UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT #1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10390
BERLITZ INTERNATIONAL, INC.
(Exact name of issuer as specified in its charter)
New York 13-3550016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Research Park, 293 Wall Street, Princeton, New Jersey 08540
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (609) 924-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title and class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period than
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
amendment to Form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE :
Part III: Those portions of registrant's 1993 Form 10-K which are
incorporated into Item 10.
PAGE 1 of 18
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2
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by Item 401 of Regulation S-K with respect to
Directors and Executive Officers of the Company is set forth in Part I of the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993, incorporated by reference herein. The information required by
Item 405 of Regulation S-K with respect to directors and executive officers
of the Company is set forth in Item 12 to this Form 10-K/A, Amendment #1.
ITEM 11. Executive Compensation
Summary of Cash and Certain Other Compensation
On December 9, 1992, the Company and Fukutake Publishing Co., Ltd.
("Fukutake") entered into an amended and restated merger agreement (the
"Merger Agreement") pursuant to which Fukutake agreed to acquire, through
a merger of the Company with an indirect wholly-owned U.S. subsidiary (the
"Merger"), approximately 67% of the outstanding new common stock, par
value $.10 per share, of the Company (the "New Common"). The
compensation disclosed below incorporates amounts received by executive
officers as a result of the Merger.
The following Summary Compensation Table sets forth the compensation
awarded to, earned by or paid to each of the Chief Executive Officer
("CEO") and certain executive officers during the fiscal years ended
December 31, 1993, 1992 and 1991 for services rendered in all capacities to
the Company and its subsidiaries. The compensation disclosed below
pertains to a) all individuals who served as the Company's CEO during the
fiscal year ended December 31, 1993, b) to certain executive officers serving
at the end of the fiscal year ended December 31, 1993 and c) to certain
former executive officers, as required by Item 402 of Regulation S-K
(collectively, the "Named Executive Officers").
<PAGE>
3
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards (11)
Annual Compensation _____________
_________________________________________________________________________________________
Name and Other Annual Options/ All Other
Principal Position Year Salary Bonus Compensation (10) SARs (12) Compensation
($) (9) ($) ($) (#) ($) (13)
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Hiromasa Yokoi (1) 1993 271,058 None 10,000 None None
Vice Chairman of the Board, 1992 - - - - -
CEO and President 1991 - - - - -
Susumu Kojima (2) 1993 143,962 None 14,000 None None
Executive Vice 1992 - - - - -
President 1991 - - - - -
Manuel Fernandez (3) 1993 157,400 30,000 10,494 None 404,681
Executive Vice 1992 141,800 None - 8,000 6,517
President 1991 132,800 29,590 - 7,500 6,502
Robert Minsky (4) 1993 177,723 30,000 None None 287,902
Executive Vice 1992 172,425 None 16,024 8,000 11,215
President and Chief 1991 163,750 49,500 None 10,000 2,063
Financial Officer
Anthony Tedesco (5) 1993 153,000 23,000 28,200 None 400,207
Vice 1992 128,620 60,000 None 7,000 7,209
President 1991 124,439 36,900 None 7,500 8,089
Joe M. Rodgers (6) 1993 34,615 None None None 608,730
Former CEO 1992 300,000 None None 90,000 None
1991 11,538 None None None None
Elio Boccitto (7) 1993 182,769 None None None 1,359,631
Former President 1992 215,000 None None 15,000 13,990
1991 195,000 60,000 None 20,000 13,150
Jacques Meon (8) 1993 118,400 None 31,315 None 800,683
Former Vice 1992 179,984 None 52,186 8,000 1,374
President 1991 161,498 50,700 50,150 7,500 1,200
</TABLE>
(1) Mr. Yokoi joined the Company as an officer in 1993 and his base
salary of $355,000 became effective April 1, 1993. Therefore,
amounts shown for him for 1993 reflect less than a full year of
compensation. Mr. Yokoi's salary increased to $361,000 effective
August 30, 1993 and to $404,000 effective January 1, 1994. During
1991 and 1992, Mr. Yokoi was not employed by the Company but
served as a Director; however, there was no compensation paid to or
earned by him in respect of such years.
<PAGE>
4
(2) Mr. Kojima joined the Company as an officer in 1993 and his base
salary of $190,000 became effective on April 1, 1993. Therefore,
amounts shown for him for 1993 reflect less than a full year of
compensation. Mr. Kojima's salary increased to $200,000 effective
January 1, 1994. During 1991 and 1992, Mr. Kojima was not
employed by the Company and, accordingly, there is no
compensation information to report for him in respect of such years.
(3) Mr. Fernandez's base salary increased from a base salary of
$135,300 effective April 1, 1991 to $143,418 effective April 1,
1992, to $185,000 effective August 30, 1993, and to $207,200
effective January 1, 1994. Mr. Fernandez's 1993 percentage
increase in base salary is based on the additional responsibilities
he assumed as a result of his promotion to Executive Vice President
- Language Services from Vice President - European Operations.
(4) Mr. Minsky's salary increased from a base salary of $165,000
effective April 1, 1991 to $174,900 effective April 1, 1992, to
$178,000 effective August 30, 1993, to $185,000 effective October
4, 1993, and to $207,200 effective January 1, 1994.
