in re weight watchers international, inc. securities litigation 14-cv-01997-consolidated

Case 1:14-cv-01997-LAK Document 37 Filed 08/12/14 of 95

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

) IN RE WEIGHT WATCHERS ) Case No. 14-cv-1997-LAK INTERNATIONAL, INC. SECURITIES ) LITIGATION ) DEMAND FOR JURY TRIAL

) )

CONSOLIDATED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS


TABLE OF CONTENTS

I. NATURE OF THE ACTION.............................................................................................2

II. JURISDICTION AND VENUE ......................................................................................... 6

III. PARTIES ............................................................................................................................ 7

IV. CONTROL PERSON ALLEGATIONS........................................................................... 10

V. BACKGROUND .............................................................................................................. 13

A. Artal ......................................................................................................................... 13

1. Artal Controls Weight Watchers, its Board of Directors and its CEO.................................................................................................................. 14

2. Artal Has Recouped its Investment in Weight Watchers Approximately 17 Times Over........................................................................ 16

B. Weight Watcher’s Online Business ......................................................................... 18

VI. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSIONS DURING THE CLASS PERIOD..........................19

A. Fourth Quarter/Full Year Fiscal 2011 Results and Announcement of Dutch- Auction Tender Offer................................................................................... 19

B. Tender Offer Closes................................................................................................. 31

C. First Quarter Fiscal 2012 Results............................................................................. 34

D. Second Quarter Fiscal 2012 Results........................................................................39

E. Stifel Nicolaus Healthcare Conference – September 6, 2012.................................. 46

F. Third Quarter Fiscal 2012 Results...........................................................................47

VII. THE TRUTH EMERGES................................................................................................. 53

VIII. POST-CLASS PERIOD DISCLOSURES........................................................................ 55

IX. THE TENDER OFFER WAS USED AS A MANIPULATIVE DEVICE TO TAKE ADVANTAGE OF THE HIGH PRICE OF WEIGHT WATCHERS’ STOCK BEFORE MATERIAL ADVERSE INFORMATION KNOWN TO DEFENDANTS WAS DISCLOSED............................57

X. ADDITIONAL SCIENTER ALLEGATIONS................................................................. 60

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A. The Officer Defendants Profited From Class Period Stock Sales Timed to Take Advantage of the February 2012 Disclosures .................................62

1. The Value and Amount of Stock Sales By the Officer Defendants During the Class Period Were Extremely Large and HighlyUnusual................................................................................................. 62

2. The Amount and Percentage of Shares Sold By the Officer Defendants During the Class Period Were Extraordinary and Inconsistent with Prior Trading History........................................................... 63

3. The Officer Defendants’ Sales Were Suspiciously Large Compared to their Share Acquisitions.............................................................. 64

4. The Officer Defendants Generated Enormous Abnormal Profits on Their Sales of Weight Watchers Stock........................................................65

5. The Officer Defendants Suspiciously Exercised Their Employee Stock Options Early, Then Immediately Sold The Shares Acquired Before Weight Watchers’ Stock Price Collapsed.............................70

6. Sardini and Kirchhoff Suspiciously Adopted 10b5-1 Plans During the Class Period; However, Those Plans Do Not Insulate This Trading Behavior...................................................................................... 73

7. Weight Watchers’ Incentive-Loaded Executive Compensation Structure Provided Additional Incentives to Withhold Adverse Information....................................................................................................... 77

XI. NO SAFE HARBOR ........................................................................................................ 79

XII. CLASS ACTION ALLEGATIONS .................................................................................80

XIII. APPLICABILITY OF PRESUMPTION OF RELIANCE UNDER THE AFFILIATED UTE DOCTRINE, AND/OR, IN THE ALTERNATIVE, THE FRAUD ON THE MARKET DOCTRINE.............................................................. 81

XIV. LOSS CAUSATION/ECONOMIC LOSS .......................................................................83

COUNT I For Violations of §10(b) of the Exchange Act and Rule 10b-5 Against Defendant Weight Watchers and the Officer Defendants.................................................85

COUNT II For Violations of §20(a) of the Exchange Act Against Kirchhoff, Sardini, Debbane, and Artal.............................................................................................. 86

PRAYER FOR RELIEF ...............................................................................................................89

JURYDEMAND.......................................................................................................................... 90

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Lead Plaintiffs Oklahoma Police Pension & Retirement System (“Oklahoma Police”) and

KBC Asset Management NV (“KBC” together with Oklahoma Police, “Lead Plaintiffs”) by their

undersigned attorneys, hereby bring this Consolidated Complaint (“Complaint”) against Weight

Watchers International, Inc. (“Weight Watchers” or the “Company”), David P. Kirchhoff

(“Kirchhoff’), Ann M. Sardini (“Sardini”), Raymond Debbane (“Debbane”), and Artal Group,

S.A. (“Artal”). 1 The allegations herein are based on Lead Plaintiffs’ personal knowledge as to

their own acts and on information and belief as to all other matters, such information and belief

having been informed by the investigation conducted by and under the supervision of Co-Lead

Counsel, which included interviews of former employees of Weight Watchers and other

individuals with knowledge of the matters alleged herein, 2 review and analysis of publicly

available information, including Securities and Exchange Commission (“SEC”) filings by

Weight Watchers, as well as regulatory filings and reports, securities analysts’ reports and

advisories about the Company, press releases and other public statements issued by the

Company, media reports about the Company, and consultation with experts. Lead Plaintiffs

believe that substantial additional evidentiary support will exist for the allegations set forth

herein after a reasonable opportunity for discovery. On behalf of themselves and the class they

seek to represent, Lead Plaintiffs allege as follows:

1 Kirchhoff and Sardini are referred to as the “Officer Defendants.” Debbane and Artal are referred to as the “Artal Defendants.” The Officer Defendants, the Artal Defendants and the Company are collectively referred to herein as “Defendants.”

2 Confidential witnesses (“CWs”) will be identified by number (CW-1, CW-2, etc.). All CWs will be described in the masculine to protect their identities.


I. NATURE OF THE ACTION

This is a securities class action on behalf of all purchasers of the common stock of

Weight Watchers between February 14, 2012 and February 13, 2013, inclusive (the “Class

Period”). Lead Plaintiffs seek to pursue remedies against Weight Watchers and two of its former

senior executives under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the

“Exchange Act”), and Rule 10b-5 promulgated thereunder, and against its controlling

shareholder and the controlling shareholder’s CEO under §20(a) of the Exchange Act.

2. The Class Period starts on February 14, 2012 when Weight Watchers announced

that it would conduct a modified Dutch auction tender offer designed to repurchase up to 8.78

million shares, or $720 million worth of the Company’s outstanding common stock. Pursuant to

the terms of the tender offer, Weight Watchers would separately purchase an equal number of

shares at a matching price from Artal (Weight Watcher’s controlling shareholder) maintaining

Artal’s ownership stake in the Company at a constant percentage. 3 In order to fund this

repurchase of nearly $1.5 billion in stock, Weight Watchers took on an additional $1.5 billion in

debt. The tender offer closed on March 22, 2012.

Defendants implemented this tender offer at a time when participation in Weight

Watchers’ traditional meetings was already beginning to decline, but before investors were

informed of the real reasons for that decline, reasons that meant that the decline was likely to

continue.

3 By Weight Watchers’ own admission, Artal (defined in ¶ 19 below) “controls” the Company through its ownership of the majority of the voting rights of the shares of Weight Watchers and through Artal’s five representatives on Weight Watchers’ nine-person Board of Directors. See ¶¶ 31-36, supra.

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4. By February 14, 2012, Defendants knew, but concealed from the investing public,

among other things, that: (1) it was growing increasingly difficult to convince dieters to pay for

Weight Watchers’ meetings and online subscriptions when there was an abundance of free

smartphone applications (“free apps”) and gadgets to help dieters track food intake, exercise, and

weight loss goals. Many of the free apps had more functionality, more comprehensive food

databases and more social media inter-connectivity than Weight Watchers’ online offerings; (2)

because of increased competition from free apps, the growth rate in the Company’s important

online segment was slowing down; (3) Weight Watchers’ online-only membership, offered at a

significantly lower price per month than the Company’s traditional membership, was

cannibalizing some of the Company’s lucrative meetings business. This was causing a

fundamental problem in the Company’s business model as its online-only offering was much less

unique (and subject to many more competitors) than its traditional and time-tested weight-loss

business model involving weekly meetings headed by former members; (4) because of Weight

Watchers’ online-only offering plus the free apps from other companies, Weight Watchers’

enrollment figures for meetings were trending significantly downward; and (5) as a result, the

Company was not on track to achieve the results that the Officer Defendants had led the market

to expect.

5. Confidential Witnesses confirm that Defendants knew about these negative trends

prior to announcing the tender offer and before providing investors with earnings guidance that

they knew or should have known could not be achieved without an unexpected reversal of those

trends. For example, CW-1 (discussed at ¶¶ 55-58) confirms that Weight Watchers was feeling

the effects of competition from free apps in 2011, even before the above-referenced tender offer.

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6. Investors began to learn about the impact of the free apps and online fitness

monitors before Defendants informed them that the free apps and online fitness monitors were

the cause of the Company’s struggles. On May 2, 2012, after the market closed, Weight

Watchers announced: 1) disappointing results for the first quarter 2012 ended March 31, 2012,

and; 2) reduced full-year 2012 earnings guidance – much lower than had been provided by the

Company on February 14, 2012 – the date the tender offer was announced. Weight Watchers’

CEO Kirchhoff attributed the disappointing first quarter results to short-term “execution issues”

and a tough first quarter comparison against the prior year rather than admitting to the long-term

challenges posed by free apps. On this news, Weight Watchers’ stock price fell $13.72 per

share, or 18% to close at $62.29 per share on May 3, 2012 .

7. However, the Defendants had visibility into all of the negative trends, including

the long-term impact and threat caused by the increased number of free apps on the market even

before the May 2, 2012 announcement. Specifically, Kirchhoff and Sardini knew, or were

reckless in not knowing, of these negative developments when they sold their shares into the

tender offer on March 22, 2012 for proceeds of approximately $3 million. The Artal Defendants

also knew, or were reckless in not knowing, of these negative developments when they sold

Artal’s shares back to the Company on April 9, 2012, after the quarter had already closed, for

proceeds of $778.9 million . Thus, the Artal Defendants, Kirchhoff and Sardini engaged in a

deliberate attempt to boost the share price of Weight Watchers so they could cash out their own

holdings, while at the same time omitting material information from the market that they had a

duty to disclose.

8. Defendants continued not only to conceal material information about the impact

and long-term threat posed by free apps from investors after the May 2, 2012 disclosure of

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missed earnings, but to outright deny that impact. 4 When addressing the effect of free weight-

loss apps on August 1, 2012, September 6, 2012, and November 5, 2012, CEO Kirchhoff

dismissed analysts’ concerns and reiterated the Company’s projections without disclosing: a) the

harm that free weight-loss apps were then having on the Company’s recruitment efforts and b)

the fact that the Company’s online-only membership had begun to cannibalize Weight Watchers’

meetings business.

9. On August 1, 2012, in connection with the release of the Company’s results for

the second quarter of fiscal 2012, the Company once again disclosed the impact of the competing

free weight loss apps on the Company’s business without informing investors that the competing

free apps were a significant cause of the decline in business. CEO Kirchhoff stated that during

June and July of 2012, Weight Watchers had witnessed “weakening in our business trends”

including declines in the Company’s North American meeting business which negatively

affected revenues and attendance. Kirchhoff explained that part of the volume shortfall was due

to the continued impact of the execution issues in the small accounts portion of the corporate

business and, further, that part of the problem was a considerable slowdown in enrollment trends

starting in June and continuing through July of 2012. The slowdown was also affecting the

Weight Watchers.com business – traditionally the Company’s growth engine. Based on these

trends, the Kirchhoff disclosed that, “the second-half recovery that we previously forecasted will

not happen,” and again reduced its full year 2012 earnings guidance. On this news, the price of

Weight Watchers common stock plunged another 15.7%, from $ 50.60 on July 31, 2012, to

4 Weight Watchers also has apps for iOS and Android, but they can only be accessed by the Company’s paid members which limits their appeal to new customers. Unlike the free apps offered by competitors, an online-only Weight Watchers membership costs approximately $18.95 per month plus a one-time start-up fee of $29.95.

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close at $ 42.66 per share on August 2, 2012 , on unusually high trading volume. However,

Defendants continued to conceal the role that free weight-loss apps were then having on Weight

Watchers’ business and market share.

10. It was not until February 13, 2013 that Weight Watchers finally admitted that its

online business had been feeling the effects of free apps and that the Company needed “to shift

gears to leverage the groundswell of people interested in weight loss mobility tools by

communicating the full value proposition of Weight Watchers online.” Because of the effects of

the free app competition, and the impact the competing free apps were expected to have on the

Company going forward, Weight Watchers reduced its 2013 guidance – taking its full year

estimated EPS down another $0.75 to $1.25 per share from Thomson Reuters’ consensus

estimates. In response, the price of Weight Watchers’ stock fell 17%, from $54.11 per share on

February 13, 2013 to $44.91 per share on February 14, 2013 – down from its Class Period

high of $82.00 per share .

II. JURISDICTION AND VENUE

11. Jurisdiction is conferred by §27 of the Exchange Act. The claims asserted herein

arise under §§10(b) and 20(a) of the Exchange Act (15 U.S.C.§§78j(b) and 78t(a)) and Rule 10b-

5 (17 C.F.R. §240.10b-5) promulgated thereunder. This Court has jurisdiction over the subject

matter of this action under 28 U.S.C. §§1331 and 1337, and §27 of the Exchange Act.

12. Venue is proper in this District pursuant to §27 of the Exchange Act and 28

U.S.C. §1391(b) as the Company’s common stock was traded on the New York Stock Exchange

(“NYSE”) throughout the Class Period, the Company maintains its corporate headquarters in this

District, and the alleged misconduct was transacted in and emanated from this District.

13. In connection with the acts alleged in this Complaint, Defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

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limited to, the mails, interstate telephone communications and the facilities of the national

securities markets.

III. PARTIES

14. Court-appointed Lead Plaintiff Oklahoma Police is a defined-benefit retirement

system founded in January 1981 to provide pension and other specified benefits for qualified

police officers and their beneficiaries from the participating municipalities. Oklahoma Police is

overseen by a board of thirteen members: seven elected by Oklahoma Police members; one

appointed by each of Oklahoma’s Governor, Speaker of the House, and President Pro Tempore

of the Senate; one appointed by the President of the Oklahoma Municipal League; and two by

virtue of their offices: Oklahoma’s State Insurance Commissioner and Director of State Finance.

As of March 2014, Oklahoma Police managed more than $2.1 billion in assets on behalf of more

than 8,500 beneficiaries. As set forth in the previously filed Certification Pursuant to Federal

Securities Laws dated May 1, 2014, Oklahoma Police purchased the common stock of Weight

Watchers at artificially inflated prices and has been damaged thereby. [ECF No. 20-1].

15. Court-appointed Lead Plaintiff KBC, founded in June 2000 and headquartered in

Brussels, Belgium, is an investment management company that provides financial and

investment services. As part of its asset management services, KBC is responsible for managing

mutual, private, and institutional funds. KBC currently holds approximately $215 billion in

assets under administration. As set forth in the previously filed Certification Pursuant to Federal

Securities Laws dated May 19, 2014, KBC purchased the common stock of Weight Watchers at

artificially inflated prices and has been damaged thereby. [ECF No. 20-1].

16. Defendant Weight Watchers is the world’s leading provider of weight

management services, operating globally through a network of Company-owned and franchise

operations. In fiscal 2012, consumers spent $5 billion on Weight Watchers branded products and

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services, including meetings conducted by the Company and its franchisees, Internet subscription

products sold by WeightWatchers.com , products sold at meetings, licensed products sold in retail

channels, magazine subscriptions, and other publications. The Company’s common stock was

listed on the NYSE, an efficient market, throughout the Class Period, under the ticker symbol

“WTW.” As of January 31, 2013, the Company had approximately 55 million shares of common

stock issued and outstanding.

17. Defendant Kirchhoff was the Company’s Chief Executive Officer (“CEO”) and

President from December 31, 2006 until his resignation on July 30, 2013. Kirchhoff also served

as a Weight Watchers Director during the same period of time. During his tenure as CEO,

Kirchhoff signed the Company’s quarterly and annual reports filed with the SEC. In 2012 and

2013, Kirchhoff received approximately $4.67 million and $4.97 million, respectively, in total

compensation including stock awards. This was a significant increase from Kirchhoff’s total

compensation of $2.96 million in 2011. During the Class Period - from March 16, 2012 through

April 4, 2012 - Kirchhoff sold 80,275 shares of Weight Watchers’ common stock for gross

proceeds of approximately $6.5 million. Kirchhoff was a direct and substantial participant in the

fraud.

18. Defendant Sardini served as the Chief Financial Officer (“CFO”) of Weight

Watchers from the start of the Class Period until her resignation effective March 30, 2012.

Sardini subsequently retired from the Company effective June 29, 2012. Over the course of

seven days, at the beginning of the Class Period, Sardini sold 54,703 shares of Weight Watchers’

common stock for gross proceeds of $4.43 million. Sardini was a direct and substantial

participant in the fraud during her tenure at Weight Watchers.

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19. Defendant Artal is, and was throughout the Class Period, the controlling

shareholder of Weight Watchers.

(a) Artal is a private equity company that controls a majority of the voting

power of Weight Watchers’ outstanding common stock, owning approximately 51% of the

Company’s outstanding shares of common stock. Throughout the Class Period, Artal exercised

control over Weight Watchers. As of April 11, 2012, Artal was the record owner of 28,749,089

shares of Weight Watcher’s common stock.

(b) Artal is a subsidiary of Westend S.A., which is a subsidiary of Stichting

Adminstratiekantoor Westend. In September 1999, Artal Luxembourg, S.A. acquired Weight

Watchers from the H.J. Heinz Company. Artal Luxembourg, S.A. is an indirect subsidiary of

Artal Group, S.A., which together with its parents and subsidiaries is referred to in this

Complaint as “Artal.” Subsequent to Artal’s acquisition of Weight Watchers, Artal Luxembourg

S.A. transferred ownership of its shares in Weight Watchers to Artal Participations and

Management S.A. and Artal Holdings Sp. z o.o., Succursale de Luxembourg, or “Artal

Holdings,” each also members of Artal. Upon information and belief, throughout the Class

Period, Artal Holdings was the record holder of all Weight Watchers shares owned by Artal, and

Artal Luxembourg held an irrevocable proxy with respect to a portion of these shares. Currently,

Artal Luxembourg, S.A. is the record holder of all Weight Watchers shares owned by Artal.

