receipt and sufficiency of which is hereby acknowledged, the Company and the

Executive agree as follows:

 

1.                                       Term.  This Agreement shall become

effective on the date hereof and, subject to the Executive’s continued

employment by the Company, remain in effect until the third anniversary

thereof; provided, however, that, on such third anniversary and

on each successive one-year anniversary thereof (each, a “Renewal Date”),

this Agreement shall automatically renew, unless the Company provides to the

Executive, in writing, at least 180 days prior to any Renewal Date, notice that

this Agreement shall not be renewed. 

Notwithstanding the foregoing, in the event that a Change in Control (as

hereinafter defined) occurs at any time prior to the termination or expiration

of this Agreement in accordance with the preceding sentence, this Agreement

shall not terminate until the second anniversary of the Change in Control.

 

2.                                       Change in Control.  No

compensation or other benefit shall be payable pursuant to Section 4 of

this Agreement unless and until either (i) a Change in Control shall have

occurred while the Executive is an employee of the Company and the Executive’s

employment by the Company thereafter shall have terminated in accordance with

Section 3(a)(i) or (ii) hereof or (ii) the Executive’s employment by the

Company shall have terminated in accordance with Section 3(a)(ii) or (iii)

hereof prior to the occurrence of a Change in Control and thereafter a Change

in Control actually occurs.  For purposes

of this Agreement, a “Change in Control” shall be deemed to have occurred when:

 

 

(a)                                  any “Person” or “Group,” in each case within

the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act

of 1934, as amended (the “Exchange Act”), (other than the Company or any

company owned, directly or indirectly, by the shareholders of the Company in

substantially the same proportions as their ownership of stock of the Company),

becomes the “Beneficial Owner,” within the meaning of Rule 13d-3 promulgated

under the Exchange Act, of 25% or more of the combined voting power of the then

outstanding securities of the Company entitled to vote generally in the

election of members of the Board; excluding, however, any

circumstance in which such beneficial ownership resulted from any acquisition

by an employee benefit plan (or related trust) sponsored or maintained by the

Company or by any Person or Group controlling, controlled by or under common

control with, the Company;

 

(b)                                 a change in the composition of the Board

since the date of this Agreement such that the individuals who, as of such

date, constituted the Board (the “Incumbent Board”) cease for any reason

to constitute at least a majority of such Board; provided, that any

individual, who becomes a member of the Board subsequent to the date of this

Agreement, whose election, or nomination for election by the Company’s

stockholders, was approved by the vote of at least a majority of the directors

then comprising the Incumbent Board, shall be deemed a member of the Incumbent

Board; and provided  further, that any individual who was

initially elected as a member of the Board as a result of an actual or

threatened election contest, as such terms are used in Rule 14a-12 of

Regulation 14A promulgated under the Exchange Act, or any other actual or

threatened solicitation of proxies or consents by or on behalf of any Person or

Group other than the Board shall not be deemed a member of the Incumbent Board;

 

(c)                                  a reorganization, recapitalization, merger or

consolidation (a “Corporate Transaction”) involving the Company, unless

securities representing 51% or more of the combined voting power of the then

outstanding voting securities entitled to vote generally in the election of

directors of the Company or the entity resulting from such Corporate

Transaction (or the parent of such entity) are held subsequent to such

transaction by the Person or Persons who were the beneficial holders of the

outstanding voting securities entitled to vote generally in the election of

directors of the Company immediately prior to such Corporate Transaction, in

substantially the same proportions as their ownership immediately prior to such

Corporate Transaction; or

 

(d)                                 the sale, transfer or other disposition of

all or substantially all of the assets of the Company or the liquidation or

dissolution of the Company;

 

if and only if, as a result of the occurrence of any of the foregoing events in

subsections (a) through (d) above, any Person or Group other than Artal

Luxembourg S.A. or any of its affiliates is or becomes the Beneficial Owner,

directly or indirectly, of securities of the Company representing 50% or more

of the combined voting power of its then outstanding securities entitled to

vote in the election of members of the Board.