(5) Mr. Tedesco's salary increased from a base salary of $123,000
effective April 1, 1991 to $130,380 effective April 1, 1992, to
$185,000 effective July 17, 1993, and to $192,000 effective January
1, 1994. Mr. Tedesco's 1993 percentage increase in base salary is
disproportionate to those of other executive officers based on his
relocation from the United States to Japan and to his assumption of
responsibilities as Vice President - East Asian Operations. A
significant portion of Mr. Tedesco's salary after July 17, 1993 is
paid in yen.
(6) Mr. Rodgers resigned from the Company effective February 8, 1993,
the date on which the consummation of the Merger occurred.
Therefore, amounts shown for him for 1993 reflect less than two
months' compensation. Mr. Rodgers joined the Company as an
officer in December 1991. Therefore, amounts shown for him for
1991 reflect less than one month's compensation.
(7) Mr. Boccitto retired from the Company effective August 31, 1993.
Therefore, amounts shown for him for 1993 represent less than a full
year's compensation. Mr. Boccitto's base salary increased from
$200,000 effective April 1, 1991 to $220,000 effective April 1,
1992.
(8) Mr. Meon resigned from the Company effective July 16, 1993.
Therefore amounts shown for him for 1993 represent less than a full
year's compensation. Mr. Meon's base salary increased from
$165,865 in 1991 to $184,691 effective April 1, 1992. A significant
portion of Mr. Meon's salary was paid in yen.
(9) Amounts shown represent base salary earned in the respective years.
(10) Other Annual Compensation for Mr. Yokoi and Mr. Kojima
represents monthly housing allowances, of $2,500 and $3,500,
respectively, effective beginning September 1, 1993. For Mr.
Fernandez, this column represents a relocation allowance of $10,494,
paid by the Company in 1993. For Mr. Tedesco, $28,200 was paid,
representing housing allowance and relocation expense
reimbursement. For Mr. Meon, $31,315 was paid, representing
housing allowance.
(11) The column designated by the SEC to report Long-Term Incentive
Plan Payouts has been excluded because the Company had no
performance-based long-term compensation plans for employees
effective during any portion of fiscal years 1993, 1992 or 1991.
<PAGE>
5
The Compensation Committee of the Company's Board of Directors
approved a long-term incentive plan, effective January 1, 1994, as
discussed in the Compensation Committee report under "Long-Term
Executive Incentive Compensation Plan".
The column designated by the SEC to report Restricted Stock Awards
has been excluded because the Company made no awards of
restricted stock to the Named Executive Officers during any portion
of fiscal years 1993, 1992 or 1991. Prior to the Merger, all
restricted stock awards had vested in twenty percent increments over
a five year period commencing on the first anniversary of the date
of grant. Shareholders of restricted stock received dividends at
the same rate and at the same time as shareholders of common stock
of the Company. In connection with the Merger on February 8, 1993,
all restrictions on shares of restricted stock lapsed, as discussed
below. Consequently, there are no New Common restricted shares
outstanding at December 31, 1993.
(12) The awards set forth in this column are of grants of stock options
only. The Company has not granted SARs to any of the Named
Executive Officers during fiscal years 1993, 1992, and 1991.
(13) The amounts reported in this column for the fiscal year 1993 include
consideration paid to Named Executive Officers for the settlement of
stock options and restricted stock in accordance with the Merger
Agreement, valued as follows: Mr. Fernandez, $397,208; Mr.
Minsky, $276,350; Mr. Tedesco, $391,691; Mr. Rodgers, $564,030;
Mr. Boccitto, $1,094,038; and Mr. Meon, $467,378. The amounts
reported for fiscal 1993 also include severance-related payments for
Mr. Rodgers, Mr. Boccitto, and Mr. Meon of $44,700, $220,000,
and $332,097, respectively. In addition, consulting payments to Mr.
Boccitto of $36,384 are included for 1993. Furthermore, the
amounts reported include contributions made by the Company for the
accounts of the Named Executive Officers pursuant to the thrift
portion (the "401(k) Plan") of the Berlitz Retirement Savings Plan
(the "Retirement Savings Plan"). For fiscal 1993, such
contributions were as follows: Mr. Fernandez, $3,449; Mr. Minsky,
$5,332; Mr. Tedesco, $3,907; and Mr. Boccitto, $4,315. The amounts
reported also include contributions made by the Company for the
accounts of the Named Executive Officers pursuant to the retirement
portion (the "Pension Plan") of the Retirement Savings Plan. During
fiscal year 1993, such contributions were as follows: Mr.
Fernandez, $4,024; Mr. Minsky, $6,220; Mr. Tedesco, $4,609; and Mr.
Boccitto, $4,894. The amount reported for Mr. Meon also includes
$1,208, representing contributions made by the Company during fiscal
year 1993 to the retirement plan of The Berlitz Schools of
Languages, Inc. (Japan) ("Berlitz-Japan").
Stock Options, Restricted Stock and Stock Appreciation Rights
There were no grants of stock options or restricted stock to the
Named Executive Officers during fiscal year 1993 under the Berlitz
International, Inc 1989 Stock Option and Incentive Plan (the "Stock
Option Plan"). In addition, as indicated under the Summary
Compensation Table above, although Stock Appreciation Rights
("SARs") are authorized under the Stock Option Plan, the
Compensation Committee (or the Awards Committee, as the case
may be) did not grant SARs to any of the Named Executive Officers
during the fiscal years ended December 31, 1993, 1992 and 1991.