20. Defendant Debbane is, and was throughout the Class Period, the CEO and a

Director of Artal. In addition, Debbane is, and was throughout the Class Period, the Chairman of

Weight Watchers’ Board of Directors and a member of the Board’s Compensation Committee.

Debbane has been the Chairman of the Company’s Board since its acquisition by Artal on

September 29, 1999. Debbane also is a co-founder and the CEO of The Invus Group, LLC - a

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private equity investment company which manages approximately $4 billion through Artal.

Throughout the Class Period, Debbane exercised control over Weight Watchers.

(a) As noted in Weight Watchers’ Bylaws, under Section 4.1, the Chairman is

deemed an officer of the Company. Under Section 4.2, the Company’s Chairman has (subject to

Board control) “full authority and responsibility for directing the conduct of the business, affairs

and operations of the Corporation.”

21. The Defendants referenced above in ¶¶ 17-18 are referred to herein as the

“Officer Defendants.” The Defendants referenced above in ¶¶ 19-20 are referred to herein as the

“Artal Defendants.” Weight Watchers, the Officer Defendants, and the Artal Defendants are

collectively referred to herein as “Defendants.”

IV. CONTROL PERSON ALLEGATIONS

22. Because of the Officer Defendants’ and Artal Defendants’ positions with the

Company, they had access to the adverse undisclosed information about the Company’s

business, operations, operational trends, financial statements, markets and present and future

business prospects via access to internal corporate documents (including the Company’s

operating plans, budgets and forecasts and reports of actual operations compared thereto),

conversations and connections with other corporate officers and employees, attendance at

management and Board of Directors meetings and committees thereof and via reports and other

information provided to them in connection therewith.

23. It is appropriate to treat the Officer Defendants and Artal Defendants as a group

for pleading purposes and to presume that the false, misleading and incomplete information

conveyed in the Company’s public filings, press releases and other publications as alleged herein

are the collective actions of the narrowly defined group of defendants identified above. Each of

the above Defendants, by virtue of their high-level positions with the Company and/or control of

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the Company, directly participated in the management of the Company, was directly involved in

the day-to-day operations of the Company at the highest levels and was privy to confidential

proprietary information concerning the Company and its business, operations, growth, financial

statements, and financial condition, as alleged herein. Said Defendants were involved in

drafting, producing, reviewing and/or disseminating the false and misleading statements and

information alleged herein, were aware, or recklessly disregarded, that the false and misleading

statements were being issued regarding the Company, and approved or ratified these statements,

in violation of the federal securities laws.

24. As officers and controlling persons of a publicly held company whose shares

were, and are, registered with the SEC pursuant to the Exchange Act, and were, and are, traded

over the NYSE, and governed by the provisions of the federal securities laws, the Officer

Defendants and Artal Defendants each had a duty to promptly disseminate accurate and truthful

information with respect to the Company’s financial condition and performance, growth,

operations, financial statements, business, markets, management, earnings, and present and

future business prospects, and to correct any previously issued statements that had become

materially misleading or untrue, so that the market price of the Company’s publicly traded shares

would be based upon truthful and accurate information. The Officer Defendants’ and Artal

Defendants’ misrepresentations and omissions during the Class Period violated these specific

requirements and obligations.

25. The Officer Defendants and Artal Defendants participated in the drafting,

preparation, and/or approval of the various public, shareholder and investor reports and other

communications complained of herein and were aware of, or recklessly disregarded, the

misstatements contained therein and omissions therefrom, and were aware of their materially

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false and misleading nature. Because of their Board membership and/or executive and

managerial positions with Weight Watchers, each of the Officer Defendants and Artal

Defendants had access to the adverse undisclosed information about Weight Watchers’ business

prospects and financial condition and performance as particularized herein and knew, or

recklessly disregarded, that these adverse facts rendered the positive representations made by or

about Weight Watchers and its business issued or adopted by the Company materially false and

misleading.

26. The Officer Defendants and Artal Defendants, because of their positions of

control and authority as officers, directors, and/or controlling shareholders of the Company, were

able to and did control the content of the various SEC filings, press releases and other public

statements pertaining to the Company during the Class Period. Defendants Kirchhoff, Sardini,

and Debbane were provided with copies of the documents alleged herein to be misleading prior

to or shortly after their issuance and/or had the ability and/or opportunity to prevent their

issuance or cause them to be corrected. Accordingly, each of the Officer Defendants and Artal

Defendants is responsible for the accuracy of the public reports and releases detailed herein and

is therefore primarily liable for the representations contained therein.

27. Each of the Defendants is liable as a participant in a fraudulent scheme and course

of business that operated as a fraud or deceit on purchasers of Weight Watchers common stock

by disseminating materially false and misleading statements and/or concealing material adverse

facts. The scheme: (i) deceived the investing public regarding Weight Watchers’ business,

operations, management and the intrinsic value of Weight Watchers common stock; and (ii)

caused Lead Plaintiffs and other members of the Class to purchase Weight Watchers common

stock at artificially inflated prices.

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28. Artal and Debbane, which effectively control Weight Watchers’ affairs, were also

motivated to engage in the fraudulent scheme alleged herein. As a direct result of Artal’s

controlling stake in Weight Watchers, it was required to record its pro rata portion of Weight

Watchers’ gains and losses. Accordingly, during the Class Period, Weight Watchers artificially

inflated earnings also inflated Artal’s, and thus Debbane’s, bottom line.

V. BACKGROUND

A. Artal

29. In September 1999, Artal acquired Weight Watchers from the H.J. Heinz

Company. Since 1999, Artal and its powerful Board Chairman Debbane have directed and

controlled Weight Watchers’ every decision. By Weight Watchers’ own admission, Artal

“controls us” through its ownership of the majority of the voting rights of the shares of Weight

Watchers. For Artal, Weight Watchers is the flagship investment whose performance has been

the benchmark of Artal’s and Debbane’s image and reputation - especially in view of Debbane’s

controlling influence on Weight Watcher’ Board.

30. The Invus Group is the exclusive investment advisor to Artal, and Debanne is

CEO and President of The Invus Group. Invus describes its relationship with Artal as follows:

“Since our founding, our source of capital has been a European family group (mainly through

their Artal investment vehicle).” The Invus Group website claims an active role in making

strategic and active business decisions and boasts about its active participation in the companies

it which it invests:

Our relationship with owner-managers is not confined to formal board meetings. We enjoy an open dialogue with our owner-managers and frequently interact with them as they seek our advice on issues facing their businesses. This allows them to move rapidly without red tape. On select strategic projects, owner-managers can also call on us, where we can deploy one or more of our team

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members to be part of a project–specific task force to more deeply assist management with a new initiative or acquisition.

1. Artal Controls Weight Watchers, its Board of Directors and its CEO

31. As noted in Weight Watchers’ public filings with the SEC, Artal exercises a

controlling influence over Weight Watchers’ business and affairs and has the power to determine

all matters submitted to a vote of Weight Watchers’ shareholders where Weight Watchers’

shares vote as a single class.

32. As Weight Watchers stated in its 2013 10-K, filed February 26, 2014:

Artal controls us and is able to control the election and removal of our directors and determine our corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate transactions. This concentration of our ownership may delay or deter possible changes in control of our company, which may reduce the value of an investment in our common stock. Even if Artal beneficially owns less than 50% but 10% or more of our common stock, Artal will have the right pursuant to an agreement with us to nominate directors to our Board of Directors in proportion to its stock ownership. The interests of Artal may not coincide with the interests of other holders of our common stock.

33. Artal has the power to elect Weight Watchers’ directors and to approve significant

corporate transactions such as certain amendments to the Company’s articles of incorporation,

the sale of all or substantially all of Weight Watchers’ assets and plans of arrangement in certain

circumstances. Artal’s voting power could have the effect of deterring or preventing a change in

control of Weight Watchers’ that might otherwise be beneficial to the Company’s other

shareholders.

34. Pursuant to its most recent SEC disclosures, Weight Watchers is a “controlled

company” within the meaning of the New York Stock Exchange rules and, as a result, qualifies

for exemptions from certain corporate governance requirements.

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Artal controls a majority of the voting power of our outstanding common stock. Under the New York Stock Exchange, or the NYSE, rules, a listed company of which more than 50% of the voting power for the election of directors is held by another person or group of persons acting together is a “controlled company” and such a company may elect not to comply with certain NYSE corporate governance requirements , including (1) the requirement that a majority of the Board of Directors consist of independent directors, (2) the requirement that the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, (3) the requirement that the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, (4) that the compensation committee be required to consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisors and (5) the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees. We have elected to be treated as a “controlled company.” Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements.

35. Weight Watchers’ Board of Directors currently has only three independent

directors. According to the Company’s 2013 Proxy filed on April 3, 2014: “The Board of

Directors has affirmatively determined that three of our nine directors, Dr. Altschuler, Ms. Elkins

and Ms. Evans, are independent under applicable listing standards of the NYSE and our

Corporate Governance Guidelines. For a director to be considered independent, the Board of

Directors must determine that the director does not have any direct or indirect material

relationship with the Company.”

36. As of July 2014, Artal and The Invus Group, LLC had five representatives on

Weight Watchers’ Board of Directors:

(a) Raymond Debbane: Weight Watchers’ Chairman of the Board; co-founder

and the CEO of The Invus Group, and CEO of Artal.

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(b) Philippe J. Amouyal: Managing Director of The Invus Group, Weight

Watchers’ Board Member since November 2002 and a member of the Weight Watchers’

Compensation Committee;

(c) Jonas M. Fajgenbaum: Managing Director of The Invus Group and

Director of Weight Watchers since the 1999 acquisition of Weight Watchers by Artal;

(d) Sacha Lainovic: Managing Partner at Invus Financial Advisors, LLC since

2007; Co-Founder and Executive Vice President of The Invus Group from 1985 to 2006; and

Director of Weight Watchers since the 1999 acquisition of Weight Watchers by Artal; and

(e) Christopher J. Sobecki: Managing Director of The Invus Group and

Director of Weight Watchers since the 1999 acquisition of Weight Watchers by Artal.

37. Former CEO Kirchhoff described his relationship with Ray Debbane, Chairman

of Weight Watchers’ Board, to a Forbes interviewer as follows: “Ray Debbane is my boss, is

how I look at it,” says David Kirchhoff, the [former] chief executive of Weight Watchers. 5

According to Forbes, “[t]here are some weeks when Kirchhoff sees Debbane every day,

grabbling lunch or just having a quick meeting.” 6

2. Artal Has Recouped its Investment in Weight Watchers Approximately 17 Times Over

38. Artal acquired Weight Watchers from the H.J. Heinz Company in September

1999 for $735 million - $224 million in cash and $511 million in debt. At the time, Weight

Watchers had roughly $365 million in revenues and operating profits of $47 million. In 2011,

5 Nathan Vardi, The Mystery Man Behind Weight Watchers and the Private Equity Deal of the Century , Forbes, Sept. 4, 2012, http://www.forbes.com/sites/nathanvardi/2012/09/04/the-mystery-man-behind-weight-watchers-and-the-private-equity-deal-of-the-century/

Id.

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Weight Watchers had its best financial year, earning $305 million in profit on revenues of $1.8

billion. The stock soared to over $80 per share and in February 2012, as detailed below, the

Company completed a tender offer in which it repurchased shares for $780 million from Artal

using mostly borrowed funds.

39. Back in 2001, only two years after purchasing the company, Ray Debbane,

Weight Watchers’ Chairman and CEO of Artal, organized an initial public offering for Weight

Watchers in which Artal sold enough shares to recoup its initial investment and obtain a

significant return. Since then, Artal has been selling blocks of Weight Watchers stock

periodically. For example, Artal initiated two large, debt-financed share buybacks to cash out of

some of its Weight Watchers’ stock – in late 2006/early 2007 and again in March-April of 2012.

However, both share buybacks have been a waste of shareholders’ money – with the increased

debt burden leaving Weight Watchers cash-constrained.

40. For example, in December 2006, Weight Watchers commenced a tender offer of

the Company’s stock and repurchased approximately 10.5 million of Artal’s shares in February

2007 at $54 per share, providing Artal with $567 million in cash purportedly in order to maintain

Artal’s percentage ownership at the same level prior to the tender offer. The March 2012 tender

offer and April 2012 share buyback at issue in this complaint yielded $778.9 million in proceeds

for Artal.

41. Weight Watchers has been a cash cow for Artal. Since 1999, Artal has received a

total of $3.8 billion in proceeds by: a) selling Weight Watchers’ stock back to the Company as

described above; b) selling Artal’s ownership in www.weightwatchers.com back to the Company

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in 2005;7 and c) collecting dividends. This represents a return to date for Artal of 17 times its

investment! And Artal still retains a 51% stake in Weight Watchers valued at approximately

$624 million as of August 1, 2014.8 On this basis, any impairment in value to Artal’s Weight

Watchers’ holdings as a result of the fraud detailed herein is almost negligible in the overall

context of Artal’s tremendous returns to date on its investment in Weight Watchers.

B. Weight Watcher’s Online Business

42. Weight Watchers’ largest segment is its traditional meetings business which

generates approximately 72% of the Company’s revenues. However, Weight Watchers’ online

business experienced strong membership growth relative to the Company’s meetings business,

particularly in 2010 and 2011 when online membership jumped 38% and 50%, respectively,

following the PointsPlus launch in late-2010 (which enabled the online business to surpass the

meetings business in total subscribers in 2012).

43. Weight Watchers.com generates revenues via two subscription products – Weight

Watchers online and Weight Watchers eTools. Weight Watchers Online offers online and mobile

content, resources and interactive web-based weight loss plans. Weight Watchers eTools is an

Internet-based weight management tool available to meetings members - providing interactive

tools and resources, including mobile applications allowing members to manage weight loss

routine and plans.

7 In 2005, Weight Watchers purchased all of Artal’s interest in WeightWatchers.com for a total price of approximately $304.8 million.

8 In other words, the $224 million in cash that Artal invested in Weight Watchers in 1999 is now worth approximately $4.4 billion - $3.8 billion realized plus the current value of Artal’s

51% interest (approximately $624 million).

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44. The fee model for both the online and eTools products is a pre-paid monthly

subscription fee. As with the meetings business, the key performance metric for the .com

segment is “paid weeks”- meaning the number of paid online subscriber weeks.

45. Weight Watchers’ online business, led by Michael Basone from its inception in

2002 to his departure which was announced in February 2013, grew from 10% of Weight

Watchers sales in 2005 to approximately 28% of sales in 2013, largely due to a nearly five-fold

increase in subscribers. In 2012, Weight Watchers.com provided 28% of the revenue ($507

million) and 51% of the operating profit of the Company. In 2013, Weight Watchers.com had in

excess of 1.7 million subscribers.

46. Revenues from the online business experienced double-digit growth every year

until 2013. With the strong growth, margins expanded rapidly. Gross margins increased from

76% in 2005 to 87% in 2012 while operating margins expanded from 7% to 51% over the same

period.9

VI. DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS AND OMISSIONS DURING THE CLASS PERIOD

A. Fourth Quarter/Full Year Fiscal 2011 Results and Announcement of Dutch- Auction Tender Offer

47. On February 14, 2012, after the market closed, Weight Watchers issued a press

release announcing its fiscal 2011 results for the fourth quarter and full year, and provided full-

year fiscal 2012 earnings guidance. In the same press release, Weight Watchers announced that

it planned to launch a “modified Dutch auction” tender offer the following week for up to $720

million of its common stock with a price range between $72 and $83 per share, for a total of 8.78

million shares. The Company further announced that it had separately agreed to purchase shares

9 Operating margins for the meetings business, on the other hand, have been steadily falling from 33% in 2003 to 19% in 2012.

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held by Artal at the same price paid in the tender offer so that Artal’s percentage ownership

interest in the Company after the tender offer and the share repurchase would be substantially

equal to its then-current level of 52%. The press release also stated: “If the tender offer is fully

subscribed, the Company will repurchase a total of approximately $1.5 billion of its common

stock collectively through the tender offer and Artal repurchase.” In the press release, CEO

Kirchhoff also provided a 2012 earnings guidance range of between $4.20 and $4.60 per fully

diluted share. Kirchhoff also stated: “Looking at 2012, we are forecasting top line growth for

the full year although the first quarter will be a tough comparable.”

48. In a separate press release also issued on February 14, 2012, the Company

provided additional details about the tender offer. If the tender offer was fully subscribed, the

Company would repurchase a total of approximately $1.5 billion of its common stock

collectively through the tender offer and Artal repurchase. The Company would take on an

additional $1.5 billion of debt in order to accomplish this. The buy-back program would reduce

the total number of outstanding Weight Watcher shares from 74 million to 57 million, a 23%

reduction. On February 14, 2012, Weight Watchers common stock was trading at $79 per share.

49. The Company represented that it expected to fund the share purchases in the

tender offer and from Artal through new borrowings, stating as follows:

Weight Watchers International, Inc. (NYSE: WTW) today announced its plan to launch a “modified Dutch auction” tender offer for up to $720,000,000 of its common stock at a price per share not less than $72.00 and not greater than $83.00. This price range represents a 4.3% premium to a 20.3% premium to the year-to-date volume-weighted average price of $69.00 per share for the Company's common stock. The tender offer is expected to commence next week and will remain open for at least 20 business days.

A “modified Dutch auction” tender offer allows shareholders to indicate how many shares and at what price within the Company’s specified range they wish to tender. Based on the number of

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shares tendered and the prices specified by the tendering shareholders, the Company will determine the lowest price per share within the range that will enable the Company to purchase $720,000,000 of its common stock (or a lower amount if the offer is not fully subscribed). All shares purchased by the Company in the tender offer will be purchased at the same price. The Company will not purchase stock below a shareholder’s indicated price, and in some cases, the Company may actually purchase shares at a price that is above a shareholder’s indicated price under the terms of the tender offer. Artal Holdings Sp. Z o.o., Succursale de Luxembourg, the Company's majority shareholder, has agreed not to tender any shares in the tender offer.