 

3.                                       Termination of Employment; Definitions.

 

(a)                                  The Executive shall be entitled to the

compensation provided for in Section 4 of this Agreement if:

 

2

 

(i)                                     within two years following a Change in

Control, the Executive’s employment is terminated by the Company for any reason

other than (A) the Executive’s Disability, (B) the Executive’s Retirement, (C)

the Executive’s death, or (D) for Cause (Disability, Retirement and Cause are

hereinafter defined);

 

(ii)                                  in the event that (A) within three months

prior to, but in connection with, the anticipated occurrence of a Change in

Control (and thereafter such Change in Control actually occurs, in which case

Executive’s date of Termination shall be deemed to have occurred immediately

following the Change of Control) or (B) within two years following a Change in

Control, the Executive terminates his or her employment for Good Reason (as

defined in Section 3(e) below) after providing the Company with a Notice

of Termination (as defined below) at least 60 days prior to such termination of

employment; or

 

(iii)                               (A) an agreement is signed which, if

consummated, would result in a Change in Control, (B) between the date on which

such agreement is signed but prior to the actual occurrence of the Change in

Control, in connection with such anticipated Change in Control the Executive’s

employment is terminated by the Company for any reason other than (x) the

Executive’s Disability, (y) the Executive’s Retirement, (z) the Executive’s

death, or (D) for Cause and (C) such Change in Control actually occurs (in

which case Executive’s date of Termination shall be deemed to have occurred

immediately following the Change of Control).

 

(b)                                 Disability.  For purposes of this

Agreement, “Disability” shall mean the Executive’s absence from the full-time

performance of the Executive’s duties (as such duties existed immediately prior

to such absence), during the term of this Agreement, for 180 consecutive

business days, when the Executive is disabled as a result of incapacity due to

physical or mental illness, as determined by a physician selected by the

Executive and approved by the Company for such purpose (such approval not to be

unreasonably withheld).

 

(c)                                  Retirement.  For purposes of this Agreement,

“Retirement” shall mean the Executive’s voluntary termination of employment,

during the term of this Agreement, pursuant to late, normal or early retirement

under a pension plan sponsored by the Company, as defined in such plan, but

only if such retirement occurs prior to a termination by the Company without

Cause (and not in anticipation of a termination for Cause).

 

(d)                                 Cause.  For purposes of this

Agreement, “Cause” shall mean the occurrence, during the term of this

Agreement, of any of the following:

 

(i)                                     the willful and continued failure of the

Executive to perform substantially all of his or her duties with the Company

(other than any such failure resulting from incapacity due to physical or

mental illness) for a period of 10 days following a written demand for

substantial performance that is delivered to such Executive by the Board, which

specifically identifies the manner in which the Board believes the Executive

has not substantially performed his or her duties;

 

(ii)                                  dishonesty in the performance of the

Executive’s duties with the Company;

 

3

 

(iii)                               the Executive’s conviction of, or plea of

guilty or nolo  contendere to, a crime under the laws of the

United States or any state thereof constituting (x) a felony or (y) a

misdemeanor involving moral turpitude;

 

(iv)                              the Executive’s willful malfeasance or

willful misconduct in connection with the Executive’s duties with the Company

or any act or omission which is injurious to the financial condition or

business reputation of the Company or its affiliates; or

 

(v)                                 the Executive’s breach of the provisions of

Section 12 of this Agreement.

 

Termination

of the Executive for Cause shall be made by delivery to the Executive of a copy

of a resolution duly adopted by the affirmative vote of not less than a

majority of the non-employee members of the Board (or, after a Change in

Control, of the ultimate parent of the entity which caused the Change in

Control (if the Company has become a subsidiary) to have occurred), at a

meeting of such members called and held for such purpose, which meeting shall

be held not less than 30 days after the Company has provided prior written

notice to the Executive specifying the basis for such termination and the

particulars thereof and a reasonable opportunity for the Executive to cure or

otherwise resolve the behavior in question prior to such meeting, finding that,

in the reasonable judgment of such members, the conduct or event set forth in

any of clauses (i) through (v) above has occurred and that such occurrence

warrants the Executive’s termination.