Pursuant to the Merger Agreement and the Stock Option Plan, on
February 8, 1993, each outstanding option became fully vested and
was converted into the right to receive (i) 0.165 share of New
Common; (ii) $19.50 minus the exercise price of such option; and
(iii) $1.48, representing the net proceeds from the disposition of
the Company's claims arising from three promissory notes issued by
<PAGE>
6
Maxwell Communication Corporation plc ("MCC") and an affiliate
of MCC in favor of the Company or a subsidiary of the Company
(the "Maxwell Notes"). In addition, pursuant to the terms of the
Merger Agreement and the Stock Option Plan, on February 8, 1993,
all restrictions on restricted stock lapsed and the holders of such
shares received (i) $19.50; (ii) 0.165 share of New Common and (iii)
$1.48, representing the net proceeds from the disposition of the
Company's claims arising from the Maxwell Notes. In addition,
holders of restricted stock received $.01 per share at such time in
consideration for the redemption of the Common Share Purchase
Rights (each, a "Right") granted pursuant to the terms of the
Amended and Restated Safeguard Rights Agreement, dated as of
February 5, 1992, between the Company and United States Trust
Company of New York (the "Rights Agreement").
Option Exercises and Holdings
The following table sets forth certain information concerning the
exercise of all options and the lapse of restricted stock in
accordance with the Merger Agreement. All options and restricted
stock prior to the Merger were converted, as discussed above, into
the right to receive certain cash and non-cash consideration pursuant
to the terms of the Merger. At December 31, 1993, there were no
options, restricted stock, or SARs outstanding.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises/Restricted Stock Lapses
in Last Fiscal Year and FY - End Option/SAR Values
Options Restricted Shares
___________________________________ _______________________________________
New Common Restricted
Options Shares Shares New Common Number of
Outstanding Received on Value Outstanding Shares Value Number restricted
Prior to Conversion Realized Prior to Received on Realized of options shares
Merger (#) ($) (1) Merger Lapse (#) ($) (2) at FY-End at FY-End
___________ ___________ __________ ___________ ___________ ________ __________ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hiromasa Yokoi 0 0 0 0 0 0 0 0
Susumu Kojima 0 0 0 0 0 0 0 0
Manuel Fernandez 45,500 7,507 291,336 4,500 743 105,872 0 0
Robert Minsky 30,500 5,032 205,769 3,000 495 70,581 0 0
Anthony Tedesco 44,500 7,342 285,819 4,500 743 105,872 0 0
Joe M. Rodgers 90,000 14,850 564,030 0 0 0 0 0
Elio Boccitto 135,000 22,275 882,295 9,000 1,485 211,743 0 0
Jacques Meon 55,500 9,158 361,506 4,500 743 105,872 0 0
</TABLE>
(1) For each option outstanding prior to the Merger, the value
realized includes i) 0.165 share of New Common having a
fair market value on February 8, 1993 (the date of
conversion) of $15.38; ii) $19.50 minus the exercise price
of such option; and iii) $1.48, representing the net proceeds
from the disposition of the Company's claims on the
Maxwell Notes.
(2) For each unvested restricted share outstanding prior to the
Merger, the value realized includes i) 0.165 share of New
Common having a fair market value on February 8, 1993
(the date of lapse) of $15.38, ii) $19.50; iii) $1.48,
representing the net proceeds from the disposition of the
Company's claims on the Maxwell Notes; and iv) $.01 in
consideration for the redemption of each Right under the
Rights Agreement.
<PAGE>
7
Directors Committees and Compensation of Directors
In 1993, the Board of Directors had standing Executive, Audit, Disinterested
Directors, and Compensation Committees. The Company does not have a
standing Nominating Committee.
The Executive Committee, during the intervals between meetings of the Board
of Directors, may, with certain exceptions, exercise the powers of the Board
of Directors. The Executive Committee did not meet during 1993.
The Audit Committee recommends to the Board of Directors the engagement
of the independent accountants of the Company and reviews with the
independent accountants the scope and results of the Company's audits. The
Audit Committee reviews the terms of all agreements between the Company
and its affiliates. The Audit Committee meets with management and with the
Company's internal auditors and independent accountants to review matters
relating to the quality of financial reporting and internal accounting control,
including the nature, extent and results of their audits, and otherwise
maintains communications between the Company's independent accountants and
the Board of Directors. The Audit Committee met five times during 1993.
Initially, the Disinterested Directors Committee was established for the
purpose of protecting the long-term interests of the Company and its minority
shareholders by independently reviewing and monitoring all matters affecting
the relationship between the Company and MCC and its affiliates. As a result
of the Merger, the Disinterested Directors Committee's role was retained and
reconstituted to review and monitor all matters affecting the relationship
between the Company and Fukutake and its affiliates. During 1993, the
Disinterested Directors Committee met in person four times, held two
telephonic meetings, and took action by unanimous written consent two times.