The Company also announced today that it has entered into an agreement to purchase shares from Artal, which owns approximately 52% of the Company’s outstanding shares of common stock as of February 13, 2012. Under the terms of this agreement, Artal agreed to sell to the Company a number of shares of common stock so that Artal’s percentage ownership interest in the Company’s outstanding shares of common stock after the tender offer and such purchase from Artal will be substantially equal to its current level. This purchase will be at the same price per share as determined by the Company in the tender offer, such that if the tender offer is fully subscribed, the Company will repurchase a total of approximately $1.5 billion of its common stock collectively through the tender offer and pursuant to the Artal purchase agreement (representing approximately 24.6% to 28.3% of the Company’s outstanding shares of common stock as of February 13, 2012).

The Company expects to fund the share purchases in the tender offer and from Artal through new borrowings under an amended and extended version of its existing credit facilities that the Company is currently negotiating and which is expected to be in place at least five business days prior to the closing of the tender offer. The tender offer will not be conditioned upon any minimum number of shares being tendered, but will be subject to the completion of the new borrowings and other customary conditions that will be described in the tender offer documents. The tender offer documents, which will be distributed to shareholders upon commencement of the tender offer, also will contain tendering instructions and a complete explanation of the tender offer's terms and conditions. 10

10 All emphasis is added unless otherwise noted.

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50. On February 14, 2012, after the market closed, Weight Watchers held a

conference call with analysts and investors to discuss the Company’s fiscal 2011 results for the

fourth quarter and full year. Participating on the call from the Company were CEO Kirchhoff and

CFO Sardini. During the call, Kirchhoff: (a) reiterated the full-year 2012 EPS guidance of $4.20

to $4.60 per share announced by the Company in its press release and (b) provided the basis for

the full-year 2012 EPS guidance. Kirchhoff noted that a number of operational issues were

affecting the Company during the first quarter of 2012, but nevertheless affirmed a “return to a

more normal business growth trajectory” for the rest of the year, stating in pertinent part as

follows:

Guidance. In providing guidance for this year, our forecast reflects the reality of lapping Q1 2011, a period of extremely high enrollment growth in our North American and UK businesses, as well as our WeightWatchers.com business. As we passed the hump of Q1 2011, we expect a return to a more normal business growth trajectory in Q2 through Q4 of 2012 that better reflects the true underlying strength of our brand and the output of our strategies . To this end, we are currently forecasting the following volume assumptions across our major lines of business.

One, North America -- volume levels in Q1 2012 will be adversely impacted by comping against the initial PointsPlus launch as well as the impact of the execution issues with our small account at-work business and delays in our new upgraded store openings. To be clear, our NACO enrollments for the first five weeks of this year, excluding at-work, are running comfortably above 2009 and 2010 levels, but as expected, they’re running behind the supercharged levels of Q1 2011 . The shortfalls in enrollments in Q1 will flow through to paid weeks for the remainder of the year, but will be largely offset as we stop lapping the Q1 hump from last year and the spring campaign this year. We’re forecasting Q1 2012 paid weeks declines in the mid-single digits, returning to growth by Q3 and into Q4. Most of this decline is due to the small account at-work issue. We are forecasting attendances of minus 10% in Q1 2012, again returning to positive numbers by the third quarter.

* * *

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WeightWatchers.com . The WeightWatchers.com business has continued moving to new heights with sign-up levels exceeding the prior-year period despite the triple-digit growth we saw at this time last year. With a strong subscriber base coming into the year combined with continuing sign-up growth, we’re forecasting paid weeks growth of 30% to 35% throughout 2012.

Overall financial performance. Given these volume forecasts, we are expecting flat revenue growth in Q1 2012, then rising to high single to low double-digit growth for the remainder of the year.

One additional factor leading to the flat revenue forecast for Q1 2012 is the effect of lapping the extremely high product sales per attendance levels associated with the product launches in 1Q last year. The beneficial impact of our Monthly Pass price increase on revenue will become increasingly evident as we proceed throughout the year, given our decision to grandfather existing members.

On the gross margin line, we expect continued expansion of 200 to 250 basis points, reflecting the proportional mix shift to the higher-margin WeightWatchers.com sales. More of that improvement will come in the second half of the year.

51. During the call, Kirchhoff also alluded to forthcoming technology innovations

and growth in the online division: 11

WeightWatchers.com . Growth in this business will continue to come from technology and product innovation and a combination of expanding audiences and continuing to increase product awareness among these audiences. Weight Watchers Online, which delivers excellent consumer satisfaction at a very competitive price point, continues to successfully convert record numbers of self-help dieters to the Weight Watchers franchise. We expect Weight Watchers Online paid weeks to equal and surpass meetings paid weeks for the first time in 2012.

* * *

[T]he fact that [weightwatchers].com will be delivering strong growth throughout the year is obviously good news.

11 In 2011, corporate/at-work business accounted for approximately 12% of Weight Watchers’ meeting attendance. Historically, the vast majority of this business had been small at-work or corporate accounts.

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52. Also during the call, Kirchhoff dismissed the notion of competition to Weight

Watchers from free weight-loss apps. In that regard, the following exchange took place:

Anand Vankawala - Avondale Partners

Okay. Then I guess last, just also on the online business, do you have any thoughts on emerging competition in the online space? We’ve seen few online startups that have been popping up, that have been just going up in popularity. So just any initiatives that you have in place to combat that?

David Kirchhoff - President and CEO:

Yes, of course we have been seeing online start-ups pop up actually for the past 10 years, so this isn’t new per se.

The first point I would make in terms of structural advantages we have in this proposition is that, first off, we have the only online offering that is apparently worth paying for because the other apps I guess the people who wrote them don’t have sufficient confidence in them to think that they’re worth very much money. But putting that aside, what I would suggest is that the average person who buys Weight Watchers Online is not buying an online calorie counter. They are not buying any particular app per se. They are buying a proven program with a brand that they trust that they know to work. And the fact that it is supported by apps is what makes for a compelling value proposition. So it’s not the application itself: A lot of these online apps that we are now starting to see — and you know, for example, there’s websites like SparkPeople that’s now been around for a bunch of years. It really hasn’t had any impact that we can discern on our business. Apps that are now popping up on the iTunes store, they are out there but, again, we can’t see any discernible impact on our business. I think it’s because the value proposition between them is pretty different.

53. The statements referenced above in ¶¶ 47, 50-52 were each materially false and

misleading when made because they failed to disclose the following adverse facts which were

known or recklessly disregarded by Defendants:

(a) that it was growing increasingly difficult to convince dieters to pay for

Weight Watchers’ meetings and online subscription when there was an abundance of free apps

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and gadgets designed to help dieters track food intake, exercise, and weight loss goals. Many of

the free apps had more functionality, more comprehensive food databases and more social media

inter-connectivity than Weight Watchers’ online offerings;

(b) because of increased competition from free apps, the growth rate in the

Company’s online segment was slowing down;

(c) that Weight Watchers’ online-only membership, offered at a lower price

than its traditional meetings membership, was cannibalizing the Company’s $42.95 per month

meetings business. This was causing a fundamental problem in the Company’s business model as

its online business was less unique (and subject to more competitors) than its traditional and

time-tested meetings business;

(d) that the Company’s transition to a software platform called The Portal had

caused such a disruption in Weight Watchers’ nascent B2B division (also called the small

account corporate division), that it was materially affecting the Company’s meetings business

and would negatively affect overall meeting attendance for some time;

(e) that the Company was experiencing a material decline in its North

America meeting attendance that would not be reversed until the Company introduced another

update to its PointsPlus diet plan; and

(f) as a result of the foregoing, Defendants lacked a reasonable basis for their

positive statements about the Company, its revenues, earnings, prospects and business.

54. Confidential Witnesses confirm that Defendants knew about these negative trends

prior to announcing the tender offer and before providing investors with earnings guidance that

they knew or should have known could not be achieved without an unexpected reversal of these

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trends. Confidential Witnesses confirm that Weight Watchers was feeling the effects of

competition from free apps in 2011, even before the tender offer.

55. From May to September of 2011, CW-1, Vice President, Strategy Partner at

McCann Erickson (“McCann”), Weight Watchers’ advertising agency managed Weight

Watchers’ social media strategy. CW-1 interacted directly with Lee Hurley, Weight Watchers’

Director of Online Marketing at the time who reported to Cheryl Callan, former SVP of

Marketing for Weight Watchers. 12 CW-1 confirmed that the availability of competing fitness

and nutrition applications had been “spiking up since 2010.” CW-1 and his colleagues at

McCann were tasked with educating Weight Watchers as to the available free and premium

(more functionality at a lower cost) apps in 2011. CW-1 stated that in 2011, Weight Watchers

was more focused on advertising and marketing than it was focused on product innovations -

which would have included their mobile application. CW-1 confirmed that in 2011, Weight

Watchers did not have someone dedicated solely to the Company’s mobile business which, in his

opinion, demonstrated the Company’s lack of initiative in its mobile and app business. CW-1

thought it was strange that given his task, to assist in enhancing Weight Watchers’ mobile app,

that he was not dealing with anyone at Weight Watchers who was focused on product innovation

or information technology.

56. CW-1 confirmed that Weight Watchers had challenges in keeping its mobile

application, social media and the mobile business up to date with industry trends. CW-1 spent

much of his time at McCann monitoring trends in the weight loss community including

12 Callan was in charge of marketing for both the meetings business and Weight Watchers’ online business. See Argyle Conversation: Cheryl Callan, Senior Vice President of Marketing, Weight Watchers , Argyle Journal, April 27, 2011, http://www.argylejournal.com/functions/chief-marketing-officer/argyle-conversation-cheryl-callan-senior-vice-president-of-marketing-weight-watchers/#sthash.tFk5iM2V.fXkpn8LY.dpuf

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applications that competed with Weight Watchers’ mobile application. CW-1 also analyzed the

“demands” of Weight Watchers’ customer base including “what they couldn’t get from the

current (competing) applications.” McCann performed a “competitive audit” for Weight

Watchers in 2011 in an effort to provide the Company with insight into what was available in the

marketplace for its new and existing customers. CW-1’s team made proposals to Weight

Watchers’ Marketing Department, headed by Cheryl Callan, of how to enhance Weight

Watchers’ app offerings – including functionality enhancements as well ideas for partnerships

and brought recommendations about the mobile landscape to Weight Watchers. 13

57. McCann’s recommendations were based on their research in the online

competitive space as well as qualitative research from listening audits (which included input

from Weight Watchers’ custom base). CW-1 also utilized social media, including Weight

Watchers’ Facebook page, to ascertain what its customers felt was lacking with Weight

Watchers’ mobile offerings. CW-1 concluded that Weight Watchers’ database of foods

(including restaurant items) was not comprehensive enough. In 2011, McCann identified to

Weight Watchers’ Marketing Department, the need for a more useable and complete database

that could help Weight Watchers’ members in calculating point values for foods they cooked or

they ordered at a local restaurant. In 2011, McCann also suggested a recipe database that would

help members calculate points for their own recipes made with various ingredients.

58. CW-1 confirmed that Weight Watchers was struggling with extending its services

and products to an audience that was increasingly becoming more mobile. CW-1 stated that

Weight Watchers was having difficulty “thinking” like a technology company where you have to

13 Callan and Nick Brien, Chairman and CEO of McCann Worldgroup presented together at the 2011 Association of National Advertisers, Masters of Marketing Annual Conference on or about October 21, 2011. See http://www.ana.net/miccontent/showvideo/id/anc-ww

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“iterate your products and services” very quickly. He explained that Weight Watchers did not

have the “agility” to turnover as quickly as it needed to - given the demands it was experiencing

with the mobile part of its business.

59. CW-2 also confirmed that Weight Watchers was feeling the effects of competition

from free apps but that then-CEO Kirchhoff was not forthright with investors about how those

apps would affect the Company’s business. CW-2 worked at Weight Watchers from 2000 to

January 2014. CW-2 worked as a Territory Manager for many years reporting to a series of

District Managers. CW-2 was responsible for, among other things, tracking and reporting

budgets and metrics on customer recruiting, sales and meeting attendance. CW-2 confirmed that

the Weight Watchers application was “not really competitive enough with what’s out there.”

CW-2 stated that former CEO Kirchhoff repeatedly told investors that free and low cost mobile

apps were not a competitive threat to Weight Watchers. However, CW-2 stated that if people

were using free mobile apps, they would be less inclined to pay for what Weight Watchers

offered, even if the Weight Watchers program might have been more effective at helping people

lose weight. CW-2 confirmed that when James Chambers took over as CEO in August 2013, he

addressed the competition posed by mobile apps.

60. Confidential Witnesses, including CW-3, also confirm that Weight Watchers’

transition to a software system called The Portal within the corporate/B2B division, in the fourth

quarter of fiscal 2011, was a complete disaster which was reported to members of the Company’s

management team. CW-3 was a Corporate Account Manager/B2B at Weight Watchers from

October 2011 until May 2013 who reported first to Daniel Boockvar, Senior VP of U.S.

Operations, and then Colin Watts, Senior VP of Weight Watchers’ Health Solutions. CW-3’s

responsibilities included negotiating corporate health and wellness programs through executive

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sponsors in the “Business to Business” division. CW-3 recalled that shortly after he began

employment with Weight Watchers, the Company adopted The Portal, a new initiative for the

application process for business clients. CW-3 stated that rollout of The Portal was a disaster - in

that it was extremely difficult to navigate the online application process. CW-3 confirmed that

the switch-over to The Portal had many glitches and that the technical problems caused by the

new application required his team to work extremely late hours to accommodate clients who

were trying to utilize the system. CW-3 stated that another disadvantage of The Portal was that

certain archived information of CW-3’s accounts became unavailable. CW-3 also stated that the

technology used by the Company was antiquated and there were always problems with data

during his tenure with Weight Watchers.

61. CW-3 also stated that part of the problem with The Portal was that clients/dieters

on B2B accounts were now required to input their own credit card information for services that

their employers were paying for. In addition, the minimum number of attendees required to host

an “at-work” B2B account was increased without warning, further disappointing CW-3’s client

base. CW-3 recalled that Weight Watchers Team Leaders were hoping that the process would

improve because the only positive part of the program was that it had relieved the Team Leaders

of personally collecting fees in the field. CW-3 stated that the negative effects of the new system

far out-weighed any improvements in Weight Watchers’ registration of new clients. CW-3’s

colleagues provided suggestions on how to improve The Portal, but all criticism of The Portal

fell on deaf ears. CW-3 stated “the Management Team was severely defensive on critical

feedback.”

62. CW-3 recounted that there were numerous instances where Corporate Account

Managers pleaded with Weight Watchers executives to abandon the new system because of the

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problems. CW-3 stated that Daniel Boockvar, an attorney, was the go-between for CW-3’s group

- reporting issues with The Portal back to Weight Watchers’ management. CW-3 also recalled

attending a meeting for Corporate Account Managers and Strategic Account Managers in

February 2012 which was attended by all the top executives on Weight Watchers’ business side,

including Colin Watts, where the problems with The Portal were discussed. CW-3 stated that

“Kirchhoff may have even been there.”

63. CW-4 worked for Weight Watchers from 2006 through the beginning of April

2014. From 2010 until April 2014, CW-4 was a Territory Manager for the Company assigned to

cover five states who reported to Sarah Glazier, a District Manager. CW-4 stated that as a result

of the introduction of The Portal, his B2B business was dramatically curtailed. The Portal was

not well received by either the subscribers or Field Managers. The online system was not user-

friendly and was “down” or unavailable for significant periods of time. CW-4 confirmed that the

credit card requirements coupled with the increased meeting size requirement caused CW-4’s

B2B Meetings to decrease from 48 Meetings to 10 Meetings in a short period of time. CW-4

stated that “we had unhappy clients and unhappy service providers.” During weekly conference

calls that all Field Managers, including CW-4, participated in - these problems were discussed.

CW-4 stated, like CW-3, that Weight Watchers was technology challenged and was further

challenged by newer, cheaper (or free) online competitors.

64. CW-5 was a Corporate Account Manager from September 2011 through August

2013 in the Missouri area and reported to Susan Grilli, U.S. Director of B2B Sales. CW-5

confirmed that The Portal system for B2B accounts was rife with problems and was so user-

“unfriendly,” that CW-5 experienced an immediate negative effect on his B2B sales. CW-5

confirmed that everyone in corporate accounts voiced their disapproval of the system, but their

criticism was ignored. CW-5 stated that many of his corporate clients ultimately dropped Weight

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Watchers because of the system’s glitches. CW-5 reported that customers could not get into the

system and could not exit the system and, in some instances could not stop getting billed after

leaving Weight Watchers entirely. CW-5 stated that his boss, the U.S. Director of B2B Sales,

was fully aware of the failures of The Portal system, but the decision to keep The Portal in place

went all the way to the top of Weight Watchers - to the former CEO Kirchhoff.

B. Tender Offer Closes

65. On February 23, 2012, Weight Watchers filed a tender offer schedule and

amendment with the SEC.

66. On March 15, 2012, the Company filed a Form 8-K with the SEC, announcing

that it had completed an amendment to its existing credit facilities to increase its borrowing

capacity up to an additional $1.45 billion to finance the share purchases in its pending tender

offer and the previously announced related share repurchase from Artal.

67. On March 15, 2012, the Company also issued a press release concerning the

magnitude of insider selling in the tender offer, stating in pertinent part as follows:

[I]n connection with the tender offer amendment, the Company is reporting that four executive officers of the Company have indicated they expect to tender shares in the tender offer. Mr. David P. Kirchhoff, President and Chief Executive Officer and a director of the Company, Mr. Jeffrey A. Fiarman, Executive Vice President, General Counsel and Secretary, and Ms. Melanie Stubbing, President, Europe, have each advised the Company of their intent to tender shares of common stock underlying stock options that represent up to 25% of their share holdings (including shares underlying vested options). In addition, Ms. Ann M. Sardini, who as previously announced will retire as Chief Financial Officer effective as of March 30, 2012, has advised the Company of her intent to tender up to 100% of her current holdings of shares (including shares underlying vested options) in the tender offer.

68. In connection with the tender offer, Kirchhoff and Sardini exercised large

quantities of options in the $42 - $53 per share range. On March 16, 2012, Kirchhoff and

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Sardini sold a total of 98,488 shares of Weight Watchers common stock on the open market in

the range of $80 - $82 per share for total insider proceeds of almost $8 million.

69. On March 22, 2012, Kirchhoff and Sardini also tendered shares to the Company

at $82 per share. Kirchhoff and Sardini received gross proceeds on shares sold in the tender

offer of approximately $1.5 million each, or a total of about $3 million .