 

(e)                                  Good Reason.  For purposes of this

Agreement, “Good Reason” shall mean the occurrence, during the term of this

Agreement, of any of the following, without the Executive’s express written

consent:

 

(i)                                     Any diminution in the Executive’s duties,

titles or responsibilities with the Company from those in effect immediately

prior to a Change in Control (or in the event that the Executive alleges that

Good Reason has occurred prior to but in connection with a Change in Control,

from those in effect prior to the date that is three months prior to the Change

in Control); provided, however, that no such diminution shall be

deemed to exist solely because of changes in the Executive’s duties, titles or

responsibilities as a consequence of the Company ceasing to be a company with

publicly traded securities or becoming a wholly owned subsidiary of another

Person or Group;

 

(ii)                                  Any reduction in the Executive’s annual base

salary and annual cash bonus percentage target established under the Company’s

annual incentive plan (the “Bonus Plan”) (together, the “Compensation”)

from the Executive’s Compensation in effect immediately prior to a Change in

Control (or in the event that the Executive alleges that Good Reason has

occurred prior to but in connection with a Change in Control, from such

Compensation in effect prior to the date that is three months prior to the

Change in Control);

 

(iii)                               any relocation of the Executive’s principal

work place to a location that is more than 35 miles from the location at which

the Executive was based immediately prior to a Change in Control (or in the

event that the Executive alleges that Good Reason has occurred prior to but in

connection with a Change in Control, from the location of

 

4

 

Executive’s

principal work place on the date that is three months prior to the Change in

Control);  or

 

(iv)                              any failure by the Company to obtain from any

successor to the Company an agreement, reasonably satisfactory to the

Executive, to assume and perform this Agreement, as contemplated by

Section 10(a) hereof.

 

Notwithstanding

the foregoing, in the event that the Executive provides the Company with a

Notice of Termination (as defined below) referencing this Section 3(e)

within 60 days after the occurrence of an event giving rise to Good Reason, the

Company shall have 30 days thereafter in which to cure or resolve the behavior

otherwise constituting Good Reason.

 

(f)                                    Notice of Termination.  Any

purported termination of the Executive’s employment (other than on account of

the Executive’s death) shall be communicated by a Notice of Termination to the

Executive, if such termination is by the Company, or to the Company, if such

termination is by the Executive.  For

purposes of this Agreement, “Notice of Termination” shall mean a written

notice which shall indicate the specific termination provision in this

Agreement relied upon and shall set forth in reasonable detail the facts and

circumstances claimed to provide a basis for termination of the Executive’s

employment under the provisions so indicated.  For purposes of this Agreement,

no purported termination of Executive’s employment with the Company shall be

effective without such a Notice of Termination having been given.

 

4.                                       Compensation Upon Termination of Employment.  If

the Executive’s employment by the Company shall be terminated in accordance

with Section 3(a) (the “Termination”), the Executive shall be

entitled to the following payments and benefits:

 

(a)                                  Severance.  The Company shall pay, or

cause to be paid, to the Executive a cash severance payment in an amount equal

to  the product of  two  times

the sum of (i) the Executive’s annual base salary on the date of the Change in

Control (or, if higher, the annual base salary in effect immediately prior to

the giving of the Notice of Termination) and (ii) the Executive’s target annual

bonus (“Target Bonus”) in respect of the fiscal year of the Company (a “Fiscal

Year”) in which the Termination occurs (or, if higher, the average annual

bonus actually earned by the Executive in respect of the three full Fiscal

Years prior to the year in which the Notice of Termination is given) under the

Bonus Plan. This cash severance amount shall be payable in a lump sum,

calculated without any present value discount, within 10 business days after

the Executive’s date of Termination.

 

(b)                                 Additional Payments and Benefits.  The

Executive shall also be entitled to:

 

(i)                                     a lump sum cash payment equal to the sum of

(A) the Executive’s accrued but unpaid base salary through the date of

Termination, (B) the unpaid portion, if any, of bonuses previously earned by

the Executive pursuant to the Bonus Plan, (C) in respect of the Fiscal Year in

which the date of Termination occurs, the higher of (x) the pro rata portion of

the Executive’s Target Bonus and (y) if the Company is exceeding the

performance targets established under the Bonus Plan for such Fiscal Year as of

the date of Termination, the Executive’s actual annual bonus payable under the

Bonus Plan based upon such achievement (such pro rata portion in either case

calculated from January 1 of

 

5

 

such

year through the date of Termination) (such payment, the “Pro Rata Bonus”),

and (D) any other compensation previously deferred (excluding qualified plan

deferrals by the Executive under or into benefit plans of the Company), and (E)

an amount representing the Executive’s accrued but unused vacation days, if

any, in each case for subsections (A) through (E) above, in full satisfaction

of the Executive’s rights thereto;

 