The Compensation Committee reviews performance of corporate officers,
establishes overall employee compensation policies and recommends to the
Board of Directors major compensation programs. The Compensation
Committee also reviews and approves salary arrangements and other
remuneration for executive officers of the Company and is responsible for
review of certain employee benefit plans. The Compensation Committee
oversees and approves grants of stock options and other stock-based awards
pursuant to the Stock Option Plan and the Company's Non-Employee Directors
Stock Plan (the "Directors' Stock Plan"). The Committee also administers the
Short-Term Executive Incentive Compensation Plan (the "Short-Term Incentive
Plan") and the Long-Term Executive Incentive Compensation Plan (the "Long-
Term Incentive Plan") and approves awards and discretionary bonuses under
these plans. No member of the Compensation Committee is eligible to
participate in the Stock Option Plan or the Short-Term Incentive Plan. During
1993, the Compensation Committee met in person three times and the Awards
Committee, a subcommittee of the Compensation Committee established prior
to the Merger which ceased to exist after the Merger date, took action by
unanimous written consent once.
The Company's standard retainer payable to each director who is not an
employee of the Company or its affiliates is $30,000 per annum plus expenses,
with an additional $2,000 for each Committee meeting attended in person and
$1,000 for each meeting participated in by telephone. No fees are paid for
actions taken by unanimous written consent. Only those directors who are also
full time employees of the Company or its affiliates are eligible to
participate in the health benefit plan maintained by the Company. Directors
employed by the Company or its affiliates receive no compensation in
consideration of their duties as directors. The outside directors earned an
<PAGE>
8
aggregate of approximately $131,000 as cash compensation for their services
during 1993.
Pursuant to the Merger, Rozanne L. Ridgway and Rudy G. Perpich, former
directors of the Company, received $10,724 and $21,449, respectively, as a
result of the conversion of stock equivalents (455.968 and 911.933,
respectively) which they held under the Directors' Stock Plan. There are no
outstanding stock equivalents under the Directors' Stock Plan as of December
31, 1993.
The Company has entered into indemnification agreements with each director
pursuant to which the Company agreed to pay any amount such director
becomes obligated to pay as a result of any claims made against such director
because of any alleged act or omission or neglect or breach of duty which he
or she commits while acting in his or her capacity as a director and solely
because of his or her being a director, subject to limitations imposed by the
NYBCL.
Employment Contracts and Termination of Employment and Change of
Control Arrangements
During 1993, the Company entered into a severance agreement with Robert
Minsky, replacing all previous agreements entered into between Mr. Minsky
and the Company, which provides that if Mr. Minsky is terminated other than
for cause (1) at any time prior to August 8, 1995, he is to be paid two years'
severance at his then current annual base salary plus a prorated amount of the
award under the Company's Short-Term Incentive Plan to which he would have
been entitled for both years and the continuation of certain other benefits; or
(2) at any time after August 8, 1995, such benefits would be payable for one
year.
The Company also has a severance agreement with Manuel Fernandez, dated
February 6, 1992, which provides that if, within 18 months following a change
of control occurring at any time before February 6, 1994, the Company
terminates Mr. Fernandez's employment other than for cause, Mr.Fernandez
would receive amounts equal to his annual base salary for one year plus a
prorated share of the award under the Company's short-term bonus plan to
which he would have been entitled and the continuation of certain other
benefits.
In addition, the Company entered into a severance agreement, dated June 15,
1993, with Anthony Tedesco, which provides that if, during the period which
Mr. Tedesco serves as Vice President - Far East, plus two years thereafter, the
Company terminates Mr. Tedesco's employment other than for cause, Mr.
Tedesco would receive amounts equal to two years' salary and the continuation
of certain other benefits.
In connection with his resignation as an executive officer and director of the
Company in 1993, Elio Boccitto received a severance payment of $220,000.
In addition, Mr. Boccitto entered into a consulting agreement with the
Company for the two year period ending August 31, 1995 pursuant to which
Mr. Boccitto receives a monthly fee of $9,167, subject to certain conditions.
The Company is a party to indemnification agreements with each director and
executive officer pursuant to which the Company agrees to pay, subject to
limitations imposed by the NYBCL, any amount such director or executive
officer becomes obligated to pay as a result of any claims made against such
director or executive officer because of any alleged act or omission or neglect
or breach of duty which he or she commits while acting in his or her capacity
as a director or executive officer, as the case may be.
<PAGE>
9
COMPENSATION COMMITTEE REPORT FOR FISCAL YEAR 1993
The Compensation Committee of the Board of Directors reviews and
determines the compensation of the Company's executive officers. It also
reviews and approves any employment, severance or similar agreements for
executive officers. The Committee determines the amount, if any, of the
Company's contributions pursuant to the Retirement Savings Plan, and oversees
and approves grants of stock options and other stock-based awards pursuant to
the Stock Option Plan and the Directors' Stock Plan. The Committee also
administers the Short-Term Incentive Plan and the Long-Term Incentive Plan
and approves awards and discretionary bonuses under each of such plans.
The Company seeks to compensate executive officers at levels competitive with
other companies with similar annual revenues and to provide incentives for
superior individual and corporate performance. Salaries are set to correspond
to the mid-range of salaries paid by competitive companies. In setting
compensation, the Company compares itself with companies with similar
annual revenues rather than with industry peers because the Company is the
only publicly-held language instruction company.
The key components of executive officer compensation are base salary, cash
bonuses, and awards pursuant to incentive-based plans. The Committee
attempts to combine these components in such a way to attract, motivate and
retain key executives critical to the long-term success of the Company. A
discussion of the various components of executive compensation for fiscal year
1993 follows.