70. On March 28, 2012, Weight Watchers announced the final results of its self-

tender offer, stating in pertinent part as follows:

Weight Watchers International, Inc. (NYSE: WTW) today announced the final results of its "modified Dutch auction" tender offer for up to $720.0 million in value of its common stock, which expired at 12:00 midnight, New York City time, on Thursday, March 22, 2012. In accordance with the terms and conditions of the tender offer, the Company has accepted for purchase an aggregate of 8,780,485 shares of its common stock at a purchase price of $82.00 per share, for an aggregate cost of approximately $720.0 million. These shares represent approximately 11.9% of the Company's outstanding shares of common stock as of February 13, 2012.

Based on the final count by the depositary for the tender offer, an aggregate of 9,038,999 shares of the Company's common stock were properly tendered and not properly withdrawn at or below a purchase price of $82.00 per share. Because more than $720.0 million in value of common stock was properly tendered and not properly withdrawn, the tender offer was oversubscribed. As a result, pursuant to the terms of the tender offer, shares will be accepted on a pro rata basis, except for tenders of "odd lots," which will be accepted in full. The depositary has informed the Company that, after giving effect to the priority for "odd lots," the final proration factor for the tender offer is approximately 97.14%. The Company will promptly pay for the shares accepted for purchase, and any shares tendered and not purchased will be returned to the tendering shareholders promptly thereafter.

Additionally, on April 6, 2012, the Company expects to purchase 9,498,804 shares of its common stock from Artal Holdings Sp. z o.o., Succursale de Luxembourg, its majority shareholder, at a purchase price of $82.00 per share. The Company previously announced an agreement with Artal to purchase a number of shares of the Company's common stock at the price established by the

- 32 -


tender offer so that Artal’s percentage ownership interest in the Company's outstanding shares of common stock after the purchase of shares in the tender offer and from Artal will be substantially equal to its current level. As a result of the tender offer and the purchase from Artal, the Company will repurchase 18,279,289 shares of its common stock for approximately $1.5 billion in the aggregate (representing approximately 24.8% of its outstanding shares of common stock as of February 13, 2012).

71. On April 9, 2012, per the terms of the tender offer, Artal Holdings sold 9.5

million shares at $82 per share, for total proceeds of $779 million .

72. On April 11, 2012, the Company filed a Form SC-13D/A with the SEC, stating

that the Company had repurchased 9.5 million shares of common stock from Artal.

73. On April 11, 2012, the Company also filed a Form SC-13G/A with the SEC

clarifying Artal’s ownership of 51.76% of Weight Watchers outstanding common stock stating

in pertinent part as follows:

(a) Amount beneficially owned:

As of the date hereof, Artal Holdings Sp. z o.o., Succursale de Luxembourg (“Artal Holdings”) is the record owner of 28,749,089 shares of Common Stock. Artal Luxembourg S.A. holds an irrevocable proxy with respect to 15,000,000 of these shares. Artal Holdings is a subsidiary of Artal Luxembourg S.A., which is a subsidiary of Artal International S.C.A., which is managed by its managing partner, Artal International Management S.A., which is a subsidiary of Artal Group S.A., which is a subsidiary of Westend S.A., which is a subsidiary of Stichting Administratiekantoor Westend, whose sole member of the Board is Mr. Pascal Minne. Consequently, each of Artal Group S.A., Artal International S.C.A. and Artal Luxembourg S.A. may be deemed to be the beneficial owner of the shares of Common Stock held of record by Artal Holdings.

(b) Percent of class:

Based on the Issuer having 55,538,970 shares of Common Stock outstanding (which, based on information provided by the Issuer, was the number of shares of Common Stock outstanding as of April 9, 2012) as of the date hereof, each of Artal Group S.A., Artal International S.C.A. and Artal Luxembourg S.A. may be

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deemed to be the beneficial owner of approximately 51.76% of the number of shares of Common Stock outstanding.

C. First Quarter Fiscal 2012 Results

74. On May 2, 2012, after the market closed, the Company issued a press release

announcing its results for the first quarter of 2012 and reducing its full-year 2012 earnings

guidance. 14 Weight Watchers reported:

• Revenues of $503.5 million, essentially flat versus the prior year period, with total paid weeks up 12.2% versus the prior year period[;]

• Marketing spend up 36.2% versus the prior year period, driven principally by investment behind Weight Watchers Online for men in the United States and awareness building for Weight Watchers Online in Continental Europe[;] and

• Internet revenues of $126.9 million, up 38.0% versus the prior year period, with Online paid weeks up 35.4% and end of period active Online subscribers up 32.3% versus the prior year period[.]

75. The Company revealed, for the first time, declining recruitment trends in its North

American meeting business. However, the Company failed to attribute these negative trends to

the long-term competition posed by free apps, instead blaming the trends solely on the short-term

execution issues in the Company’s small account/B2B business. Commenting on the

disappointing quarterly results, Kirchhoff was quoted in the press release as saying:

Engagement with our brand reached a new height in the first quarter of this year with 12.2% growth in total paid weeks versus the first quarter of 2011, driven by robust growth in the WeightWatchers.com business. While we expected to face difficult comparisons versus a record first quarter in 2011, results in the meetings business were still somewhat softer than our expectations. Most of our challenges in the meetings business

14 The Company filed its quarterly report on Form 10-Q with the SEC for the first quarter of fiscal 2012 ended March 31, 2012 on May 10, 2012. The 10-Q was signed by Kirchhoff.

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were attributable to execution issues, which are now in the process of being addressed.

76. In the press release, Kirchhoff also acknowledged that the full-year 2012 earnings

guidance he had provided on February 14 - which was half-way through the first quarter - could

no longer be achieved. According to Kirchhoff, “We are revising our fiscal 2012 earnings

guidance to incorporate the effect of the tender offer transaction and related share repurchase as

well as the impact of trends to date. Our full year earnings guidance range is now between $4.60

and $4.80 per fully diluted share.” Although this was an increase from its previous forecast of

$4.20 to $4.60 per share, the update included a $.50 to $.55 per share benefit from the recently

completed tender offer. Thus, without the benefit from the tender offer, the Company would

have missed its EPS guidance significantly – guiding down to the $4.05 to $4.25 or $4.10 to

$4.30 per-share range.

77. On May 2, 2012, after the market closed, Weight Watchers held a conference call

with analysts and investors to discuss the Company’s first quarter earnings and operations.

Participating from the Company was CEO Kirchhoff. Kirchhoff blamed the execution issues and

a tough Q1 comp on declining NACO 15 recruitment trends rather than admitting to the long-term

challenges posed by free apps:

Total NACO revenue, which includes the US and Canada, in Q1 2012 was down 9% on a constant currency basis versus the same period in 2011, with NACO meeting fees declining by 7%. In-meeting product sales declined by 14% versus the prior year quarter, driven primarily by volume declines, with product sales for attendants also down 2.5% due to lower enrollment product sales this year versus last, a function of lapping the points plus innovation launch last year. NACO Q1 2012 paid weeks declined 6% while attendances declined 12% versus the prior year period,

15 NACO refers to “North America Company Owned” business and does not include revenues from Weight Watchers’ franchises.

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driven most significantly by execution issues in the small account portion of our corporate business, which I will explain in detail shortly. Excluding the corporate business, NACO paid weeks and attendances in the first quarter were down an estimated 3% and 8%, respectively. After enrollment growth of better than 70% in Q1 of the previous year, and in light of the first price increase ever in our monthly pass offering, we knew it would be a challenge to match that quarter's strong volume results .

78. Kirchhoff later explained what purportedly happened during the quarter and why

the Company was reducing its full-year 2012 guidance, stating in pertinent part:

Looking forward. I am heartened by the strong consumer demand and vibrancy of the Weight Watchers brand, as evidenced by our 12% growth in global combined paid weeks in Q1 2012, even on top of the outstanding growth we saw in Q1 2011. However, I am disappointed by the financial performance this quarter, which was driven significantly by execution issues in both marketing and parts of our operations. I bear responsibility for those misses . . . .

* * *

Guidance. The extent of our enrollment challenges in Q1 was somewhat worse than we had originally anticipated when we provided guidance on the last call. In particular, it has taken us longer to dig out of the hole we created for ourselves in the small account corporate business in the US. Therefore, the impact to Q1 challenges will create pressure on our top-line results, and the remaining quarters of 2012, specifically in our meetings business . For Q2, the flow-through of Q1 softness in the meetings business will result in declining revenue in the mid-single digits . Growth in internet revenues will provide a greater positive impact which should allow us to achieve total revenue growth for Q2 in the low single digits. This, coupled with the financial impacts I discussed earlier, translates into operating income being flat-to-down in the low single digits.

As we move into the second half of this year, volume trends should stabilize in the meetings business, and we will continue to benefit from growing WeightWatchers.com volumes. This, combined with the growing benefit from our price increase, should result in top-line growth in high single digits for the second half of the year. Given this, coupled with the marketing timing I discussed earlier, operating income should therefore accelerate into Q3, and more so in Q4. For the full year, we’re

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narrowing and lowering our guidance range of 2012 EPS to $4.60 to $4.80, which includes $0.50 to $0.55 per fully diluted share accretion benefit from our tender offer transaction and related share repurchase. This compares with the previously provided range of $4.20 to $4.60 per fully diluted, which at the time excluded a then-estimated 2012 accretion benefit of $0.45 to $0.60 per fully diluted share.

79. In the question and answer portion of the call, analysts inquired about the timing

of the tender offer, suggesting the Company could have bought its stock back at a lower price

after reporting its disappointing results for the first quarter of fiscal 2012. Kirchhoff defended the

tender offer, remarkably claiming it was “ a way of returning value to shareholders while

improving the efficiency of our capital structure ” and that the “decision that we made with the

tender was a really smart one .”

80. In response to the May 2, 2012 disclosures, the price of Weight Watchers

common stock plunged 18%, from $76.01 per share on May 2, 2012, to close at $62.29 per share

on May 3, 2012, on unusually high trading volume of 6.5 million shares trading.

81. The statements in ¶¶ 75-79 were each materially false and misleading when made

because they failed to disclose the adverse facts which were known to, or recklessly disregarded

by, Defendants and which are set forth in ¶ 53. Moreover, Defendants continued to conceal the

negative long-term impact that free weight-loss apps were then having and would have on

Weight Watchers’ business.

82. After the May 2, 2012 conference call, analysts and financial writers continued to

opine on the Company’s ill-timed tender offer. Timothy Green, a financial writer for the stock

blog The Motley Fool, called the Company’s tender offer “the most absurd share buyback

program I’ve seen. Loading up the company with debt to repurchase shares at an inflated price is

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a terrible idea, plain and simple.” 16 Green analyzed Weight Watchers’ financial position at the

end of 2011, before the massive buyback. He determined the fair value of Weight Watchers

stock at the end of 2011, just prior to the share buyback, was $60 per share. “[O]ne thing is

clear: $82 per share certainly wasn’t cheap.” Green explained the harm of the share buyback

inflicted on Weight Watchers’ shareholders:

This is what happens when you overpay for your own shares - you hurt the common shareholder. The people who accepted the tender offer for $82 per share made out like bandits, as the current share price is around $60 per share. Those who stayed saw the real value as well as the market value of their shares fall. This reeks of a desperate attempt to boost the share price which in the end did exactly the opposite.

83. Michael Olsen, also a financial writer for The Motley Fool, in an online article,

also criticized the share buyback as an attempt by Artal to cash out. 17 Olson wrote:

Artal Group, a private equity firm, owns 44% [sic] of shares, and effectively controls the board. You might argue that last summer’s tender offer was a cash-out for its private equity owners, and it wouldn’t be unreasonable.

* * *

Last year, management repurchased roughly 25% of shares outstanding. I might champion that behavior, were it for an important fact: The price was positively outrageous and, in doing so, destroyed value for shareholders. Worse, the company assumed $1.6 billion worth of debt -- nearly tripling its burden.

16 Timothy Green, Destroying Your Waistline Along With Shareholder Value , The Motley Fool, Jan. 11, 2013, http://beta.fool.com/thebargainbin/2013/01/11/destroying-your-waistline-along-shareholder-value/21275/

17 Michael Olsen, Why I'm Buying Weight Watchers , The Motley Fool, June 25, 2013, http://www.fool.com/investing/general/2013/06/25/why-im-buying-weight-watchers.aspx

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D. Second Quarter Fiscal 2012 Results

84. On August 1, 2012, after the market closed, Weight Watchers issued a press

release: (1) announcing its results for the second quarter of fiscal 2012; (2) revising its fiscal

2012 earnings guidance downwards yet again; and (3) disclosing deteriorating recruitment trends

in the traditional meetings business and in online sign-ups . 18 The Company reported:

• Revenues of $484.8 million, up 2.3% on a constant currency basis versus the prior year period, with total paid weeks up 11.1% versus the prior year period[;]

• Internet revenues of $ 135.6 million, up 31.0% on a constant currency basis versus the prior year period, with Online paid weeks up 30.2% and end of period active Online subscribers up 26.4% versus the prior year period[; and]

• Following the quarter end, the hiring of a new Chief Financial Officer, Nicholas Hotchkin, who will be joining the Company effective August 20, 2012[.]

85. In the press release, Kirchhoff commented:

Second quarter 2012 results were in line with our expectations, benefiting from 11% total paid weeks growth in the quarter versus the prior year period. Yet, since June we have seen a weakening in our trends so we are taking a more cautious view of our business for the second half of the year in light of difficult macro-economic trends, particularly in consumer sentiment. Therefore, we are revising our fiscal 2012 earnings guidance to a range of between $4.00 and $4.20 per fully diluted share .

86. The press release also disclosed that:

Second quarter 2012 meeting revenues for the North American meetings business (NACO) were down 6.5% on a constant currency basis versus the prior year period, as a result of lower enrollment volumes. The lower enrollment volumes were the result of the continued impact of execution issues in the small-accounts corporate business and weakness in the traditional meetings business beginning late in the quarter . As a result, Q2

18 The Company filed a quarterly report on Form 10-Q with the SEC for the second quarter of fiscal 2012 ended June 30, 2012 on August 9, 2012. The 10-Q was signed by Kirchhoff.

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2012 meeting paid weeks and attendance decreased 5.5% and 9.9%, respectively, versus the prior year period.

* * *

Second quarter 2012 International meeting revenues were down 5.1% on a constant currency basis versus the prior year period, with growth in Continental Europe (CE) more than offset by declines in the United Kingdom (UK).

* * *

The WeightWatchers.com business continued to deliver strong growth in the second quarter of fiscal 2012, with Internet revenues up 31.0% on a constant currency basis versus the prior year period. Online paid weeks were up 30.2%, and end of period active Online subscribers were up 26.4%, versus Q2 2011. Sign-up performance was particularly strong in the Continental European markets.

87. On August 1, 2012, also after the market closed, Weight Watchers held a

conference call with analysts and investors to discuss the Company’s second quarter earnings

and reduced earnings’ guidance for 2012. Participating on the call for the Company was CEO

Kirchhoff. During the conference call, Kirchhoff revealed that while second quarter 2012 results

were in line with expectations and previously provided guidance, during June and July of 2012,

the Company had experienced “weakening in our business trends” including declines in the

Company’s North American meeting business (which affected revenues and attendance) and a

slowdown in sign-ups in the online business.

88. Kirchhoff explained that part of the volume shortfall was due to the continued

impact of the short-term execution issues in the small accounts portion of the corporate business

and part of the problem was a considerable slowdown in enrollment trends starting in June and

continuing through July 2012. Addressing the slowdown in enrollment trends, Kirchhoff stated:

The second significant issue facing our North American meetings business comes from our efforts to attract members through our traditional consumer channel. While enrollment levels were solid

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in April and early May, we saw a considerable slowdown beginning in June and continuing into July. While these are traditionally slower months for enrollments, we are nonetheless concerned by the trends we’re seeing . During the last two months, we, like many other consumer businesses, have seen clear indications of consumer disengagement as consumer confidence levels and spending have fallen. Our ability to enroll members into our program is linked to consumer confidence and spending, given that the timing of a consumer's decision to start a weight loss effort is inherently discretionary. Whereas in 2011, we had the benefit of a strong innovation and a relatively fresh advertising campaign to counter the general economic weakness, this year we do not . It is clear that being at the tail end of our typical two-year renovation cycle, and in the third year of our marketing campaign, coupled with increasing weakness in the economy is negatively impacting our business. Despite our challenges in attracting members, retention remains strong.

* * *

In this context, we’re now operating under the assumption that enrollment trends for the remainder of the year will be worse than we had originally forecasted. While we originally expected second-half attendances to be roughly flat to prior, and for paid weeks to grow modestly, we are now forecasting high single-digit declines in attendances and paid weeks.

* * *

Moving on to www.weightwatchers.com. For the second quarter, overall results for our Internet business remained strong, particularly in our CE business. Internet revenues were up 31% on a constant-currency basis, paid weeks for our online product were up a similar 30%, and end-of-period active subscribers were up 26%. Recruitment trends in the first half of Q2 were strong for the Weight Watchers online product across the board, including in the US. However, the end of May and much of June was weaker due primarily to differences in the promotional campaigns employed, as well as a somewhat different media mix. Online sign-ups have since strengthened in the US, although not to the levels that we had previously forecasted. The fact that we are at the end of our two-year innovation cycle, and the increasing weakness in the economy are also having an impact on the www.weightwatchers.com business tempering the overall growth rates relative to what we saw in the first half .

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For the second half of the year, we expect paid weeks growth of 15% to 20%. This will result in full-year volume growth of roughly 25% for the year rather than the previously provided guidance of 30%. The difference in operating income resulting from this forecast change is roughly $20 million for the year, most of which will come in the second half. Despite our second-half outlook, we see significant growth ahead of us for the Weight Watchers online product both domestically and internationally .

* * *

Guidance -- given the weakness we’re now seeing in the NACO business that began in June, and some of the spillover effect on the US Weight Watchers online business, we’re in the difficult position of having to reduce our guidance for this year again. The second-half recovery that we previously forecasted will not happen. A revised view of the NACO and www.weightwatchers.com business has a combined effect of $0.40 to $0.50 per fully diluted share. We also see some additional vulnerability in Europe given economic uncertainty, as well as additional ForEx exposure. Given all the above, we are now forecasting EPS of $4 to $4.20 for the year. As we look at 2013, we’re optimistic about our ability to strengthen our trends, but we realize that we will start the year with a lower membership base in our meetings business given expected weak second-half 2012 recruitments .

89. During the conference call, Kirchhoff also discussed the Company’s plan to

improve Weight Watchers’ business going forward. He stated in part:

With all of this in mind, we have much in the works for 2013 including -- one, a new program. While it is still too soon to reveal many of the details, we’re in the process of ramping up the development of a significant new program upgrade across all of our major markets, currently planned for launch in time for January next year . We believe that this new program has the potential to significantly improve our ability to help members make sustained changes in their weight loss behaviors. While this innovation is not of the same scope as the platform change we launched with ProPoints in 2011, we believe it will be meaningful nonetheless .