(ii)                                  continued medical, dental, vision, and life

insurance coverage (excluding accidental death and disability insurance) (“Welfare

Benefit Coverage”) for the Executive and the Executive’s eligible

dependents or, to the extent Welfare Benefit Coverage is not commercially

available, such other Welfare Benefit Coverage reasonably acceptable to the

Executive, on the same basis as in effect prior to the Executive’s Termination,

for a period ending on the earlier of (A) the second anniversary of the date of

Termination (the “Continuation Period”) and (B) the commencement of

comparable Welfare Benefit Coverage by the Executive with a subsequent

employer;

 

(iii)                               continued provision of the perquisites the

Executive enjoyed prior to the date of Termination for a period ending on the

earlier of (A) the end of the Continuation Period and (B) the receipt by the

Executive of comparable perquisites from a subsequent employer;

 

(iv)                              immediate 100% vesting of all outstanding

stock options, stock appreciation rights, phantom stock units and restricted

stock granted or issued by the Company prior to, on or upon the Change in

Control (to the extent not previously vested on or following the Change in

Control);

 

(v)                                 additional Company contributions under the

Company’s qualified defined contribution plan and any other retirement plans in

which the Executive participated prior to the date of Termination during the

Continuation Period; provided, however, that where such

contributions may not be provided without adversely affecting the qualified

status of such plan or where such contributions are otherwise prohibited by any

such plans, the Executive shall instead receive an additional lump sum payment

equal to the contributions that would have been made during the Continuation

Period if the Executive had remained employed with the Company during such

period; and

 

(vi)                              all other accrued or vested benefits in

accordance with the terms of any applicable Company plan, which vested benefits

shall include the Executive’s otherwise unvested account balances in the

Company’s qualified defined contribution plan, which shall become vested as of

the date of Termination (the “Accrued Benefits”) (with an offset for any

amounts paid under Section 4(b)(i)(D), above).

 

All

lump sum payments under this Section 4(b) shall be paid within 10 business

days after the Executive’s date of Termination.

 

(c)                                  Outplacement.  If

so requested by the Executive, outplacement services shall be provided by a

professional outplacement provider selected by the Executive; provided, however,

that such outplacement services shall be provided to the Executive at a cost to

the Company of not more than $15,000.

 

6

 

(d)                                 Legal Expenses.  The

Company shall pay or reimburse the Executive for reasonable legal fees

(including without limitation, any and all court costs and attorneys’ fees and

expenses) incurred by the Executive in connection with or as a result of any

claim, action or proceeding brought by the Company or the Executive with

respect to or arising out of this Agreement or any provision hereof; provided,

however, that the Company shall have no obligation to pay or reimburse

any such legal fees if (i) in the case of an action brought by the Executive,

the Company is successful in establishing with the court that the Executive’s

action was taken in bad faith or was frivolous or otherwise without a

reasonable legal or factual basis, or (ii) in the case of any action, the

action is materially decided in favor of the Company.

 

5.                                       Compensation Upon Termination for Death,

Disability, Retirement.  If the Executive’s employment is terminated

by reason of Death, Disability or Retirement prior to any other Termination

(other than in anticipation of a termination for Cause by the Company), the

Executive will receive:

 

(a)                                  the sum of (i) the Executive’s accrued but

unpaid base salary through the date of Termination, (ii) the Pro Rata Bonus,

and (iii) any compensation previously deferred (excluding any qualified plan

deferrals) by the Executive under or into benefit plans of the Company and an

amount representing the Executive’s accrued but unused vacation days, if any,

in each case, in full satisfaction of the Executive’s rights thereto; and

 

(b)                                 the Accrued Benefits (with an offset for any

amounts paid under Section 5(a)(iii), above).

 

6.                                       Compensation Upon Termination by the Company

for Cause.  If the Executive’s employment is terminated

by the Company for Cause, the Executive will receive the sum of the Executive’s

accrued but unpaid salary through the date of Termination and an amount

representing the Executive’s accrued but unused vacation days, if any, in each

case, in full satisfaction of the Executive’s rights thereto.