Base Salary
Each executive officer receives a base salary and the potential for annual
salary increases is largely based on merit from prior annual performance.
The proposed annual compensation of Company employees was discussed at
two of the three Compensation Committee meetings held in 1993.
Presentations by an outside consultant were given regarding the Company's
current compensation and benefits plans. Among other things, the
presentations included a compensation survey comparing the Company's
compensation for 37 job titles to the consultant's database of comparable
marketplace salary ranges and midpoints. Committee members were given
sufficient time to review the consultant's presentations. Base salary
recommendations were made by management for the Committee to approve.
After review and consideration by the Committee of management's
recommendations, the Committee approved base salary adjustments to
comparable marketplace levels provided by the consultant, considering
individual and Company performance. The criteria used to evaluate Company
performance were salary and earnings figures, and return on equity. The
Committee believes that all such criteria were accorded equal weight.
Bonuses
At the third Compensation Committee meeting, held on December 2, 1993, the
Committee approved the Short-Term Incentive Plan, commencing with the
1993 calendar year, pursuant to which each executive officer is eligible for an
annual bonus based upon the officer's present employment position, individual
performance, and the Company's performance compared to earnings goals. The
Committee believes that individual performance and Company performance are
given approximately equal weight. The Short-Term Incentive Plan also permits
<PAGE>
10
the Committee to award discretionary cash awards to employees, who may or
may not be participants under the Short-Term Incentive Plan, subject to those
terms and conditions as the Committee shall determine in its sole discretion.
At the December meeting, the Committee approved, after discussion, a 1993
discretionary bonus proposal for certain executive officers, recommended by
management based upon exceptional individual performance. Bonuses that
accrued for 1993 for such executive officers ranged from 14.6% to 17.7% of
their total salary.
Stock Options and Restricted Stock
The Stock Option Plan provides for the award of stock options, restricted stock
and other stock-based awards to senior management of the Company. Grants
under this plan are intended to provide executives with the promise of longer-
term rewards which appreciate in value with favorable future performance of
the Company. In determining grants of stock options and restricted stock, the
Compensation Committee reviews individual performance and Company
performance. The criteria used to evaluate Company performance include sales
and earnings figures and return on equity. The Committee believes that all
such criteria are accorded equal weight. The Committee did not approve, and
the Company did not make, any grants of stock options, restricted stock, or
any other stock-based award under the Stock Option Plan in 1993.
Long-Term Executive Incentive Compensation Plan
At the Compensation Committee meeting held on December 2, 1993, the
Committee approved the Long-Term Incentive Plan, effective January 1, 1994,
pursuant to which officers and certain key employees are eligible to receive,
for each performance unit granted to the individual by the Committee, cash
awards based on Company performance and common stock price results over
a five year period ending on December 31, 1998. The plan was instituted to,
among other things, provide executives with a direct economic interest in
meeting long-term business objectives. Performance units are granted by the
Committee to each executive officer in its discretion. Criteria used to
evaluate Company performance are earnings and sales figures. The weight
assigned to the earnings component of Company performance is 60% and the weight
assigned to the sales component of Company performance is 40%. For each
performance unit granted by the Committee, each executive officer will receive
a cash award based on Company performance and the Company's common
stock price results from January 1, 1994 through December 31, 1998. The
Long-Term Incentive Plan also contains provisions governing such awards in
the event of a change of control of the Company or a "going private"
transaction with Fukutake or its affiliates.
Other Compensation
The executive officers also are eligible to participate in the Pension Plan.
The Pension Plan provides for the Company to make regular contributions based
on salaries of eligible employees. During 1993, the Compensation Committee
determined that the Company would contribute 3.5% of eligible employees'
respective base salary to the Pension Plan. During 1993, the Compensation
Committee also determined that matching contributions by the Company would
be provided under the 401(k) Plan to all domestic employees up to a maximum
of 3% of the employee's salary.
<PAGE>
11
Chief Executive Officer Compensation
Subsequent to the Merger, Hiromasa Yokoi was appointed by the Board of
Directors to be the CEO and Vice Chairman of the Board of the Company,
effective as of February 1993. At the time, Mr. Yokoi was serving as a
director of the Company and had been serving as a director of the Company
since January 1991. The Company entered into an employment agreement with
Mr. Yokoi, pursuant to which he was entitled to receive $355,000 per annum
and certain other benefits. On August 31, 1993, Elio Boccitto resigned as
President of the Company, and Mr. Yokoi assumed the additional
responsibilities of President. Mr Yokoi's salary increased to $361,000
effective August 30, 1993 and to $404,000 effective January 1, 1994, based on
his additional responsibilities as President.
The Compensation Committee approved and ratified the compensation paid to
Mr. Yokoi for fiscal year 1993 based on Mr. Yokoi's business experience and
familiarity with the Company, and his responsibilities to guide, among other
things, the Company's daily affairs and the Company's long-term strategic plan
in a global marketplace. The Company's 1993 performance was not a factor
in determining Mr. Yokoi's 1993 compensation package. The Committee
believes that Mr. Yokoi's 1993 compensation package was in line with
compensation packages of chief executive officers of other companies with
similar annual revenues.