Two, new advertising campaigns. With all the learnings from 2012, as well as the opportunity to build new partnerships with new brand ambassadors, such as Jessica Simpson, we will be in a

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position to deliver much more effective marketing campaigns next year.

Three, recovery of the small accounts business. With the execution issues that caused the January breakdown behind us, we plan to enter 2013 with our strongest selling capability ever. At minimum, recapturing a significant portion of the volume we lost this year would result in a meaningful financial improvement for 2013.

Four, continued growth in our strategic accounts business. This line of business has grown significantly in 2012, and is beginning to become much more revenue-significant in our corporate portfolio. We will have more specifics to share about our plans and expectations for this business in future earnings calls. Five, we remain on track to have 80% of our retail system fully converted to stronger locations and better stores in the US by year-end. Of course, we’re continuing to work on our long-term growth objectives, particularly in the healthcare context. All of the trends here are continuing to be favorable for us in the medium to long term.

90. In response to a question about growth in Weight Watchers’ online business,

Kirchhoff conceded that the Company was experiencing a slowdown in its online business, but

that innovation and marketing would help to push growth in the online segment in 2013:

As we enter 2013, we obviously have a different set of expectations on the online business because we kind of get back to the point that, yes, the economy is still difficult. But then the dot com business you have the benefit of the fact that it has a relatively lower price point which has traditionally allowed it to fare better during the recessionary environment that we’ve now been in for the past three or four years. And then if you add on top of that the benefit of program news, continued innovation around the actual set of software tools and new marketing campaigns that we believe that those are the types of things that are going to allow us to sort of push growth back into the volume of that business.

91. On the earnings call, however, Kirchhoff continued to downplay the effect of free

apps on the Company’s business, claiming that free weight-loss apps were frequently

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downloaded, but infrequently used by consumers. In response to a question from John Faucher,

an analyst at J.P. Morgan, Kirchhoff stated in pertinent part:

John Faucher – J.P. Morgan Analyst:

First off, on the online business you talked about maybe seeing some other trends in online with some competitors. Are you seeing any shift to some of the free products that are out there with the economic weakness. And do you perceive this as being more of a threat if the economic weakness continues? . . .

David Kirchhoff - President and CEO:

Yes. Both good and fair questions. Particularly, so let me start with the free app.

Of course I'm always concerned about anything that’s being given away. And there certainly has been a lot of distribution of free mobile applications that help people count calories, and that’s typically what they’ve been. Most of the apps I've seen they've tended to focus on one specific element of the weight loss process. They tend not to have a complete program built around them.

And what I would say is that when we see people signing up for Weight Watchers online what we hear is that they want to do Weight Watchers the program and the software tools are merely a way of helping them do Weight Watchers. So, their purchase decision isn't so much of comparing our points tracker versus someone else’s calorie tracker, it’s more a decision of do I want to do Weight Watchers because I know other people that have done Weight Watchers and is it a program that can work for me?

Further to that point what I would argue is that the Weight Watchers program is obviously, I would argue, I’m biased of course, but it’s much more comprehensive form of behavior change and tools and resources stretching from not just mobile but also including website across. And having a completely full-blown program that is much more comprehensive in nature than what is available in a free app.

Finally, what I would suggest is one of the challenges with free apps is that it is pretty easy to get to someone to download something that's free. It’s less clear how long someone is going to actually use it once they download it. So, I wouldn't be surprised if you had a number of people out there that had three

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or four free weight loss apps on their phone and perhaps weren't even using any of them.

So, what I’m trying to say is that we, like any other competitive threat, we take this seriously and our best way of defending against it is to continue to oppress an aggressive agenda in terms of product and program development and getting people excited about Weight Watchers as a the way of helping them achieve their goals in a way that a free application would have a hard time matching. And so that's kind of our starting point in terms of how we address that particular issue. And I would also point out that a lot of the sort of massive downloads on free apps has been happening even while we were experienced, for example it was going all through 2011 when we were also experiencing a huge amount of sales growth for Weight Watchers online products.

92. In response to the August 1, 2012 disclosures and reduced 2012 guidance, the

price of Weight Watchers common stock plunged 15.7% , from a close of $50.60 on July 31,

2012, to close at $42.66 per share on August 2, 2012, on unusually high trading volume.

93. On August 2, 2012, John Faucher of J.P. Morgan issued an analyst report on

Weight Watchers which repeated management’s representations that despite the reduction in full

year 2012 guidance, the Company expected Weight Watchers business to come back in 2013:

Although management do not expect the macro environment to improve in 2013, they are hoping their business will benefit from a new program upgrade that’s slated for January, improved campaigns, revival of the small accounts corporate business, further growth of the strategic account business, and revamped retail infrastructure.

94. On August 3, 2012, Brian Wang of Barclays Capital Inc. issued an analyst report

on Weight Watchers after having “an in-depth conversation with management related to our

concerns about the business.” The report stated, in part:

We postponed publishing our review of Weight Watchers’ 2Q12 results until we could have an in-depth conversation with management related to our concerns about the business. Although that conversation did not eliminate all of our worries, we got enough comfort the company’s ability to execute on its long-term

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story as well as the potential upcoming catalysts to maintain our Overweight rating . .. . Over the upcoming quarters, WTW also promised more transparency around a key long-term driver of the company, the business to business (B2B) division . We think the lowered FY12 guidance is now realistic, assuming no further deterioration in the external economic environment. The launch of a new program and advertising campaign in the beginning of 2013 should also drive improved results, especially given the relatively easy comparisons this year . We acknowledge that uncertainty remains high, and management will only win back credibility over time, so we factor this in by lowering the multiple we use for our price target.

95. The statements in ¶¶ 85-91 were each materially false and misleading when made

because they failed to disclose the adverse facts which were known to, or recklessly disregarded

by, Defendants and which are set forth in ¶ 53.

E. Stifel Nicolaus Healthcare Conference – September 6, 2012

96. On September 6, 2012, CEO Kirchhoff presented at the Stifel Nicolaus

Healthcare Conference. During his presentation, Kirchhoff stated: “ we believe the underlying

momentum and trajectory in the business is going to be strong .” In response to a question from

a Stifel Nicolaus analyst, Kirchhoff downplayed the effect free weight loss and fitness monitor

apps were having on Weight Watchers’ business:

Free apps – there’s a lot of them. And with Weight Watchers online, we’ve been doing this for a long time, and we have always believed that a paid for model makes sense when it comes to weight. If you can actually help people lose weight, they’ll pay for it. Yes, there’s been a proliferation of free apps, but effectively, these apps – they’re online calorie counters. What Weight Watchers is delivering is a much more comprehensive solution that operates on a lot of different levels.

Most significantly, we actually have a program, and we have a

brand, and people know people who have had success on Weight Watchers. On the other hand, how many consumers get super, super excited about counting calories? That’s also been known for a long time, but it tends not to have the same sort of word of mouth.

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And so, as a result of that, we think that the – what’s going to be important for us, in competing against this landscape of free apps, with Weight Watchers online, is to continue emphasizing the fact that when you do Weight Watchers online, you’re doing Weight Watchers with online tools. It’s a comprehensive solution, as opposed to an online calorie counter.

97. Defendants continued to conceal the negative impact that free weight-loss apps

were then having on Weight Watchers’ meetings business. Kirchhoff’s statements also failed to

disclose the adverse facts which were known to or recklessly disregarded by Defendants and

which are set forth in ¶ 53.

F. Third Quarter Fiscal 2012 Results

98. On November 5, 2012, after the market closed, the Company issued a press

release announcing its results for the third quarter of fiscal 2012 and narrowing its fiscal 2012

earnings guidance. 19 The Company reported:

• Revenues of $430.6 million, up 2.7% on a constant currency basis versus the prior year period, with total paid weeks up 8.8% versus the prior year period[;]

• Internet revenues of $124.2 million, up 24.2% on a constant currency basis versus the prior year period, with Online paid weeks up 23.2% and end of period active Online subscribers up 19.5% versus the prior year period[; and]

• Q3 2012 EPS of $1.20, up 10.5% versus the prior year period EPS of $1.09[.]

99. In the press release, Kirchhoff commented:

Overall, fiscal 2012 is expected to end very much in line with our prior earnings guidance. Our Q3 2012 financial results were somewhat better than our expectations with continued strength of our WeightWatchers.com business being offset in part by pressure on our North American and UK meetings businesses .

19 The Company filed a quarterly report on Form 10-Q with the SEC for the third quarter of fiscal 2012 ended September 29, 2012 on November 8, 2012. The 10-Q was signed by Kirchhoff and Hotchkin.

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Our recent decision to accelerate a few investment areas in preparation for 2013, as well as Hurricane Sandy, will impact our Q4 2012 results. Therefore, we are narrowing our fiscal 2012 earnings guidance to a range of between $4.00 and $4.10 per fully diluted share, reflecting approximately $0.05 per fully diluted share of investment costs pulled forward into the fourth quarter from Q1 2013 as well as an estimated $0.02 to $0.03 per fully diluted share of negative impact from Hurricane Sandy.

100. On November 5, 2012, after the market closed, Weight Watchers held a

conference call with analysts and investors to discuss the Company’s earnings and operations.

Participating on the call for the Company was CEO Kirchhoff and new-CFO Nicholas Hotchkin.

The Company disclosed that online revenues rose 22% in the third-quarter versus the prior-year

period, or 24% on a constant-currency basis and that “[p]aid weeks grew 23% in Q3, with

double-digit growth in the US and even stronger growth in Continental Europe and Canada.” The

Company also disclosed that the decline in North American meeting business had moderated –

down only 3.3% versus the same period in fiscal 2011 - and compared with the 6.4% decline in

Q2 2012 and the 9% decline in Q1 2012.

101. The Company’s new CFO Nick Hotchkin revealed that the weakness in the

Company’s small B2B business had finally stabilized after three quarters:

Similar to the first half, part of the weakness in NACO stemmed from the regional AtWork issue that we have discussed throughout the year. Importantly, while the regional AtWork business was still down considerably versus Q3 2011 , the business performed in line with our expectations and has stabilized, leaving us well situated for the 2013 selling season, which begins this month . Also, importantly, the strategic national accounts part of the business continues to perform very well, and while still a small part of the overall B2B business, it is growing by double-digits.

102. Kirchhoff discussed the new program change for Weight Watchers’ diet plan

coming at the end of 2012 which he described as a “significant enhancement” and a “critical

step” in the Company’s transformation. Specifically, Kirchhoff stated:

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Our new innovation launch for 2012 continues our efforts to fully revamp and expand our program platform, now with a much larger focus on behavior-change techniques. While we do not expect this new innovation to have the same kind of enrollment impact as the 2011 PointsPlus launch, we do see it as a far more significant enhancement than what we did in January 2012, and we view it as a critical step in the ongoing evolution of how we help our members not only to lose their weight, but also to create a real path to keep the weight off.

* * *

When I look forward to 2013, and I think about what we’re going to have going for us, is that we will have program news, we will have new advertising campaigns for Weight Watchers Online, so that those things should be net pluses for us as we think about that business next year.

103. Kirchhoff also discussed the Weight Watchers.com business and the anticipated

enhancements for the Company’s mobile app in 2013, stating in pertinent part:

[O]ur WeightWatchers.com business has continued in Q3 to deliver very solid double-digit revenue and volume growth versus the same period in 2011, benefiting from a strong entering active subscriber base and continued surge in growth in our CE and Canadian Internet businesses. US Online recruitments were under more pressure in Q3, which was driven by the same factors that are affecting the NACO meetings business. . . . Like the meetings business, the Weight Watchers Online business will have the benefit of a fully refreshed marketing campaign, along with the new program launch, as we enter January 2013.

* * *

Much of 2012 has been focused on rolling out the full toolkit of web and mobile apps across our major geographies, as the WeightWatchers.com business outside the US has become increasingly important to us, both from a top-line and bottom-line perspective. As well, the team has been working hard to ready the Weight Watchers Online product to have full functionality to support the new program launch, which will create even greater differentiation from the much narrower competitive applications currently available in either web or mobile platforms .

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104. During the conference call, Kirchhoff discussed the growth of free weight-loss

apps on the market, but countered with the fact that Weight Watchers would overcome the

challenges posed by free apps with “major program improvements.” Kirchhoff stated, in

pertinent part:

[W]e recognize that in an environment where there is pressure and consumer discretionary spend, that the proliferation of so-called free apps has the potential to create additional pressure on our ability to recruit new people . Our plan is to overcome these challenges with major program improvements, as well as new marketing campaigns that allow us to rise above the clutter and noise and to create further differentiation in our offerings versus other alternatives .

105. In the question and answer portion of the conference call, Kirchhoff again sought

to dispel any concerns investors may have had about the effect of free apps on Weight Watchers’

bottom line. The following exchange took place:

John A. Faucher – J.P. Morgan Analyst

Two questions here. The first is, it seems as though there was a slight change in tone in terms of your discussion of the free app issue. Is this something where you’ve seen something going on in the market where you’ve got a heightened level of concern here? ...

David P. Kirchhoff – President and CEO:

So, in the first question on apps, part of the reason I wanted to proactively bring it up was just because its been kind of a constant part of conversation and dialogue with the investment community, and I wanted to basically be responsive to it. Here is my take on apps, is that they have obviously been out there for some period of time. Lots of people are downloading free apps. They are all over the place. There’s lots of companies developing free apps. It’s like 10 guys and a box of pizza, and you have a free app. What I’ve seen, and I’ve spent a lot of time looking closely at them, going out to technology conferences where I’ve met the people that are running these companies, nice guys, hard

workers. I think there’s a couple of issues.

First off, there’s really not a business model to be found among any of these companies, which I think begs the question of

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sustainability over the long term. Secondly, frankly, the bigger issue that I see with free apps is an issue that has been vexing across the app space within the broader healthcare area, that you’ll hear a lot of people in healthcare complaining about sort of underneath their breath sometimes, and sometimes not underneath their breath, which is people download an app and use them for two weeks and then put it away. The problem that I see with apps is that they’re effectively calorie counters, and they’re applications that make counting calories a little bit easier, but they’re not based on an actual program.

They are not based on a lot of behavior-mod science. There’s really not that much there. And I believe that, therefore, from our point of view, we take every competitive challenge seriously. But, from our point of view, I think given what we have going for us and going into next year, we believe that we’re going to have a value proposition that is nowhere even close to being in the same place as a lot of these applications, which are much more narrowly defined. But we haven’t seen anything different this month versus what we saw six months ago, to answer your question directly.

106. On November 5, 2012, Kurt Frederick of Wedbush Securities issued an analyst

report on Weight Watchers entitled “Q3 Beat on N. Am. Meetings Biz Improvement and Lower-

Than-Expected Marketing Spend,” in which Frederick reiterated management’s representations

regarding recovery of the Company’s business in 2013. Frederick stated in part:

Potential turnaround in performance in 2013. The company could see improved results in 2013 due to fixes in the at work business, planned significant program changes in major markets, new marketing campaigns, and benefit from retail transformation initiatives. Management noted it anticipates entering 2013 with roughly 15% more online members and 10% fewer meeting members than in 2012 and spending less on marketing due to improved efficiencies.

107. On November 6, 2012, Brian Wang of Barclays Capital Inc. issued an analyst

report on Weight Watchers, entitled “Future Growth Is What Matters,” in which Wang repeated

the Company’s bullish statements regarding the Company’s initiatives which would drive strong

growth in 2013. The report stated in part:

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WTW has several initiatives underway which should drive strong growth in 2013 and beyond, but for competitive reasons investors will not be told much about them until their official launch at the end of 2012. These initiatives include a major program innovation that will be supported by new marketing campaigns. . . . Additional growth initiatives already being implemented include relocating and modernizing the company’s retail centers and investing in the online business; both are already providing benefits. WTW also plans to be more efficient with its marketing investments in 2013, with total spending forecast to be down year over year.

108. On November 6, 2012, John Faucher of J.P. Morgan also issued an analyst report

on Weight Watchers, stating in part:

Management were optimistic about 2013 , which should benefit from 1) a new program upgrade, 2) improved/revived marketing campaigns, 3) revitalized B2B business (with a segmented offering for the regional and national accounts), 4) continued investment in the online business, and 5) revamped retail infrastructure (80% of storefronts should be done, with 65% already converted by the end of October).

109. On news of Weight Watchers’ strong results for the third quarter of fiscal 2012

including a narrowed range of guidance for full year fiscal 2012, Weight Watchers’ stock price

jumped from a close of $47.48 on November 5, 2012 to close at $55.37 on November 6, 2012,

an increase of 16.6 % on extremely heavy trading volume .

110. The statements in ¶¶ 99-100, 102-105 were each materially false and misleading

when made because they failed to disclose the following adverse facts which were known to, or

recklessly disregarded by, Defendants including:

(a) that the Company was facing increased competition from free weight-loss

apps, which was materially undermining the Company’s recruitment efforts;

(b) that Weight Watchers’ online-only membership offered at a lower price

than its traditional meetings membership was cannibalizing the Company’s $42.95 per month

meetings business. This was causing a fundamental problem in the Company’s business model as

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its online business was less unique (and subject to more competitors) than its traditional and

time-tested offline business;

(c) as a result of increased competition from free weight-loss apps and the

Company’s online-only offering, the Company’s enrollment figures for U.S. meetings were still

trending downward; and

(d) based on the foregoing, the Company was not on track to achieve the

financial results Defendants had led the market to expect at the start of the Class Period

VII. THE TRUTH EMERGES

111. On February 13, 2013, after the market closed, the Company issued a press

release announcing its fiscal 2012 results for the fourth quarter and full year and provided full-

year fiscal 2013 earnings guidance. Weight Watchers’ 2013 full-year guidance range of $3.50 to

$4.00 per share widely missed Thomson Reuters’ consensus of $4.75 per share. In the press

release, Kirchhoff commented:

While 2012 set a Company record for combined global meetings members and global Weight Watchers Online subscribers, we have been disappointed by our recruitment trends thus far in 2013. Our current marketing has not been as effective in this tough economic and increasingly competitive environment . In this context, we are taking appropriate steps to address these near-term challenges while continuing to pursue our long-term growth strategies. We are providing a 2013 full-year guidance range of $3.50 to $4.00 per fully diluted share

112. On February 13, 2013, also after the market closed, Weight Watchers held a

conference call with analysts and investors to discuss the Company’s earnings and operations.