 

7.                                       Excess Parachute Excise Tax. 

Notwithstanding any other provision of this Agreement,

 

(a)                                  If it is determined (as provided in

Section 7(c), below) that the payments and benefits provided under

Section 4(a) and Sections 4(b)(i), (ii) and (iii), in the aggregate (a “Payment”),

would be subject to the excise tax imposed under Section 4999 (or any

successor provision thereto) of the Internal Revenue Code of 1986, as amended

(the “Code”) by reason of being “contingent on a change in ownership or

control” of the Company, within the meaning of Section 280G of the Code

(or any successor provision thereto) or to any similar tax imposed by state or

local law, or any interest or penalties with respect to such excise tax (such

tax or taxes, together with any such interest and penalties, are hereafter

collectively referred to as the “Excise Tax”), and the aggregate value

of the Payment exceeds 3.0 times the Executive’s “base amount,” as defined in

Section 280G(b)(3) of the Code (the (“Base Amount”) by five percent

(5%) or less, then the Payment shall be reduced to the extent necessary so that

the aggregate value of the Payment is equal to 2.99 times the Base Amount (the

“Reduced Amount”); provided, however, that if the

aggregate value of the Payment exceeds the Base Amount by more than five

percent (5%), then the Executive shall be entitled to receive an additional

payment or payments (a “Gross-Up Payment”) in an amount such that, after

payment by the Executive of all taxes

 

7

 

(including

any interest or penalties imposed with respect to such taxes), including any

Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount

of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

 

(b)                                 If the determination made pursuant to

Section 7(a) results in a reduction of the payments that would otherwise

be paid to the Executive except for the application of Section 7(a)(i)

hereof, the Executive may then elect, in his sole discretion, which and how

much of any particular entitlement shall be eliminated or reduced and shall

advise the Company in writing of his election within 10 days of the

determination of the reduction in payments. 

If no such election is made by the Executive within such 10-day period,

the Company may elect which and how much of any entitlement shall be eliminated

or reduced and shall notify the Executive promptly of such election.  Within 10 days following such determination

and the elections hereunder, the Company shall pay to or distribute to or for

the benefit of the Executive such amounts as are then due to the Executive

under this Agreement and shall promptly pay to or distribute to or for the

benefit of the Executive in the future such amounts as become due to the

Executive under this Agreement.

 

(c)                                  Subject to the provisions of

Section 7(a) hereof, all determinations required to be made under this

Section 7, including whether an Excise Tax is payable by the Executive and

the amount of such Excise Tax and whether a Gross-Up Payment is required and

the amount of such Gross-Up Payment, shall be made by the nationally recognized

firm of certified public accountants (the “Accounting Firm”) used by the

Company prior to the Change in Control (or, if such Accounting Firm declines to

serve, the Accounting Firm shall be a nationally recognized firm of certified

public accountants selected by the Executive). 

The Accounting Firm shall be directed by the Company or the Executive to

submit its preliminary determination and detailed supporting calculations to

both the Company and the Executive within 15 calendar days after the date of

Termination, if applicable, and any other such time or times as may be

requested by the Company or the Executive. 

If the Accounting Firm determines that the aggregate value of the

Payment exceeds the Base Amount by more than 5% such that an Excise Tax is

payable by the Executive, the Company shall pay the required Gross-Up Payment

to, or for the benefit of, the Executive within five business days after

receipt of such determination and calculations.  If the Accounting Firm determines that no Excise Tax is payable

by the Executive, it shall, at the same time as it makes such determination,

furnish the Executive with an opinion that he has substantial authority not to

report any Excise Tax on his/her federal, state, local income or other tax

return.  Any determination by the

Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon

the Company and the Executive absent a contrary determination by the Internal

Revenue Service or a court of competent jurisdiction; provided, however,

that no such determination shall eliminate or reduce the Company’s obligation

to provide any Gross-Up Payment as a result of such contrary determination.  As a result of the uncertainty in the

application of Section 4999 of the Code (or any successors provision

thereto) and the possibility of similar uncertainty regarding state or local

tax law at the time of any determination by the Accounting Firm hereunder, it

is possible that Gross-Up Payments that will not have been made by the Company

should have been made (an “Underpayment”), consistent with the

calculations required to be made hereunder. 

In the event that the Company exhausts or fails to pursue its remedies

pursuant to Section 7(e) hereof and the Executive thereafter is required

to make a payment of any Excise Tax, the Executive shall direct the Accounting

Firm to determine the amount of the Underpayment that has occurred and to submit

its determination and detailed supporting calculations to both the Company and

the

 

8

 

Executive

as promptly as possible. Any such Underpayment shall be promptly paid by the

Company to, or for the benefit of, the Executive within five business days

after receipt of such determination and calculations.