Tax Legislation
During 1993, the U.S. Internal Revenue Code was amended to limit deductions
for certain compensation in excess of $1 million annually paid to executive
officers of public companies. The legislation imposing this change is unclear
on a number of critical issues, and the ultimate effect of the change on the
Company and other public companies will depend to a significant extent on the
implementing regulations. Proposed regulations have been issued, but these
regulations are not final and also are subject to a number of interpretations.
The Committee intends to continue to evaluate this change during 1994. At
this time, however, the Committee and the Board of Directors have not taken
action in respect of the Company's compensation policy as result of the change.
Compensation Committee Membership
Subsequent to the Merger, during 1993, the Compensation Committee consisted
of Soichiro Fukutake, Edward G. Nelson, and Aritoshi Soejima. All of the
views expressed by the Compensation Committee in 1993 may not have been
the views of each member of the Compensation Committee individually.
However, all decisions affecting compensation were approved by all of the
members of the Compensation Committee.
Compensation Committee for Fiscal Year 1993
Soichiro Fukutake
Edward G. Nelson
Aritoshi Soejima
<PAGE>
12
Compensation Committee Interlocks and Insider Participation
As discussed above, subsequent to the Merger and at March 31, 1994, the
Compensation Committee consisted of Soichiro Fukutake, Edward G. Nelson,
and Aritoshi Soejima. None of these committee members was an officer of the
Company or any of its subsidiaries during 1993.
Mr. Fukutake serves as the Chairman of the Board of the Company. In
addition to his role in presiding over board meetings, Mr. Fukutake is actively
involved in creating and monitoring strategies for the Company's global
growth. As a result, upon recommendation of management and after
discussion, the Compensation Committee, with Mr. Fukutake absent, approved
the inclusion of Mr. Fukutake as a participant in the Long-Term Incentive
Plan, based upon the considerable time and effort spent by Mr. Fukutake in
monitoring long-term strategies for the Company, apart from his duties as
Chairman of the Board.
Aritoshi Soejima previously served as an advisor to Fukutake. He resigned
such position prior to his appointment as a Disinterested Director and a
member of the Compensation Committee.
Mr. Yokoi, who had been a member of the Compensation Committee prior to
the Merger, was elected to the Board of Directors in January 1991 pursuant to
Fukutake's acquisition of a 20% interest in Berlitz-Japan for an aggregate
consideration of $27.1 million. On February 8, 1993, Mr. Yokoi was
appointed CEO and Vice Chairman of the Board of the Company as a result
of the Merger. He attended the Compensation Committee meeting held on
February 27, 1993; however, he excused himself after roll call and, as a
result, did not participate in compensation discussions or decisions. He
resigned from the Compensation Committee effective as of February 28, 1993.
Performance Graph
The following graphs set forth the Company's total shareholder return as
compared to the S&P 400 Industrial Index and two peer groups (described
below) over a four-year period, beginning December 31, 1989, and ending
December 31, 1993. In December 1989, the Company completed an initial
public offering of approximately 8.4 million shares of common stock. See
"Certain Relationships and Related Transactions" for further discussion. The
total shareholder return assumes one hundred dollars invested at the beginning
of the period in the Company's common stock, the S&P 400 Industrial Index
and the peer group indices. It also assumes reinvestment of all dividends.
As the Company is the only publicly-held language instruction company, there
are no directly comparable companies. The two closest industry groups to the
Company are education companies and educational publishers. Therefore, the
Company has created an index of selected publicly held companies in each of
these two industries. These indices have been plotted against the Company's
total shareholder return and the S&P 400 Industrial Index. The companies
included in the education companies index are Flightsafety International, which
sells primarily flight training materials, and National Education Corporation,
which sells primarily technical and vocational training materials. The
companies included in the educational publishing index are Houghton Mifflin,
John Wiley & Sons and McGraw-Hill, Inc. While none of these companies is
directly comparable to the Company, the Company believes they come under
either the same broad rubric of education-related activities as the Company, in
the case of the education companies index, or educational publishers, in the
case of the educational publishing index.
<PAGE>
13
<TABLE>
<CAPTION>
Comparison of Stock Prices
Berlitz International, Inc., the S&P 400 Industrial Index
and Selected Education Companies
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Berlitz $100 $81 $119 $132 $83 (1)
S & P 400 Index $100 $96 $122 $126 $134
Education Companies $100 $91 $100 $111 $124
</TABLE>
<TABLE>
<CAPTION>
Comparison of Stock Prices
Berlitz International, Inc., the S & P 400 Industrial Index,
and Selected Educational Publishing Companies
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Berlitz $100 $81 $119 $132 $83 (1)
S & P 400 Index $100 $96 $122 $126 $134
Educational Publishing Companies $100 $94 $101 $90 $79
</TABLE>
(1) As a result of the Merger, each share of the Company's common stock
outstanding prior to the Merger ("Old Common") was converted into the right
to receive i) $19.50; ii) 0.165 share of New Common; iii) $1.48, representing
the net proceeds from the disposition of the Company's claims on the Maxwell
Notes; and iv) $.01, representing consideration paid for the redemption of each
Right under the Rights Agreement. As of March 18, 1994, 10,032,903 shares
of New Common were outstanding. Prior to the Merger, 19,075,584 shares
of Old Common were outstanding.