Participating in the conference call from the Company were CEO Kirchhoff and CFO Hotchkin.

During the conference call, Kirchhoff admitted to a greater concern about the impact of free

apps on the Company’s business and finally disclosed that free weight-loss apps were in fact

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taking their toll on the Company’s business – and had been for the previous six months, stating

in part:

Over the past year, however, there’s been an increase in proliferation of free applications , and Google Trends metrics indicate that consumer interest in these apps is up significantly this January. It’s now clear that the WeightWatchers.com awareness-driving strategy that has been so successful at driving millions of people in the WeightWatchers.com started losing some effectiveness roughly 6 months ago . We now need to shift gears to leverage the groundswell of people interested in weight loss mobility tools, by communicating the full value proposition of Weight Watchers Online, and the behavior modification approach on which it’s based. . . .

What we have been seeing this January is softness in never-member recruitment in Weight Watchers online, but continuing strength in recruiting rejoins and continuing strength in retention . To us, this reflects the fact that people who have used Weight Watchers online, and are therefore aware of the value proposition, are choosing to come back rather than turning to free apps. However, as to those who have not yet experienced the value proposition, we have not connected with them with our marketing. . . . The indications that we’re seeing for many of these free apps is that while they’re frequently downloaded, they often are used only used a few times and then sit idly on the consumer’s device. In this context, the modest investment of $18.95 per month for Weight Watchers should be an easy decision for any consumer to make to get the delivery of actual weight loss success, which is what ultimately what wins in the marketplace .

113. On the February 13, 2013 call, Kirchhoff also announced that Michael Basone,

the Company’s Chief Technology Officer and the President of the Company’s online division,

who had been at the helm of the Company’s online business - WeightWatchers.com - since its

inception, would be leaving the Company.

114. On February 14, 2013, John Faucher of J.P. Morgan issued an analyst report on

Weight Watchers which repeated management’s statements about the Company’s business. The

report stated in part:

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Although management continues to be confident in the value proposition of the online offering and the benefits it offers vs. free options, we sensed a greater sense of concern about the impact those free apps are having on the business. We expect Weight Watchers to be more aggressive in going after new customers both for the online business, as well as the meetings business, as the company’s problem lies with getting new members through the door as opposed to re-attracting former members or maintaining the same retention levels. We think we may see more promotions from WTW to generate trial, which is probably necessary to help revive the business. With online historically driving the company’s growth, at a dramatically higher margin, a slowdown the company is seeing there is clearly having a significant impact on the business and needs to be addressed .

115. On the news of Weight Watchers’ reduced guidance for full year 2013 and the

Company’s disclosure that free apps were having a significant effect on the Company’s business,

the price of Weight Watchers’ common stock plummeted 17%, from a close of $54.11 per share

on February 13, 2013, to close at $44.91 per share on February 14, 2013, on unusually high

trading volume of more than six million shares trading.

116. In response to the February 13, 2013 disclosures, Stephen D. Simpson, CFA, a

financial writer for the Investopedia website, in an online article published on February 15, 2013,

opined: “I think Weight Watchers has failed to develop compelling new products that add value

to the user/client experience. I think that could be particularly dangerous in the online

business, where dieters can increasingly choose free apps or ad-supported website in lieu of

paying $19 a month for a subscription. ”20

VIII. POST-CLASS PERIOD DISCLOSURES

117. On May 2, 2013, after the market closed, the Company issued a press release

announcing its financial results for the first quarter of 2013 and narrowing its full-year 2013

20 Stephen D. Simpson, Weight Watchers Still Can’t Get It Right , Investopedia, February 15, 2013, http://www.investopedia.com/stock-analysis/2013/weight-watchers-still-cant-get-it-right-wtw-ntri-nsrgy-arna0215.aspx

- 55 -


earnings guidance to between $3.60 and $3.90 per share. During a conference call with analysts

and investors to discuss the Company’s first quarter 2013 earnings, Kirchhoff again

acknowledged that the Company was still feeling the pain of free apps:

This macro environment would have been difficult in isolation, but add to this, we are also experiencing an explosion of interest by consumers in various free fitness and weight-loss applications. In this cash-strapped environment, the sudden proliferation in popularity of free alternative offerings has created a surge of trial in these apps. The resulting impact is contributing to a challenging recruitment environment, similar to what we saw back in 2000 with the low-carb diet fad .

118. On August 1, 2013, after the market closed, the Company announced its second

quarter 2013 financial results. The company reported a 16% drop in profit for the second quarter,

with revenue falling 4.1% to $465.1 million. The company cut its profit forecast for 2013 and

said revenue would contract by more than 10% in the second half of the year. Revenue from

meetings for the full year was expected to fall by even more. Further, the Company disclosed

that growth in the online business had slowed down due, in part, to “ declining sign-ups in the

US business which continued through the quarter, as the commercial weight loss category

continued to be impacted by increasing consumer trial of activity monitors and free apps .”

During a conference call with analysts and investors to discuss the Company’s earnings and

operations, Hotchkin attributed the disappointing progress to the “very tough recruitment

environment,” which was being negatively affected by the “continued sudden explosion of

interest in free apps and activity monitors.”

119. On August 1, 2013, the Company also announced that Kirchhoff had resigned as

Weight Watchers’ CEO and Board Member effective as July 30, 2013 and that James Chambers

had been appointed the Company’s President and CEO and also had been elected to the

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Company’s Board of Directors. Weight Watchers’ shares closed down more than 19% on August

2, 2013 wiping out another $500 million in Weight Watchers’ market value.

IX. THE TENDER OFFER WAS USED AS A MANIPULATIVE DEVICE TO TAKE ADVANTAGE OF THE HIGH PRICE OF WEIGHT WATCHERS’ STOCK BEFORE MATERIAL ADVERSE INFORMATION KNOWN TO DEFENDANTS WAS DISCLOSED

120. Weight Watchers’ Board of Directors, which is dominated by representatives of

Artal/Invus Group, first authorized a share repurchase program of $250 million in October 2003

thereafter adding $250 million to the program on June 2005, May 2006 and October 2010. The

repurchase program currently has no expiration date and does not allow for share repurchases

from Artal and its subsidiaries. In December 2006, Weight Watchers commenced a tender offer

to acquire up to 8.3 million shares of the Company’s stock and repurchased approximately 10.5

million of Artal’s shares in February 2007 to maintain its percentage ownership at the same level

prior to the tender offer.

121. On February 14, 2012, Weight Watchers announced another self-tender offer.

After gathering all the offers to sell from its shareholders, Weight Watchers announced the final

results of its self-tender offer on March 28, 2012 and set the tender price at $82.00:

Weight Watchers International, Inc. (NYSE: WTW) today announced the final results of its "modified Dutch auction" tender offer for up to $720.0 million in value of its common stock, which expired at 12:00 midnight, New York City time, on Thursday, March 22, 2012. In accordance with the terms and conditions of the tender offer, the Company has accepted for purchase an aggregate of 8,780,485 shares of its common stock at a purchase price of $82.00 per share, for an aggregate cost of approximately

$720.0 million. These shares represent approximately 11.9% of the Company's outstanding shares of common stock as of February 13, 2012.

122. As can be seen from the exhibit below, the tender offer price of $82 set on March

28, 2012 represents a very generous price compared to the market price of Weight Watchers at

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that time. On March 28, 2012, Weight Watchers stock price opened at $79, fluctuated between

$79.53 and $77.51 and closed at $78.71, which is $3.29 or 4% below the tender offer price of

$82.00. In fact, the tender price of $82 represents the highest closing price ever attained during

the Class Period. After March 28, 2012, Weight Watchers’ stock price continued to plummet.

Thus, it was obvious to the executives at Weight Watchers that the price they set – $82 –

represented an overly generous price that would result in outright wealth transfers from those

who did not tender to those who tendered.

123. Consequently, the executives themselves rushed to early-exercise their own

options to participate in this bonanza that they contrived even though these compensation options

still had many years of life left in them. They then acquired shares and tendered these shares

immediately at this extremely generous price of $82 which they themselves set. This evidence

further corroborates the conclusion that the tender offer was a manipulative device used by the

top executives to shift wealth to them. Had the top executives believed that the tender offer

would actually increase the future stock price of Weight Watchers, then they would not have

tendered any shares at all. Neither would they have sold any shares in the open market. Instead,

they would have kept all of their options and stock or even increased their holdings.

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124. After taking into account concurrent overall market conditions, Weight Watchers’

stock price did not show a positive reaction either at the initial announcement of the tender offer

or the final announcement of the tender offer. This evidence indicates that the self-tender offer

did not serve to signal that Weight Watchers stock price was undervalued. Moreover, investors

and market participants also did not view the self-tender offer as a wealth creating device. The

chart below shows the results of an event study to isolate the effects of the overall stock market

conditions from the stock price of Weight Watchers. Thus, this chart shows the firm-specific

reaction to the announcement of the tender offer independent of the current market conditions.

125. Hence, the evidence showing a lack of positive abnormal returns to Weight

Watchers’ stock price further confirms that stock market participants did not believe that the self-

tender offer would increase the price of Weight Watchers’ common stock. Again, this evidence

is consistent with the conclusion that the self-tender offer represented nothing more than a

manipulative device for the top executives to shift wealth to themselves as well as others who

tendered from those who did not tender.

- 59 -


0.2

E 0.15 0.1

a) 0.05

• 0 -0.05

0 C -0.1

-0.15 -0.2

-0.25 • -0.3

-0.35 C.) -0.4

Cumulative Abnormal Returns Around Self-Tender Offer in Weight Watchers

-20 -10 0 10 20 30 40 50 60 Event Days Relative to Self Tender date of February 14, 2012

Day (0)

X. ADDITIONAL SCIENTER ALLEGATIONS

126. As alleged herein, the Officer Defendants acted with scienter in that they knew

that the public documents and statements issued or disseminated in the name of the Company

were materially false and misleading; knew that such statements or documents would be issued

or disseminated to the investing public; and knowingly and substantially participated or

acquiesced in the issuance or dissemination of such statements or documents in violation of the

federal securities laws. The Officer Defendants, by virtue of their receipt of information

reflecting the true facts regarding Weight Watchers, their control over, and/or receipt and/or

modification of Weight Watchers’ allegedly materially misleading statements and/or their

associations with the Company which made them privy to confidential proprietary information

concerning Weight Watchers, participated in the fraudulent scheme alleged herein.

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127. Additionally, the Officer Defendants were motivated to consciously and/or

recklessly make false and misleading statements and omissions in order to allow Kirchhoff,

Sardini, Artal and other insiders to sell shares of their personally-held Weight Watchers common

stock at inflated prices, yielding proceeds of approximately $796 million during the Class Period,

as the following chart demonstrates:

Last Name First Name Position Date Shares Price Proceeds Basone Michael Chief Technology

Officer 11/15/12 28,690 54.45 $1,562,171 05/07/13 3,800 42.07 $159,866 05/07/13 22,100 40.82 $902,122 05/07/13 257 42.43 $10,905

54,847 $2,635,063

3/16/12 11,275 80.67 $909,554 3/22/12 4,789 $82.00 $392,698 04/04/12 141 77.97 $10,994

16,205 $1,313,246

3/16/12 3/16/12 3/22/12 04/04/12

300 81.28

61,165 80.68

18,272 $82.00

538 77.97 80,275

$24,384 $4,934,792 $1,498,304

$41,948 $6,499,428

Fiarman

Jeffrey

General Counsel (Tender Offer)

Kirchhoff

David

Chief Executive Officer/Defendant

(Tender Offer)

200 81.29 $16,258

36,823 80.69 $2,971,248

17,680 $82.00 $1,449,760

54,703 $4,437,266

8,145 80.69 $657,220

3,016 $82.00 $247,312

89 77.97 $6,939

24,750 55.01 $1,361,498

36,000 $2,272,969

9,498,804 82.00 $778,901,928

9,740,834 $796,059,900

Sardini

Ann Chief Financial Officer/Defendant 3/16/12

3/16/12 (Tender Offer) 3/22/12

Stubbing

Melanie President-Europe

3/16/12 (Tender Offer)

3/22/12 04/04/12 11/20/12

Westend SA Beneficial Owner of More than 10% Class/Defendant (Subsidiary Artal Group S.A. is a Defendant)

(Buy-back) 04/09/12

Total:

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A. The Officer Defendants Profited From Class Period Stock Sales Timed to Take Advantage of the February 2012 Disclosures

128. During the Class Period, the Officer Defendants engaged in stock sales that were

suspiciously-timed and dramatically out of line with their prior trading practices, further

evidencing that each of the Officer Defendants possessed the requisite scienter to support a

finding of liability for the claims asserted against them herein. The Officer Defendants profited

substantially while in possession of material adverse nonpublic information, the public

dissemination of which would have and did cause the share price of Weight Watchers stock to

fall. Indeed, the Officer Defendants’ Class Period stock sales amount to approximately $11

million compared to pre-Class Period sales of less than half that amount.

1. The Value and Amount of Stock Sales By the Officer Defendants During the Class Period Were Extremely Large and Highly Unusual

129. To evaluate the Officer Defendants’ selling activity, Lead Plaintiffs used the

publicly-available trading data that is required to be reported to the SEC on Form 4s. In

collaboration with a university professor of finance with an expertise in analyzing insider

trading, Lead Plaintiffs analyzed the trading by insiders that occurred during the Class Period

(366 days) and during the period immediately preceding the Class Period (also 366 days)

beginning February 13, 2011 and ending February 13, 2012 (the “Control Period”). The Weight

Watchers Form 4s filed during the Class Period and Control Period are incorporated herein by

reference.

130. To analyze the Officer Defendants’ sales, Lead Plaintiffs calculated the total sales

by each of the Officer Defendants, together with the cash proceeds from such sales, during the

Control Period and Class Period. Those totals were then compared, to identify whether the

Officer Defendants’ sales during the Class Period were consistent with their sales during the

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Control Period. These analyses reveal that the Officer Defendants’ Class Period sales were

extremely large and highly unusual.

2. The Amount and Percentage of Shares Sold By the Officer Defendants During the Class Period Were Extraordinary and Inconsistent with Prior Trading History

131. The Officer Defendants’ Class Period stock sales were not only large in absolute

terms, but were also inconsistent with the Officer Defendants’ own prior selling activity during

the Control Period. Lead Plaintiffs computed the Officer Defendants’ percentage sales by

taking into account the common shares held at the beginning and end of the Relevant Periods, as

well as their vested restricted stock and vested options positions. To compute the total equity

holdings and percentage trades of the Officer Defendants, their vested restricted stock and vested

option positions were added to their unrestricted common stock holdings.

132. Kirchhoff’s sales during the Class Period totaled 80,275 shares or approximately

$6.5 million in proceeds (including the tendered shares), which represented about 31% (based on

average of beginning and end of Class Period) of the total shares (common shares plus vested

options) he had available during the Class Period. Thus, Kirchhoff’s sales during the Class

Period are large and unusual both in dollar and percentage terms. In contrast, Kirchhoff did not

report any sales during the Control Period. Thus, Kirchhoff’s trading increased dramatically

relative to the Control Period.

133. Sardini’s sales during the Class Period totaled 54,703 shares or $4.43 million in

proceeds (including the tendered shares), which represented about 179% (based on average of

beginning and end of Class Period) of the total shares (common shares plus vested options) she

had available during the Class Period. Thus, Sardini’s sales during the Class Period are large and

unusual both in dollar and percentage terms. In contrast, Sardini’s sales during the Control

Period totaled 60,000 shares or $4.94 million, which represented about 78% (based on average of

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beginning and end of Control Period) of the total shares (common shares plus vested options) she

had available. Thus, Sardini’s sales activity more than doubled in percentage terms from the

Control Period to the Class Period.

134. Finally, Westend SA’s sales during the Class Period totaled 9,498,800 shares or

$778.9 million, which represented about 28% (based on average of beginning and end of Class

Period) of the total shares it had available. 21 Thus, Westend SA’s sales during the Class Period

are large and unusual both in dollar and percentage terms. In contrast, Westend SA’s sales

during the Control Period totaled 5 million shares or $372.5 million, which represented about

13% (based on average of beginning and end of Control Period) of the total shares it had

available. Thus, Westend SA’s sales of Weight Watchers’ shares just about doubled based on

number of shares, more than doubled based on dollar terms, and increased about 130% based on

percentage terms from the Control Period to the Class Period.

3. The Officer Defendants’ Sales Were Suspiciously Large Compared to their Share Acquisitions

135. Lead Plaintiffs also analyzed the percentage of the Officer Defendants’

acquisition of Weight Watchers’ stock that was sold during both the Control Period and the Class

Period. Notably, neither of the Officer Defendants purchased Weight Watchers stock on the

open market during the Class Period. However, at various times they were either granted stock

awards, or they exercised their option awards to acquire shares. This is what the term “share

acquisitions” refers to.

136. Kirchhoff acquired 6,562 shares (through option exercises) and sold zero shares

during the Control Period. In sharp contrast, during the Class Period, Kirchhoff acquired 84,400

21 As set forth herein, Westend S.A. is the parent company of Artal.

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shares (through option exercises) and sold 80,275 shares during the Class Period, or 95% of his

acquisitions. Once again, the sharp jump in selling pattern provides strong support for scienter.

137. Sardini acquired 62,063 shares (through option exercises) and sold 60,000 shares

during the Control Period, or 97% of her acquisitions. 22 In contrast, during the Class Period,

Sardini acquired 50,250 shares and sold 54,703 shares during the Class Period, or 109% of her

acquisitions, an increase of about 12%.23 Once again, this increase in selling provides additional

support for the allegations of scienter.

4. The Officer Defendants Generated Enormous Abnormal Profits on Their Sales of Weight Watchers Stock

138. Lead Plaintiffs further analyzed whether the Officer Defendants’ sales of Weight

Watchers stock during the Class Period generated abnormal (above-average) profits.

139. Abnormal profits were evaluated using a commonly-used event study

methodology called the “market-model method,” which computes cumulative shareholder

returns not explained by market factors. Under this approach, first, two parameters (called alpha

and beta) are estimated using “ordinary least squares” regression during a time period prior to the

period of interest (typically using one year of daily data). 24 For the purpose of illustration,

suppose alpha is estimated as zero and beta as one. If an insider buys a share of stock which then

increases in price from $100 to $120 (up 20%), and the benchmark market index increases from

1000 to 1010 (up 1%) during the same period, then the abnormal profit would be 19%. In this

case 1% of the total return is due to market factor, while 19% of the total return is considered

unusual or abnormal. Similarly, if a company’s stock price declines 20% subsequent to an

22 Tax-related sales are excluded.

23 Once again, tax-related sales are excluded.

24 Ordinary least squares is a method for estimating the unknown parameters in a linear regression model.

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insider sale by a greater amount than the relevant benchmark index (say down 5%), then the sale

enabled the insider to generate an abnormal profit of 15% by avoiding this decline. This

methodology is widely-accepted, having been used extensively in academic literature studying

the stock price reaction to any news announcements as well as profitability of insider trading.