 

(d)                                 The federal, state and local income or other

tax returns filed by the Executive (or any filing made by a consolidated tax

group that includes the Company) shall be prepared and filed on a consistent

basis with the determination of the Accounting Firm with respect to the Excise

Tax payable by the Executive.  The

Executive shall make proper payment of the amount of any Excise Tax, and at the

request of the Company, provide to the Company true and correct copies (with

any amendments) of his/her federal income tax return as filed with the Internal

Revenue Service and corresponding state and local tax returns, if relevant, as

filed with the applicable taxing authority, and such other documents reasonably

requested by the Company, evidencing such payment.  If, prior to the filing of the Executive’s federal income tax

return, or corresponding state or local tax return, if relevant, the Accounting

Firm determines that the amount of the Gross-Up Payment should be reduced, the

Executive shall within 10 business days pay to the Company the amount of such

reduction.

 

(e)                                  (i) In the event that the Internal Revenue

Service claims that any payment or benefit received under this Agreement

constitutes an “excess parachute payment,” within the meaning of

Section 280G(b)(1) of the Code (or any successor provision thereto), the

Executive shall notify the Company in writing of such claim.  Such notification shall be given as soon as

practicable but no later than 10 business days after the Executive is informed

in writing of such claim and shall apprise the Company of the nature of such

claim and the date on which such claim is requested to be paid.  The Executive shall not pay such claim prior

to the expiration of the 30 day period following the date on which the

Executive gives such notice to the Company (or such shorter period ending on

the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in

writing prior to the expiration of such period that it desires to contest such

claim, the Executive shall (i) give the Company any information reasonably

requested by the Company relating to such claim; (ii) take such action in

connection with contesting such claim as the Company shall reasonably request

in writing from time to time, including without limitation, accepting legal

representation with respect to such claim by an attorney reasonably selected by

the Company and reasonably satisfactory to the Executive; (iii) cooperate with

the Company in good faith in order to effectively contest such claim; and (iv)

permit the Company to participate in any proceedings relating to such claim; provided,

however, that the Company shall bear and pay directly all costs and

expenses (including, but not limited to, additional interest and penalties and

related legal, consulting or other similar fees) incurred in connection with

such contest and shall indemnify and hold the Executive harmless, on an after-tax

basis, for and against any Excise Tax or other tax (including interest and

penalties with respect thereto) imposed as a result of such representation and

payment of costs and expenses.

 

(ii)                                  The Company shall control all proceedings

taken in connection with such contest and, at its sole option, may pursue or

forgo any and all administrative appeals, proceedings, hearings and conferences

with the taxing authority in respect of such claim and may, at its sole option,

either direct the Executive to pay the tax claimed and sue for a refund or

contest the claim in any permissible manner, and the Executive agrees to

prosecute such contest to a determination before any administrative tribunal,

in a court of initial jurisdiction and in one or more appellate courts, as the

Company shall determine; provided, however, that if the Company

directs the Executive to pay such claim and sue

 

9

 

for

a refund, the Company shall advance the amount of such payment to the Executive

on an interest-free basis, and shall indemnify and hold the Executive harmless,

on an after-tax basis, from any Excise Tax or other tax (including interest and

penalties with respect thereto) imposed with respect to such advance or with

respect to any imputed income with respect to such advance; and provided,

further, that if the Executive is required to extend the statute of

limitations to enable the Company to contest such claim, the Executive may

limit this extension solely to such contested amount.  The Company’s control of the contest shall be limited to issues

with respect to which a corporate deduction would be disallowed pursuant to

Section 280G of the Code and the Executive shall be entitled to settle or

contest, as the case may be, any other issue raised by the Internal Revenue

Service or any other taxing authority. 

In addition, no position may be taken nor any final resolution be agreed

to by the Company without the Executive’s consent if such position or resolution

could reasonably be expected to adversely affect the Executive (including any

other tax position of the Executive unrelated to matters covered hereby).