<PAGE>
14
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
Management Security Ownership
The following table sets forth the number and percentage of outstanding shares
of New Common beneficially owned by each director, nominee, all individuals
serving as the Company's chief executive officer during the fiscal year ended
December 31, 1993, the four most highly compensated executive officers of the
Company at December 31, 1993, two former officers, and all officers and
directors serving at December 31, 1993 as a group, as of March 1, 1994. If
not mentioned, the individual does not beneficially own any shares of New
Common as of December 31, 1993. No security set forth in the third column
of the following table reflects an amount as to which the beneficial owner has
joint voting or investment power.
Amount and
Nature of
Beneficial Percent
Title of Class Name Ownership of Class
______________ ____ __________ ________
New Common Manuel Fernandez 8,745 Less than 1%
New Common Robert Minsky 2,857 Less than 1%
New Common Owen Bradford Butler 1,000 Less than 1%
New Common Edward G. Nelson 1,500 Less than 1%
New Common Anthony Tedesco 8,332 Less than 1%
New Common Elio Boccitto 24,750 Less than 1%
New Common Jacques Meon 10,395 Less than 1%
All Officers and
Directors as a Group
New Common (14 in number) 41,408 Less than 1%
__________
To the best of registrant's knowledge, there are no events of delinquent filing
requiring disclosure under Item 405 of Regulation S-K.
<PAGE>
15
Other Security Ownership
The following table sets forth the ownership by each person or group who
owned of record, or was known by the Company to own beneficially more than
5% of New Common on March 18,1994.
Percent
Title of Class Beneficial Owner Ownership of Class
______________ ________________ _________ ________
New Common Fukutake Publishing Co., Ltd.(1) 6,735,338 67%
3-17-17 Minamigata
Okayama-shi 700, Japan
New Common Macmillan, Inc. 627,000 6%
55 Railroad Ave.
Greenwich, CT 06830
__________________
(1) 6,722,138 shares of New Common are held by a wholly owned
subsidiary of Fukutake and 13,200 shares of New Common are held
directly by Fukutake.
ITEM 13. Certain Relationships and Related Transactions
Prior to the Company's initial public offering in December 1989, the Company
was a wholly owned subsidiary of Macmillan. On December 13, 1989, the
Company sold 8.4 million shares of common stock to the public in an initial
public offering and issued to Macmillan 200,000 shares of the Company's 7%
non-cumulative preferred stock (the "Preferred Stock") (of which 20,000 shares
were subsequently retired and cancelled and 180,000 shares remained
outstanding) in exchange for the capital stock of its predecessor companies.
Mr. Yokoi was elected to the Board of Directors in January 1991 pursuant to
Fukutake's acquisition of a 20% interest in Berlitz-Japan, a subsidiary of the
Company, for an aggregated consideration of $27.1 million. Pursuant to an
agreement with Fukutake entered into in connection with such acquisition,
Fukutake was entitled to nominate one director of the Company and had an
option, under certain circumstances, to sell back such interest to the Company,
including in the event that the Company should decide not to apply for public
registration of its subsidiary in Japan. Pursuant to the Merger, Fukutake
relinquished the above-mentioned option. Mr. Saburou Nagai currently serves
as the Fukutake nominee on the Board of Directors of the Company pursuant
to the acquisition by Fukutake in January 1991 of a 20% interest in Berlitz-
Japan.
On December 9, 1992, the Company and Fukutake entered into the Merger
Agreement pursuant to which Fukutake agreed to acquire, through a Merger
of the Company with an indirect wholly owned U.S. subsidiary of Fukutake,
approximately 67% of the New Common. The Company's shareholders
received for each of their shares of common stock held prior to the Merger: (i)
$19.50 cash; (ii) 0.165 share of New Common and (iii) $1.48, representing the
net proceeds from the disposition of the Company's claims arising from the
Maxwell Notes. Public shareholders of the Company hold the remaining
approximately 33% of New Common. In addition, at the time of the closing,
the shareholders of record on February 17, 1992 received $.01 per share in
consideration for the redemption of each Right granted pursuant to the terms
of the Rights Agreement.
<PAGE>
16
The Merger Agreement and the transactions contemplated thereby were
approved by the required holders of at least two-thirds of the Company's
outstanding shares and were consummated on February 8, 1993.
In January 1993, the Company entered into agreements with MCC and
Macmillan (the "Disengagement Agreements") with respect to disengaging
certain relationships among such companies. Pursuant to these agreements,
among other things: (i) the Company redeemed from Macmillan all of the
outstanding Preferred Stock of the Company; (ii) MCC waived all claims that
payments to the Company should be considered preferential and other claims
of MCC and its affiliates against the Company and its subsidiaries the MCC
may have as a result of MCC's bankruptcy filing on December 16, 1991; and
(iii) U.S. and U.K. Bankruptcy authorities allowed for all purposes a portion
of the Maxwell Notes and a claim by the Company against MCC as subrogee
of Midland Bank plc in the Chapter 11 case (and any superseding Chapter 7
case) and in the MCC administration pending in the High Court of Justice in
the United Kingdom. In addition, the Company and its subsidiaries (a) sold to
Macmillan a promissory note of Macmillan with a principal amount of $64.568
million and (b) reduced by $58 million the amount of their claims against MCC
in respect of the Maxwell Notes.