Abnormal profits were calculated using the Standard and Poor’s 500 Index as the market index.

Exactly 250 days of daily data (approximately one calendar year) immediately preceding the

period of interest (Control and Class) were used to estimate the market model parameters.

140. Using this methodology, the Officer Defendants each generated extremely large

abnormal profits exceeding 100% after one year on their transactions in Weight Watchers’ stock

during the Class Period. The timing and extent of the abnormal profits, as well as the contrast

between Control Period and Class Period trades, are reflected graphically in the charts below.

The charts compare trades for the Control Period and Class Period for each of the Officer

Defendants, and depict cumulative abnormal profit (or loss) on all trades occurring during each

period, calculated daily for one to 250 trading days (approximately one calendar year) following

the day of trade. As reflected in the charts below, trades during the Class Period immediately

generated abnormal profits exceeding 100% after one year, demonstrating them to be

extraordinarily well-timed and therefore highly suspicious, particularly when compared to the

lack of abnormal profits generated during the Control Period.

-66 -


1.6 1.5 1.4 i Abnormal Profitability of Trading by All Inside 1.3 1.2 in Weight Watchers 1.1

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1

0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 -0.9

-11

11 1

-250 -200 -150 -100

Event Days Relative to the Insider Trading Day (0)

1. 1. 1. 1. 1. LO-

[L 1.

0. 0.

o 0. 0. 0. 0. 0. a) 0. 0) 0. a)

-0. -0. -0. -0. -0. -0. -0. -0

Abnormal Profitability of Trading by Kirchhoff i Weight Watchers

.8 -0.9 "Class-Period"

-1 I I I I I I I I I I I I I I I I I I I I I I I I I I I I -1.1

-250 -200 -150 -100 -50 0 50 100 150 200 250


"Class-Period" Control Period

-50 0 50 100 150 200 250

- 67 -


1.6 1.5 1.4 I Abnormal Profitability of Trading by Sardini in

2 1.312 Weight Watchers 1.1

.1 1

0.9 0.8 0.7

0.6 - 0.5 0.4 0.3 0.2 0.1

0 -0.1 -0.2 - -0.3

-0.4 - -0.5 -0.6 -0.7 -0.8

-250 -200 -150 -100 -50


1. 1. 1. 1. 1. 0

1

1.

0. 0.

o 0. 0. 0. 0. 0. a) 0. 0) 0. a)

-0. -0. -0. -0. -0. -0. -0. -0. 0

Abnormal Profitability of Trading by Westend SA in Weight Watchers


-1 -1.1

-250 -200 -150 -100 -50 0 50 100 150 200 250



0 50 100 150 200 250

-


141. As is clear from the charts, the Class Period trades of Kirchhoff and Sardini and

the tender of shares by Artal were well-timed. Collectively, these defendants have earned

abnormal profits of 7.5%, 16.4%, 22.7%, 38.1%, and 40.8% after 10, 20, 30, 40 and 50 days

respectively, immediately following the insider trading days. The abnormal profits earned in this

manner exceeded 23.0% for Kirchhoff, 19.7% for Sardini and 30.4% for Westend SA during the

30 days immediately following the insider trading day. During the 50 days following the insider

trading day, abnormal profits earned in this manner exceeded 41.3% for Kirchhoff, 40.5% for

Sardini and 39.8% for Westend SA.

142. To determine whether these unusual profits were the result of random chance,

Lead Plaintiffs used a robust estimation method, clustering abnormal returns for each trader. The

abnormal returns from the market-model for the 250 trading days before and up to 250 trading

days after the day of the trade were averaged across each event day for each Defendant. This

data was then used to compute a t-statistic to infer the probability that the observed cumulative

abnormal profits were due to random chance. Using this robust method, it is clear that the

possibility that these abnormal profits resulted from random chance is extremely remote. Indeed,

the probability of these profits occurring randomly is less than 1 percent and the results are

therefore strongly statistically significant.

143. In contrast, there was no abnormal profitability for any of the Defendants during

the Control Period. For each Defendant individually, as well as for all Defendants collectively,

abnormal profits are either zero and statistically indistinguishable from zero abnormal profit.

Thus, the sharp contrast between lack of abnormal profitability during the Control Period and the

large profitable trading during the Class Period provides additional strong support for scienter.

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5. The Officer Defendants Suspiciously Exercised Their Employee Stock Options Early, Then Immediately Sold The Shares Acquired Before

Weight Watchers’ Stock Price Collapsed

144. Under normal circumstances (absent material and adverse inside information), it

does not make any economic sense for anyone to early-exercise their long-term executive

compensation options for a stock such as Weight Watchers stock. This is because at the time of

the grant, exercise price equals the current stock price, intrinsic value is zero, and 100% of the

value of the option comes from so-called time-value, namely the possibility that the stock price

might increase during the long-life of the option, typically ten years. Over time, if the stock

price rises, some of the value comes from immediate exercise value (intrinsic value) and some or

most of it will still be time-value. At the time of maturity, when the options expire, the situation

will completely reverse, 100% of the value will be intrinsic value (if any), and time-value will be

zero.

145. For long-term executive compensation options (on stocks such as Weight

Watchers), the time value of options will always be positive during the life of the options, and it

is better for executives to hold on to their options until maturity. However, there is one big

exception to this rule: Material adverse inside information. Suppose that insiders expect the

stock price to collapse by the end of the year because of adverse inside information. In this case,

it might be better to sacrifice the time value of the option, exercise the option early, receive the

stock, and then immediately sell the stock before the stock price collapses. In this way, insiders

can avoid being tied up with executive compensation options while the stock price drops below

the exercise price and loses most of its value. Given that time-value is very important, this will

only make sense if the material adverse information possessed by the insider is significantly

large. Thus, the presence of early exercise of executive compensation options provides a strong

evidence of scienter.

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146. During the Class Period, the Officer Defendants each early-exercised their options

by sacrificing time value, received the Weight Watchers stock and then immediately sold the

stock to get out before the stock prices collapsed. Thus, early exercises helped them avoid the

loss of option value as a result of the collapsing stock price.

147. During the Class Period, Kirchhoff early exercised 80,275 options (and then

immediately sold the stock acquired) even though these options still had more than 3.3 to 4.8

years of life in them. Using Black-Scholes options pricing model, modified by Merton for

dividends, the estimated value of these options is $3.24 million. By exercising early, Kirchhoff

pocketed $2.64 million instead and appears to have lost a time-value of more than $600,000.

Hence, on the face of it, these early exercises appear to be uneconomic for an uninformed

person. However, Weight Watchers’ stock price collapsed to $44.91 at the end of the Class

Period. Thus, viewed from this insider-information perspective, these early-exercises make

perfect sense for Kirchhoff. Had Kirchhoff waited until the stock price had fallen to $44.91, his

options would have been worth about $1.06 million. Thus, by exercising early, Kirchhoff

avoided a loss of more than 50% value in his options as a result of the collapsing stock price and

instead immediately pocketed about $2.64 million from his early exercises. Put another way,

given his inside information about the likely collapse in stock price, early-exercise actually

allowed Kirchhoff to profit an additional $1.58 million ($2.64 million minus $1.06 million).

148. In contrast, Kirchhoff did not early-exercise any of his options during the Control

Period . Since Kirchhoff did not expect the stock price to decline during the Control Period, this

finding makes perfect sense. This sharply contrasting evidence between Control Period and

Class Period on early exercises for Kirchhoff provides additional strong support for scienter.

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149. During the Class Period , Sardini also early-exercised 48,000 options (and then

immediately sold the stock acquired) even though these options still had between 5 and 6 years

of life in them. Using Black-Scholes-Merton options pricing model, the estimated value of these

options is $2.12 million. By exercising early, Sardini pocketed $1.61 million instead and appears

to have lost a time-value of approximately $500,000. Hence, these early exercises appear to be

uneconomic for an uninformed person. However, Weight Watchers’ stock price collapsed to

$44.91 at the end of the Class Period. Thus, viewed from this insider-information perspective,

these early-exercises also make perfect sense for Sardini. Had Sardini waited until the stock

price had fallen to $44.91 per share, her options would have been worth approximately $770,000.

Thus, by exercising early, Sardini avoided a loss of more than 50% value in her options as a

result of the collapsing stock price and instead immediately pocketed about $1.61 million from

her early exercises. Put another way, given the inside information she possessed about the likely

collapse in stock price, early-exercise actually allowed Sardini to profit an additional $840,000

million ($1.61 million minus $0.77 million).

150. During the Control Period , Sardini early-exercised 60,000 of her options.

However, these options were deeper in the money and they had less than one year of life left in

them. As a result, the sacrificed time value of these options is minimal. Lead Plaintiffs estimate

the sacrificed time value during the Control Period to be about $5,600. However, this amount is

much smaller than the value she sacrificed during the Class Period (approximately $500,000) to

get out early. Thus, the sharply contrasting difference in values sacrificed between Control

Period and Class Period due to early exercises for Sardini corroborates the conclusion that

Sardini was in much more of hurry to get out of her options positions during the Class Period.

This evidence provides additional strong support for scienter.

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6. Sardini and Kirchhoff Suspiciously Adopted 10b5-1 Plans During the Class Period; However, Those Plans Do Not Insulate This Trading Behavior

151. In 2000, the SEC adopted Rule 10b5-1, 17 C.F.R. § 240.10b5-1, which provides

that a person will be deemed to have traded “on the basis of” material, nonpublic information if

the person engaging in the transaction was “aware of” that information at the time of the trade.

Previously, courts had split on whether simple possession of material, nonpublic information at

the time of the trade was a sufficient basis for imposing liability, and some courts had held that

liability attached to a trade only if the insider “used” inside information in making the trade. See

Selective Disclosure and Insider Trading, 65 Fed. Reg. 51,716, at 51,727 (Aug. 24, 2000).

152. To provide a safe harbor under the “aware of” standard, the SEC created an

affirmative defense to insider trading claims for trades made pursuant to a binding agreement or

plan (“10b5-1 Plans”). See id . at 51,727-28. Pursuant to SEC Rule 10b5-1(c), a 10b5-1 Plan is a

defense to insider trading liability only if it is entered into by an insider “before becoming

aware ” of inside information, and was established “in good faith and not as part of a plan or

scheme to evade the prohibitions” against insider trading.

153. Because of these requirements, insiders are advised to “design a trading plan with

the intention that it will not be modified or amended frequently, since changes to the plan will

raise issues as to a person’s good faith.” Thomson West, Corporate Counsel's Guide to Insider

Trading and Reporting § 12:26 (2006). Conversely, the adoption and/or modification of these

Plans while in possession of material, non-public information is highly suspicious and supportive

of scienter.

154. Sardini and Kirchhoff’s stock sales were made pursuant to 10b5-1 plans, but in

each case the circumstances of those sales are sufficiently suspicious to overwhelm any

affirmative defense that might otherwise have been available to pre-planned sales based on such

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plans. For example, Kirchhoff first reports a sale based on a 10b5-1 plan on March 16, 2012 -

exactly 31 days into the Class Period and at a time when Kirchhoff was already in possession of

material, non-public information, as alleged herein. Under these circumstances, even trades

according to a 10b5-1 plan are high suspicious and indicative of informed insider trading

behavior.

155. Furthermore, Kirchhoff sold an irregular number of shares at irregular intervals

under this “plan”, including 61,465 shares on March 16, 2012; more than 18,000 shares tendered

on March 22, 2012; and finally 538 shares on April 4, 2012. After, April 4, 2012, Kirchhoff does

not report any sales under the 10b5-1 plan. Furthermore, Kirchhoff also does not report any

10b5-1 plan during the Control Period. Thus, for Kirchhoff, between the first mention of a

“plan” and the last sale reported under the “plan”, a mere 19 days pass, while Kirchhoff disposed

of more than 80,000 shares of his Weight Watchers’ stock.

156. Sales pursuant to a proper trading plan should occur with a prescribed, regular

pattern – for example, 500 shares a month on the 10th day of the month. Instead, Kirchhoff

adopts a “plan” right at the beginning of the Class Period, dumps millions of dollars of stock

under the so-called plan, and then he is immediately finished with the plan. Kirchhoff’s so-

called “plan” defies common sense.

157. Sardini also first reports a sale based on a 10b5-1 plan on the same day as

Kirchhoff, on March 16, 2012 - 31 days into the Class Period and at a time when Sardini was

also already in possession of material, non-public information, as alleged herein. Under these

circumstances, even trades according to a 10b5-1 plan are highly suspicious and indicative of

informed insider trading behavior. The fact that different executives both set up trading plans on

the same day further corroborates the conclusion that these trading plans were an attempt to

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avoid liability for insider trading while selling millions of dollars of shares in possession of

material, adverse, non-public information.

158. Furthermore, Sardini also sold an irregular number of shares at irregular intervals

under this so-called “plan”, including 37,023 shares on March 16, 2012; and more than 17,000

shares tendered on March 22, 2012. After, March 22, 2012, Sardini does not report any sales

under the 10b5-1 plan. Furthermore, Sardini also does not report a 10b5-1 plan during the

Control Period. Thus, for Sardini, between the first mention of a “plan” and the last sale reported

under the “plan”, a mere six days pass, while Sardini disposes of more than 54,000 shares.

Under these circumstances, trades according to this 10b5-1 plan are highly suspicious and

indicative of informed insider trading behavior.

159. 10b5-1 plans are being heavily scrutinized by the SEC in light of a recent Wall

Street Journal investigation that found that insiders who were trading pursuant to 10b5-1 plans

were still trading at opportune times and reaping better-than-expected results. According to the

November 27, 2012 Wall Street Journal article entitled “Executives’ Good Luck in Trading Own

Stock,” executives trading pursuant to 10b5-1 plans are still able to time their trades to avoid

losses and increase earnings because trading plans are not public and can be canceled or

amended at any time without disclosure.

160. With regard to such trading plans, a December 13, 2012 Wall Street Journal

article entitled “Trading Plans Under Fire,” notes “[i]n building this ‘safe harbor’ for executives,

the SEC has unwittingly given them a defense for unethical behavior.” According to one source

cited in the article, “[c]ompanies are using these plans as a tool . . . that allows executives to do

insider trading.”

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161. Another Wall Street Journal article from April 24, 2013, entitled, “Directors Take

Shelter in Trading Plans,” notes that: “[I]nstead of selling a fraction of their shares at regular

intervals, as envisioned when regulators created the plans as a way for executives to diversify

their holdings, some directors use the plans to sell heavily in a short time.” 25

162. According to a March 18, 2007 Bloomberg article, “The SEC Is Eyeing Insider

Stock Sales,” an academic study of such plans revealed that executives “do substantially better”

making trades purportedly insulated from trading on insider information pursuant to 10b5-1

plans “than would be expected if trading were truly automatic.” According to the study, trades

made based on plans “beat the market by 6% over six months, while those at the same firms who

traded outside of plans only topped it by 1.9%.” Thus, while protected by the so-called safe-

harbor of 10b5-1 plans, insiders earned abnormal profits almost three times higher than those

trades without a plan. These results prompted the SEC to initiate a detailed analysis of 10b5-1

plans in 2007, and the latest Wall Street Journal coverage has led to renewed scrutiny.

163. Indeed, according to a report issued by Wilson Sonsini in March 2013, “[t]he

floodlights now aimed at such plans are the result of recent Wall Street Journal articles showing

that corporate insiders, even those executing trades pursuant to Rule 10b5-1 plans, have

generated significant profits – or avoided significant losses – by trading company stock in the

days just before their companies issued market-moving news.”

164. The report recommends that clients avoid multiple trading plans, as well as

frequent modifications, and suggests clients adopt “[s]imple plans with a prescribed, regular

pattern of stock sales ( e.g. , 1,000 shares a month on the 15th day of the month).”

25 Susan Pullman and Rob Barry, Directors Take Shelter in Trading Plans, Wall Street Journal, Apr. 24, 2013, http://online.wsj.com/news/articles/SB10001424127887323696404578300073046959086

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165. Further, although Sardini and Kirchhoff filed Form 4s disclosing their trades and

indicating that certain of them were made pursuant to 10b5-1 plans, no further information is

available on the plans. Without discovery, investors cannot understand the details pertaining to

the plans’ creation and amendments, whether any trades pursuant to the plans were canceled, or

what criteria, such as share price, may have triggered sales pursuant to the plans.

166. There are some additional circumstances surrounding Sardini that call into

question the motivation for her stock sales. Sardini announced her retirement from Weight

Watchers on December 2011, effective June 29, 2012 and this may provide an alternative

explanation for Sardini’s stock sales.

167. But, evidence strongly suggests that Sardini’s stock sales were also motivated by

insider information: 1) Sardini did not sell her shares at the time she announced her retirement

(December 2011) or at the time she actually left Weight Watchers (June 2012). Instead, she

early-exercised her options on the same day as Kirchhoff, on March 16, 2012; 2) Sardini

tendered her shares to Weight Watchers at a price of $82 per share on March 22, 2012 and sold

the remainder of her shares right around the tender offer; and 3) Sardini set up a 10b5-1 plan on

the same day as Kirchhoff. Hence, the pattern of early-exercises, stock sales, tendering of shares

and establishment of 10b5-1 plans shows a very high degree of coordination between Sardini and

Kirchhoff. This evidence supports the conclusion that Sardini’s insider trading activity was

motivated by the same insider information as was Kirchhoff’s trading activity.

7. Weight Watchers’ Incentive-Loaded Executive Compensation Structure Provided Additional Incentives to Withhold Adverse Information

168. The Officer Defendants’ compensation structure emphasizes incentives based

payoffs. Total compensation consists of three components: 1) base salary; 2) annual

performance awards (with a one-year lag); and 3) long-term equity incentives awards (again with

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a one-year lag). Weight Watchers used extremely outsized “performance multipliers” which

provide additional payoff ranging from 0-200% for incentive based component to help meet and

exceed performance targets.