 

(iii)          If, after the

receipt by the Executive of an amount advanced by the Company in connection

with the contest of the Excise Tax claim, the Executive becomes entitled to

receive any refund with respect to such claim, the Executive shall promptly pay

to the Company the amount of such refund (together with any interest paid or

credited thereon after taxes applicable thereto); provided, however,

if the amount of that refund exceeds the amount advanced by the Company or it

is otherwise determined for any reason that additional amounts could be paid to

the Executive without incurring any Excise Tax, any such amount will be

promptly paid by the Company to the named Executive.  If, after the receipt by the Executive of an amount advanced by

the Company in connection with an Excise Tax claim, a determination is made

that the Executive shall not be entitled to any refund with respect to such claim

and the Company does not notify the Executive in writing of its intent to

contest the denial of such refund prior to the expiration of 30 days after such

determination, such advance shall be forgiven and shall not be required to be

repaid and shall be deemed to be in consideration for services rendered after

the date of the Termination.

 

(f)                                    The Company and the Executive shall each

provide the Accounting Firm access to and copies of any books, records and

documents in the possession of the Company or the Executive, as the case may

be, reasonably requested by the Accounting Firm, and otherwise cooperate with

the Accounting Firm in connection with the preparation and issuance of the

determination contemplated by Section 7(c) hereof.

 

(g)                                 The fees and expenses of the Accounting Firm

for its services in connection with the determinations and calculations

contemplated by Section 7(c) hereof shall be borne by the Company.  If such fees and expenses are initially advanced

by the Executive, the Company shall reimburse the Executive the full amount of

such fees and expenses within five business days after receipt from the

Executive of a statement therefor and reasonable evidence of his or her payment

thereof.

 

10

 

8.                                       Obligations Absolute; Non-Exclusivity of

Rights; Joint and Several Liability.

 

(a)                                  The obligations of the Company to make the

payment to the Executive, and to make the arrangements, provided for herein

shall be absolute and unconditional and shall not be reduced by any

circumstances, including without limitation any set-off, counterclaim,

recoupment, defense or other right which the Company may have against the

Executive or any third party at any time.

 

(b)                                 Nothing in this Agreement shall prevent or

limit the Executive’s continuing or future participation in any benefit, bonus,

incentive or other plan or program provided by the Company and for which the

Executive may qualify (other than any change in control or other severance plan

or policy), nor shall anything herein limit or reduce such rights as the

Executive may have under any agreements with the Company.  Amounts which are vested benefits or which

the Executive is otherwise entitled to receive under any plan or program of the

Company shall be payable in accordance with such plan or program, except as

explicitly modified by this Agreement.

 

(c)                                  Any successors or assigns of the Company

shall be joint and severally liable with the Company under this Agreement.

 

9.                                       Entire Agreement; Not an Employment Agreement;

No Duplication of Payments or Benefits.

 

(a)           This Agreement constitutes the entire

agreement of the parties hereto and supersedes all prior and contemporaneous

agreements and understandings (including term sheets), both written and oral,

between the parties hereto, or either of them, with respect to the subject

matter hereof.  No agreements or

representations, oral or otherwise, express or implied, with respect to the

subject matter hereof have been made by either party which are not expressly

set forth in this Agreement.

 

(b)                                 This Agreement is not, and nothing herein

shall be deemed to create, a contract of employment between the Executive and

the Company. The Company may terminate the employment of the Executive by the

Company at any time, subject to the terms of this Agreement and/or any

employment agreement or arrangement between the Company and the Executive that

may then be in effect.

 

(c)                                  To the extent, and only to the extent, a

payment or benefit that is paid or provided under Section 4 would also be

paid or provided under the terms of another Company plan, program or

arrangement (a “Company Plan”), (i) in the event that such payment or benefit

is first paid or provided under the terms of a Company Plan prior to the date

such payment or benefit is paid or provided under Section 4, such payment

or benefit shall offset any corresponding payment or benefit that is paid or

provided under Section 4, and (ii) in the event that such payment or

benefit is first paid or provided under Section 4, such Company Plan will

be deemed to have been satisfied by the corresponding payment or benefit made

or provided under Section 4.

 

11

 

10.                                 Successors; Binding Agreement, Assignment.

 

(a)                                  The Company shall require any successor

(whether direct or indirect, by purchase, merger, consolidation or otherwise)

to all or substantially all of the business of the Company, by agreement to

expressly, absolutely and unconditionally assume and agree to perform this

Agreement in the same manner and to the same extent that the Company would be

required to perform it if no such succession had taken place. As used in this

Agreement, “Company” shall mean (i) the Company as hereinbefore defined, and

(ii) any successor to all the stock of the Company or to all or substantially

all of the Company’s business or assets which executes and delivers an

agreement provided for in this Section 10(a) or which otherwise becomes

bound by all the terms and provisions of this Agreement by operation of law, including

any parent or subsidiary of such a successor.