The Company also entered into an agreement with Macmillan clarifying certain
commercial relationships, including formally terminating the services
agreement with MCC and Macmillan as of December 31, 1991. Certain
distribution agreements with Macmillan and its affiliates remain in effect.
The Company was included in the consolidated tax returns of the affiliated
group of which Macmillan was the parent (the "Macmillan Group") prior to the
Company's initial public offering in December 1989 and, consequently, is
severally liable for any federal income tax liabilities of the Macmillan Group
arising prior to that date. Pursuant to the Disengagement Agreement,
Macmillan and a new obligor which owns 100% of Macmillan School
Publishing, Inc agreed to pay all such Federal income tax liabilities pursuant
to an amended and restated tax allocation agreement (the "Tax Allocation
Agreement') and MCC put into escrow $39.5 million to secure Macmillan's
obligation under the Tax Allocation Agreement.
On November 10, 1993, Macmillan commenced a voluntary Chapter 11 case
in the United States Bankruptcy Court for the Southern District of New York
and filed a prepackaged plan of reorganization (the "Reorganization Plan").
The Reorganization Plan provides that the Tax Allocation Agreement, along
with many other contracts between Macmillan and other parties, is to be
assumed by Macmillan and assigned to a trust intended to have sufficient assets
to satisfy the obligations being assumed and assigned. The Reorganization Plan
also provides a cash reserve to pay tax claims that are entitled to priority,
which may include tax liabilities covered by the Tax Allocation Agreement.
On February 18, 1994, the Bankruptcy Court confirmed the Reorganization
Plan. Any tax liability assessed against the Company that would otherwise be
payable by Macmillan under the Tax Allocation Agreement (as described in the
preceding paragraph) is likely to be paid either by the trust or from the cash
reserve described above. Management believes that any such liability will not
result in a material effect on the financial condition of the Company.
As part of the Merger, Fukutake established a $50,000 irrevocable letter of
credit to be used in the event that income tax liabilities are imposed on the
Company that relate to the Macmillan Group. The Company is obligated to
pay fees as may be charged in connection with such letter of credit and to
reimburse Fukutake for amounts paid by Fukutake to the issuer of the letter of
credit to the extent that it is drawn upon.
<PAGE>
17
Berlitz-Japan has a contract (the "Development Agreement") with Fukutake,
originally executed in 1992 and amended in 1993, for the development of
English conversation video taped programs for elementary and junior high
school students in Japan. Under this contract, Fukutake will reimburse
Berlitz-Japan for project-related production costs incurred, including
employee salaries and outside production fees, and pay to Berlitz-Japan a
one-time development fee of Yen 46,672,000 (approximately $420,000 based
on the Yen/Dollar exchange rate at the close of business on December 31,
1993) and a coordination fee of 10% of project-related employee salaries,
estimated at Yen 2.3 million (approximately $21,000 based on the Yen/Dollar
exchange rate at the close of business on December 31, 1993).
Pursuant to the Development Agreement, the Company received reimbursement
for production costs of approximately $1.8 million and $296,000 during 1993
and 1992, respectively. In addition, the Company received the development
fee of approximately $420,000 in 1993.
Fukutake and Berlitz-Japan also entered into an agreement, dated as of October
1, 1993, pursuant to which Berlitz-Japan would assist Fukutake in the
development of an English correspondence course and related audio visual
materials. Under the terms of the agreement, Fukutake would pay Berlitz-
Japan a minimum guaranty usage fee of Yen 6,592,416 (approximately $59,000
based on the Yen/Dollar exchange rate at the close of business on December 31,
1993) and an additional royalty for all courses sold beyond the first 1,200.
The Company and Fukutake entered into certain other joint business
arrangement in the ordinary course of business, as follows. Berlitz-Japan and
Fukutake entered into an extended industrial block contract whereby Berlitz-
Japan has waived a one-time registration charge and has provided Fukutake
with an industrial lesson rate which is approximately 20% below the individual
rate. In addition, the Company entered into a sublease with Fukutake
Information and Publishing for approximately 2,100 square feet of space in
New York at an annual base rent of $79,000 plus operating expenses.
Furthermore, Fukutake and Berlitz-Japan have entered into a cooperative
advertising arrangement pursuant to which Fukutake is allowed to include a
Berlitz-Japan advertisement and a discount coupon toward registration fees in
a targeted mailing to certain Fukutake customers.
Management believes that the Company has entered into all such agreements
on terms no less favorable than it would have received in a arms-length
transaction with independent third parties. Each of the transactions with
Fukutake entered into after the Merger was approved by the Disinterested
Directors Committee.
Fukutake has advised the Company that it plans to change Fukutake's name to
"Benesse Corporation" on April 1, 1995, upon approval of Fukutake's
shareholders. Subject to receipt of all required Japanese approvals and
prevailing market conditions, Fukutake plans to make an initial public offering
of Fukutake securities no earlier than the later part of 1995. There is no
assurance that such a public offering will be made, the timing of any such
public offering, nor can the Company predict its possible impact on Berlitz.
<PAGE>
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Berlitz International, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BERLITZ INTERNATIONAL, INC.
By:/s/ HIROMASA YOKOI
Hiromasa Yokoi
Vice Chairman of the Board,
Chief Executive Officer and President
Dated: April 29, 1994