169. Specifically, Weight Watchers in their fiscal 2012 proxy stated 26 :

A rating between 0% and 200% for the portion of each named executive officer’s annual cash bonus determined by the Company’s achievement of its financial performance goals is determined based on the following scale:

Range of Financial Performance Goal Ratings

Percentage of Target Operating Income Achieved

during Fiscal Year 75% or less

90% 100%

115% and greater

Financial Performance Goal Rating

0% 50% 100% 200%

170. Thus, small variations in performance can lead to huge payoffs. For instance, a

25% decline in performance can completely wipe out all incentive compensation. Similarly, a

15% increase in performance metric can double the bonus awards. As a result of this highly top-

heavy incentive compensation scheme, the Officer Defendants had the incentives to delay to

disclosure of information as long as possible in order to continue earning their bonuses and other

incentive compensation.

171. In 2012, based on 2011 performance, Kirchhoff and Sardini received

performance-based equity awards multiple times their base salary. 27 Kirchhoff received a total

pay package worth $4.67 million which represents more than 4.8 times his base salary of

$960,000. Sardini received a total pay package of $967,000 which represents more than 4 times

26 Weight Watchers’ 2013 Schedule 14-A, filed with the SEC on April 5, 2013, at 35.

27 Weight Watchers’ 2013 Schedule 14-A, filed with the SEC on April 5, 2013, at 46.

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her base salary of $224,000. Consequently, it was in their personal interest for the Officer

Defendants to ensure that maximum levels of the performance targets were met.

172. The Officer Defendants also knew that releasing adverse information regarding

online competitors to Weight Watchers likely would have led to reduced subscriptions and

reduced stock prices, thus impairing their incentive compensation component - where they made

most of their money. Instead, the longer they withheld the adverse information, revenues and

stock prices would remain high, thereby providing them with additional compensation. This

evidence provides additional support for a strong inference of scienter.

XI. NO SAFE HARBOR

173. The “Safe Harbor” warnings accompanying Weight Watchers’ reportedly

forward-looking statements (“FLS”) issued during the Class Period were ineffective to shield

those statements from liability. To the extent that projected revenues and earnings were included

in the Company’s financial reports prepared in accordance with GAAP, including those filed

with the SEC on Form 8-K, they are excluded from the protection of the statutory Safe Harbor.

See 15 U.S.C. §78u-5(b)(2)(A).

174. Defendants are also liable for any false or misleading FLS pleaded because, at the

time each FLS was made, the speaker knew the FLS was false or misleading and the FLS was

authorized and/or approved by an executive officer of Weight Watchers who knew that the FLS

was false. None of the historic or present tense statements made by Defendants were

assumptions underlying or relating to any plan, projection or statement of future economic

performance, as they were not stated to be such assumptions underlying or relating to any

projection or statement of future economic performance when made, nor were any of the

projections or forecasts made by Defendants expressly related to or stated to be dependent on

those historic or present tense statements when made.

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XII. CLASS ACTION ALLEGATIONS

175. Lead Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a class consisting of all purchasers of the common stock

of Weight Watchers during the Class Period (the “Class”). Excluded from the Class are

Defendants, the officers and directors of the Company at all relevant times, members of their

immediate families and their legal representatives, heirs, successors or assigns and any entity in

which Defendants have or had a controlling interest.

176. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Weight Watchers common stock was actively

traded on the NYSE. While the exact number of Class members is unknown to Lead Plaintiffs at

this time and can only be ascertained through appropriate discovery, Lead Plaintiffs believe that

there are hundreds of thousands of members in the proposed Class. Record owners and other

members of the Class may be identified from records maintained by Weight Watchers and/or its

transfer agent and may be notified of the pendency of this action by mail, using the form of

notice similar to that customarily used in securities class actions.

177. Lead Plaintiffs’ claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by Defendants’ wrongful conduct in violation of the

federal securities laws that are complained of herein.

178. Lead Plaintiffs will fairly and adequately protect the interests of the members of

the Class and have retained counsel competent and experienced in class and securities litigation.

179. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

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(a) whether the federal securities laws were violated by Defendants’ acts as

alleged herein;

(b) whether the Officer Defendants caused Weight Watchers to issue false and

misleading financial statements and omissions during the Class Period;

(c) whether the Officer Defendants acted knowingly or recklessly in issuing

false and misleading financial statements and omissions;

(d) whether the Officer Defendants and the Artal Defendants were control

persons of Weight Watchers;

(e) whether the price of Weight Watchers common stock during the Class

Period were artificially inflated because of Defendants’ conduct complained of herein; and

(f) whether the members of the Class have sustained damages and, if so, what

is the proper measure of damages.

180. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

XIII. APPLICABILITY OF PRESUMPTION OF RELIANCE UNDER THE AFFILIATED UTE DOCTRINE, AND/OR, IN THE ALTERNATIVE, THE FRAUD ON THE MARKET DOCTRINE

181. Plaintiffs are entitled to a presumption of reliance under Affiliated Ute v. United

States , 406 U.S. 128 (1972), because the claims asserted herein against the Defendants are

primarily predicated upon omissions of material fact which there was a duty to disclose.

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182. Plaintiffs are entitled to a presumption of reliance because, as more fully alleged

above, the Defendants failed to disclose material information regarding Weight Watchers

business.

183. Alternatively, Plaintiffs are entitled to a presumption of reliance under the fraud

on the market doctrine, because at all relevant times, the market for Weight Watchers common

stock was an efficient market and the price of Weight Watchers common stock was impacted by

the misrepresentations and omissions for the following reasons, among others:

(a) Weight Watchers’ common stock met the requirements for listing, and

was listed and actively traded on the NYSE, a highly efficient and automated market;

(b) As a regulated issuer, Weight Watchers filed periodic public reports with

the SEC (and was eligible to file SEC Form S-1) and the NYSE;

(c) Weight Watchers regularly communicated with public investors via

established market communication mechanisms, including through regular disseminations of

press releases on the national circuits of major newswire services and through other wide-

ranging public disclosures, such as communications with the financial press and other similar

reporting services; and

(d) Weight Watchers was followed by numerous investor research services

that published publicly available reports, as well as by several securities analysts at major

brokerage firms including but not limited to: 1) John Faucher of JP Morgan Securities LLC; 2)

Anand Vankawala at Avondale Partners; 3) Kurt Frederick of Wedbush Securities; 4) Charles

Boorady and Glen Santangelo of Credit Suisse; 5) Dara Mohsenian of Morgan Stanley; 6) Brian

Wang of Barclays Capital Inc.; 7) Jerry Herman of Stifel Nicholas; and 8) Greg Badishkanian of

CitiGroup. These analysts authored reports about the Company that were distributed to the sales

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force and certain customers of their respective brokerage firms. Each of these reports was

publicly available and entered the public marketplace.

184. As a result of the foregoing, the market for Weight Watchers’ common stock

promptly digested current information regarding Weight Watchers from all publicly available

sources and reflected such information in the Company’s stock price. Under these

circumstances, all purchasers of Weight Watchers’ stock during the Class Period suffered similar

injury through their purchase of Weight Watchers’ common stock at artificially inflated prices

and a presumption of reliance applies.

XIV. LOSS CAUSATION/ECONOMIC LOSS

185. During the Class Period, as detailed herein, Defendants made false and

misleading statements and engaged in a scheme to deceive the market and a course of conduct

that artificially inflated the price of Weight Watchers common stock and operated as a fraud or

deceit on Class Period purchasers of Weight Watchers common stock by misrepresenting the

value of the Company’s business and prospects as alleged herein.

186. As Defendants’ misrepresentations and fraudulent conduct became apparent to the

market, the price of Weight Watchers common stock fell precipitously, as the prior artificial

inflation was removed from the price. As a result of their purchases of Weight Watchers

common stock during the Class Period, Lead Plaintiffs and other members of the Class suffered

economic loss upon the removal of the inflation from Weight Watchers common stock.

Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the damages

suffered by Lead Plaintiffs and the Class.

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187. The truth about Weight Watchers business was disclosed in a series of three

corrective disclosures beginning on May 2, 2012 and concluding on February 13, 2013.

(a) First Corrective Disclosure . The May 2, 2012 press release and earnings

conference call (after the market closed) constituted a partial corrective disclosure as the

Company revealed that its results in the meetings business were softer than expected. Kirchhoff

acknowledged that the full-year fiscal 2012 earnings guidance he had provided on February 14,

2012 - which was already half-way through the first quarter - could not be achieved. In response

to the May 2, 2012 disclosures, the price of Weight Watchers common stock plunged 18%, from

$76.01 per share on May 2, 2012, to close at $62.29 per share on May 3, 2012, on unusually high

trading volume of 6.5 million shares trading. However, Defendants continued to conceal the

negative impact that free weight-loss apps were then having on Weight Watchers’ business.

(b) Second Corrective Disclosure . The August 1, 2012 press release and

earnings conference call (after the market closed) constituted a partial corrective disclosure as

the Company disclosed a weakening in its trends and a downward guidance revision for the

Company’s fiscal 2012 earnings. In response to the August 1, 2012 disclosures, the price of

Weight Watchers common stock plunged 15.7%, from $ 50.60 per share on July 31, 2012, to

close at $ 42.66 per share on August 2, 2012, on unusually high trading volume. However,

Defendants continued to conceal the negative impact that free weight-loss apps were then having

on Weight Watchers’ business.

(c) Final Corrective Disclosure . The February 13, 2013, press release and

earnings conference call (after the market closed) constituted the final corrective disclosure as

the Defendants finally admitted that Weight Watchers’ online business had been feeling the

effects of free apps for at least six months and that the Company needed “to shift gears to

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leverage the groundswell of people interested in weight loss mobility tools by communicating

the full value proposition of Weight Watchers online.” Because of the effects of the free app

competition, Weight Watchers further reduced 2013 guidance – taking full year estimated EPS

down another $0.75 to $1.25 per share from Thomson Reuters’ consensus estimates. In response,

the price of Weight Watchers’ common stock plummeted 17%, from $54.11 per share on

February 13, 2013, to close at $44.91 per share on February 14, 2013, on unusually high trading

volume of more than six million shares trading.

COUNT I

For Violations of §10(b) of the Exchange Act and Rule 10b-5

Against Defendant Weight Watchers and the Officer Defendants

188. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein.

189. During the Class Period, Weight Watchers and the Officer Defendants

disseminated or approved the false statements specified above, which they knew or recklessly

disregarded were misleading in that they contained misrepresentations and failed to disclose

material facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading.

190. Weight Watchers and the Officer Defendants violated § 10(b) of the Exchange

Act and Rule 10b-5 in that they: (a) employed devices, schemes and artifices to defraud; (b)

made untrue statements of material facts or omitted to state material facts necessary in order to

make the statements made, in light of the circumstances under which they were made, not

misleading; or (c) engaged in acts, practices and a course of business that operated as a fraud or

deceit upon Lead Plaintiffs and others similarly situated in connection with their purchases of

Weight Watchers common stock during the Class Period.

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191. Lead Plaintiffs and the Class have suffered damages in that, in reliance on the

integrity of the market, they paid artificially inflated prices for Weight Watchers common stock.

Lead Plaintiffs and the Class would not have purchased Weight Watchers common stock at the

prices they paid, or at all, if they had been aware that the market prices had been artificially and

falsely inflated by Defendant Weight Watchers’ and the Officer Defendants’ misleading

statements.

COUNT II

For Violations of §20(a) of the Exchange Act

Against Kirchhoff, Sardini, Debbane, and Artal

192. Lead Plaintiffs repeat and reallege each and every allegation contained above as if

fully set forth herein.

193. This claim is asserted against defendants Kirchhoff, Sardini, Debbane and Artal

(collectively, the “Section 20(a) Defendants”). Throughout the Class Period, the Section 20(a)

Defendants by virtue of their positions, stock ownership and/or specific acts described above,

were controlling persons of Weight Watchers within the meaning of Section 20(a) of the

Exchange Act.

194. The Section 20(a) Defendants had the power to, and did, directly and indirectly,

exercise control over Weight Watchers, including the content and dissemination of statements

which Lead Plaintiffs allege are false and misleading. The Section 20(a) Defendants were each

provided with and/or had access to reports, filings, press releases and other statements alleged to

be misleading prior to and/or shortly after they were issued and had the ability to prevent the

issuance or correct the statements. Defendants Kirchhoff, Sardini, and Debbane had direct and

supervisory involvement in the day-to-day operations of the Company and engaged in the acts

constituting violations of the federal securities laws, as set forth in Count One above.

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195. The Section 20(a) Defendants culpably participated in the matters alleged herein

because, among other things, they knew, or were reckless in not knowing, that the statements set

forth above were materially false and misleading, or omitted material information. Facts giving

rise to the Section 20(a) Defendants’ culpable participation are set forth in detail above.

196. As Weight Watchers has disclosed, Artal controlled the Company throughout the

Class Period. As stated in Weight Watchers’ public filings with the SEC, since 1999, Artal and

its Board Chairman Debbane directed and controlled Weight Watchers’ every decision. By

Weight Watchers’ own admission, defendant Artal “controls us” through its ownership of the

majority of the voting rights of the shares of Weight Watchers.

197. In addition to the foregoing, Artal’s control over Weight Watchers is

demonstrated by the following:

(a) Artal owns more than 50% of the controlling shares of Weight Watchers;

Weight Watchers is a “controlled company” within the meaning of the New York Stock

Exchange Rules;

(b) Artal has the power to elect Weight Watchers’ directors and to approve

significant corporate transactions such as certain amendments to Weight Watchers’ articles of

incorporation, the sale of all or substantially all of Weight Watchers’ assets and plans of

arrangement in certain circumstances.

(c) Artal’s voting power could have the effect of deterring or preventing a

change in control of Weight Watchers that might otherwise be beneficial to Weight Watchers’

other shareholders.

198. Debbane exercises control over Weight Watchers through his position on the

Board of Directors of Weight Watchers and his position as a majority shareholder. Specifically,

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since 1999, Debbane has served Chairman of the Weight Watchers’ Board. As a result,

Debbane’s close relationship with Artal enabled him to exercise control over the Company for

his personal gain.

199. The Section 20(a) Defendants acted as controlling persons of Weight Watchers

within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their

high-level positions, and their ownership and contractual rights, participation in and/or

awareness of the Company’s core operations and/or intimate knowledge of the false statements

filed by the Company with the SEC and otherwise disseminated to the investing public, the

Section 20(a) Defendants had the power to influence and control and did influence and control,

directly or indirectly, the decision-making of the Company, including the content and

dissemination of the various statements which Lead Plaintiffs contend are false and misleading.

Defendants were provided with or had unlimited access to copies of the Company’s reports,

press releases, public filings and other statements regarding Weight Watchers’ business prior to

and/or shortly after these statements were issued and had the ability to prevent the issuance of the

statements or cause the statements to be corrected.

200. In particular, each of the Officer Defendants and the Artal Defendants had direct

and supervisory involvement in the day-to-day operations of the Company and, therefore, is

presumed to have had the power to control or influence the particular transactions giving rise to

the securities violations as alleged herein, and exercised the same.

201. As set forth above, Weight Watchers violated Section 10(b) and Rule 10b-5 by its

acts and omissions as alleged in this Complaint. By virtue of their positions as controlling

persons, the Officer Defendants and Artal Defendants are liable pursuant to Section 20(a) of the

Exchange Act as control persons of Weight Watchers, the primary violator. As a direct and

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proximate result of the Officer Defendants and Artal Defendants’ wrongful conduct, Lead

Plaintiffs and other members of the Class suffered damages in connection with their purchases of

the Company’s common stock during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, Lead Plaintiffs pray for relief and judgment, as follows:

A. Determining that this action is a proper class action and certifying Lead Plaintiffs

as Class representatives under Rule 23 of the Federal Rules of Civil Procedure and appointing

Lead Plaintiffs’ counsel as Class Counsel;

B. Awarding compensatory damages in favor of Lead Plaintiffs and the other Class

members against all Defendants, jointly and severally, for all damages sustained as a result of

Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding Lead Plaintiffs and the Class their reasonable costs and expenses

incurred in this action, including attorneys’ fees and expert fees; and

D. Awarding such other and further relief as the Court may deem just and proper.

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JURY DEMAND

Lead Plaintiffs demand a trial by jury.

Dated this 12 th day of August, 2014. LABATON SUCHAROW LLP

/S/ Jonathan Gardner Jonathan Gardner Mark S. Goldman Christine M. Fox 140 Broadway New York, New York 10005 Telephone: (212) 907-0700 Facsimile: (212) 818-0477 [email protected] [email protected] [email protected]

Gregg S. Levin David P. Abel MOTLEY RICE LLC 28 Bridgeside Blvd. Mt. Pleasant, SC 29464 Telephone: (843) 216-9000 Facsimile: (843) 216-9450 [email protected] [email protected]

Co-Lead Counsel for Lead Plaintiffs and the Proposed Class

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CERTIFICATE OF SERVICE

I certify that on this 12th day of August, 2014, I electronically filed this Consolidated

Complaint For Violations of the Federal Securities Laws using the Court’s CM/ECF system, and

the Consolidated Complaint will be sent electronically to the registered participants listed in the

attached Electronic Mail Notice List.

By: /s/ Jonathan Gardner

Jonathan Gardner LABATON SUCHAROW LLP 140 Broadway New York, New York 10005 Telephone: (212) 907-0700 Facsimile: (212) 818-0477 E-mail: [email protected]

Co-Lead Counsel for Lead Plaintiffs and the Proposed Class


Mailing Information for a Case 1:14-cv-01997-LAK

I. Electronic Mail Notice List

The following are those who are currently on the list to receive e-mail notices for this case.

• Rae Caroline Adams [email protected] ,[email protected]

• Christine Marie Fox [email protected],[email protected],[email protected]

• Jonathan Gardner [email protected],[email protected]

• Mark S. Goldman [email protected]

• Gregg Steven Levin [email protected],[email protected] ,[email protected]

• Lynn Katherine Neuner [email protected],[email protected]

• Samuel Howard Rudman [email protected],[email protected],[email protected], [email protected]

• Joseph R. Seidman [email protected]

• Michael Walter Stocker [email protected] ,[email protected],[email protected]

• Stephen William Tountas [email protected],[email protected],[email protected] , [email protected]

• George S Wang [email protected],[email protected]

II. Manual Notice List

The following is the list of attorneys who are not on the list to receive e-mail notices for this case (who therefore require manual noticing). You may wish to use your mouse to select and copy this list into your word processing program in order to create notices or labels for these recipients.

~(No manual recipients)

1206651-1 08/12/2014 04:38 PM

in re weight watchers international, inc. securities litigation 14-cv-01997-consolidated

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