 

(b)                                 This Agreement shall inure to the benefit of

and be enforceable by the Executive’s personal or legal representatives,

executors, administrators, successors, heirs, distributees, devisees and legatees.

If the Executive should die while any amount would be payable to the Executive

hereunder if the Executive had continued to live, all such amounts, unless

otherwise provided herein, shall be paid in accordance with the terms of this

Agreement to the Executive’s estate or designated beneficiary.  Neither this Agreement nor any right arising

hereunder may be assigned or pledged by the Executive.

 

11.                                 Notice.  For purpose of this

Agreement, notices and all other communications provided for in this Agreement

or contemplated hereby shall be in writing and shall be deemed to have been

duly given when personally delivered, delivered by a nationally recognized

overnight delivery service or when mailed United States certified or registered

mail, return receipt requested, postage prepaid, and addressed, in the case of

the Company, to the Company at:

 

Weight

Watchers International, Inc.

175

Crossways Park West

Woodbury,

New York 11797

Attention:  Board of Directors

 

and

in the case of the Executive, to the Executive at the address set forth on the

execution page at the end hereof.

 

Either

party may designate a different address by giving notice of change of address

in the manner provided above, except that notices of change of address shall be

effective only upon receipt.

 

12.                                 Confidentiality.  The

Executive shall retain in confidence any and all confidential information

concerning the Company, its shareholders, officers, directors and customers and

its respective business which is now known or hereafter becomes known to the

Executive, except as otherwise required by law and except information (i)

ascertainable or obtained from public information, (ii) received by the

Executive at any time after the Executive’s employment by the Company shall

have terminated, from a third party not employed by or otherwise affiliated

with the Company or (iii) which is or becomes known to the public by any means

other than a breach of this Section 12. 

Upon the Termination of employment, the

 

12

 

Executive

will not take or keep any proprietary or confidential information or

documentation belonging to the Company.

 

13.                                 Miscellaneous.

 

(a)                                  Amendments.  No provision of this

Agreement may be amended, altered, modified, waived or discharged unless such

amendment, alteration, modification, waiver or discharge is agreed to in

writing signed by the Executive and such officer of the Company as shall be

specifically designated by the Committee or by the Board.

 

(b)                                 Waivers.  No waiver by either party, at

any time, of any breach by the other party of, or of compliance by the other

party with, any condition or provision of this Agreement to be performed or

complied with by such other party shall be deemed a waiver of any similar or

dissimilar provision or condition of this Agreement or any other breach of or

failure to comply with the same condition or provision at the same time or at

any prior or subsequent time.  No

agreements or representations, oral or otherwise, express or implied, with

respect to the subject matter hereof have been made by either party which are

not expressly set forth in this Agreement.

 

14.                                 Severability.  If

any one or more of the provisions of this Agreement shall be held to be

invalid, illegal or unenforceable, the validity, legality and enforceability of

the remaining provisions of this Agreement shall not be affected thereby. To

the extent permitted by applicable law, each party hereto waives any provision

of law that renders any provision of this Agreement invalid, illegal or unenforceable

in any respect.

 

15.                                 Governing Law; Venue.  The

validity, interpretation, construction and performance of this Agreement shall

be governed on a non-exclusive basis by the laws of the State of New York

without giving effect to its conflict of laws rules.  For purposes of jurisdiction and venue, the Company hereby

consents to jurisdiction and venue in any suit, action or proceeding with

respect to this Agreement in any court of competent jurisdiction in the state

in which the Executive resides at the commencement of such suit, action or

proceeding and waives any objection, challenge or dispute as to such

jurisdiction or venue being proper.

 

16.                                 Counterparts. 

This Agreement may be executed in two or more counterparts, each of

which shall be an original and all of which shall be deemed to constitute one

and the same instrument.

 

[Signatures on next page.]

 

13

 

IN

WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date

first above written.

 

 

	

   

  	

  WEIGHT

  WATCHERS INTERNATIONAL, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  EXECUTIVE:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Address:

  	

   

  	

   

  
					

 

14

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