UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 registrant as specified in its charter)
NEW YORK 13-355-0016
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 ALEXANDER PARK, PRINCETON, NEW JERSEY 08540-6306
----------------------------------------------------
(Address of principal executive offices)
(609) 514-9650
--------------------------------------------------
Registrant's telephone number, including area code
N/A
--------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
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 that 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
--- ---
The number of shares outstanding of the registrant's common stock, at the close
of business on May 13, 1997, is 9,656,013.
Page 1 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BERLITZ INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
(Dollars in thousands, except per share amounts)
1997 1996
--------- -------
Sales of services and products $ 88,429 $ 89,266
-------- --------
Costs and expenses:
Cost of services and products sold 53,066 54,125
Selling, general and administrative 29,141 27,997
Amortization of publishing rights, excess of cost
over net assets acquired, and other intangibles 3,149 3,234
Interest expense on long-term debt 1,759 2,016
Interest expense to affiliates 514 383
Other expense, net 235 35
-------- --------
Total costs and expenses 87,864 87,790
-------- --------
Income before income taxes and minority
interest in earnings of subsidiary 565 1,476
Income tax expense 323 1,295
Minority interest in earnings of subsidiary 74 (23)
-------- --------
Net income $ 168 $ 204
======== ========
Earnings per share $ 0.02 $ 0.02
======== ========
Average number of shares outstanding (000's) 9,406 10,033
======== ========
See accompanying Notes to the Consolidated Financial Statements.
2
<PAGE>
BERLITZ INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
---------- -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and temporary investments $ 25,599 $ 25,781
Accounts receivable, less allowance for
doubtful accounts of $2,193 and $1,914 36,533 36,048
Unbilled receivables 5,316 3,807
Inventories 8,736 10,260
Prepaid expenses and other current assets 7,446 6,815
--------- ---------
TOTAL CURRENT ASSETS 83,630 82,711
Property and equipment, net of accumulated
depreciation of $14,303 and $15,275 29,278 29,363
Publishing rights, net of accumulated amorti-
zation of $3,668 and $3,504 18,338 18,864
Excess of cost over net assets acquired and other intangibles,
net of accumulated amortization of $48,231 and $46,049 408,360 417,611
Other assets 12,544 12,696
--------- ---------
TOTAL ASSETS $ 552,150 $ 561,245
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,019 $ 10,741
Accounts payable 4,636 5,943
Deferred revenues 36,131 34,748
Payrolls and commissions 9,804 10,227
Income taxes payable 3,396 4,207
Accrued expenses and other current liabilities 14,003 11,713
--------- ---------
TOTAL CURRENT LIABILITIES 74,989 77,579
Long-term debt 56,138 56,353
Notes payable to affiliates 38,223 38,294
Deferred taxes and other liabilities 22,487 22,348
Minority interest 9,400 9,264
--------- ---------
TOTAL LIABILITIES 201,237 203,838
--------- ---------
Commitments and Contingencies (Note 6)
SHAREHOLDERS' EQUITY:
Common stock 1,003 1,003
Additional paid-in capital 368,658 368,658
Retained earnings 3,594 3,426
Cumulative translation adjustment (16,699) (10,037)
Treasury stock at cost (5,643) (5,643)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 350,913 357,407
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 552,150 $ 561,245
========= =========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
3
<PAGE>
BERLITZ INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 168 $ 204
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,114 4,906
Minority interest, provision for bad debts,
foreign exchange (gains) losses, net, and
gains on currency swap agreements 744 (1)
Changes in operating assets and liabilities 1,698 (1,315)
-------- --------
Net cash provided by operating activities 7,724 3,794
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,144) (3,741)
-------- --------
Net cash used in investing activities (3,144) (3,741)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of note payable to affiliate -- 6,000
Repayment of long-term debt (3,931) (3,019)
-------- --------
Net cash (used in) provided by financing activities (3,931) 2,981
-------- --------
Effect of exchange rate changes on cash and
temporary investments (831) (312)
-------- --------
Net increase (decrease) in cash and temporary investments (182) 2,722
Cash and temporary investments, beginning of period 25,781 25,402
-------- --------
Cash and temporary investments, end of period $ 25,599 $ 28,124
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for:
Interest $ 204 $ 432
======== ========
Income taxes $ 978 $ 722
======== ========
Cash refunds of income taxes $ 16 $ 53
======== ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
4
<PAGE>
BERLITZ INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. GENERAL
The Consolidated Financial Statements of Berlitz International, Inc.
(the "Company") have been prepared in accordance with the instructions
to Form 10-Q and are unaudited. The information reflects all
adjustments which are of a normal recurring nature which are, in the
opinion of management, necessary for a fair presentation of such
financial statements. The financial statements should be read in
conjunction with the financial statements and related notes to the
Company's 1996 Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior period financial
statements to conform to the 1997 presentation.
2. LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
Term Loan $ 6,790 $10,500
Senior Notes 56,000 56,000
Other 367 594
------- -------
Total 63,157 67,094
Less current maturities 7,019 10,741
------- -------
Long-term debt $56,138 $56,353
======= =======
3. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's
financial instruments at March 31, 1997 and December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
Assets:
<S> <C> <C> <C> <C>
Cash and temporary investments $ 25,599 $ 25,599 $ 25,781 $ 25,781
Currency coupon swap agreements 692 692 228 228
Liabilities:
Long-term debt, including
current maturities 63,157 68,209 67,094 71,652
Notes payable to affiliates 38,223 32,779 38,294 32,926
Currency coupon swap agreements 409 409 694 694
</TABLE>
For cash and temporary investments, the carrying amount approximates
fair value due to their short maturities. The fair values of long-term
debt and notes payable to affiliates are estimated based on the
interest rates currently available for borrowings with similar terms
and maturities. The fair values of the coupon swap agreements represent
5
<PAGE>
the amounts that could be settled based on estimates obtained from a
dealer. The value of these swaps will be affected by future interest
rates and exchange rates.
4. OTHER EXPENSE, NET
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1997 MARCH 31, 1996
--------------- --------------
<S> <C> <C>
Interest income on temporary investments $ (144) $ (176)
Foreign exchange losses, net 210 72
Gain on currency coupon swap agreement - (399)
Other non-operating taxes 163 109
Term Loan administration fee 150 150
Other (income) expense, net (144) 279
------- -------
Total other expense, net $ 235 $ 35
======= ======
</TABLE>
5. EARNINGS PER SHARE
Earnings per share ("EPS") are computed by dividing net income by the
weighted average number of shares outstanding during the period.
Primary and fully diluted EPS are the same since the Company had no
common stock equivalents during the periods presented.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share", which simplifies the standards
for computing EPS. Statement 128 replaces the standards for computing
and presenting EPS found in Accounting Principles Board Opinion No. 15,
"Earnings Per Share" (APB 15). Statement No. 128 requires dual
presentation of Basic (which replaces APB 15's Primary EPS) and Diluted
EPS on the face of the income statement for all entities with complex
capital structures. Statement No. 128 will be effective for financial
statements for the year ended December 31, 1997, including interim
periods to be presented therein; however, earlier application is not
permitted. The Company does not expect that the adoption of this
statement will have a material effect on its calculation of EPS.
6. CONTINGENCIES
In October 1996, the Internal Revenue Service issued a deficiency
notice to the Company relating to its 1989, 1990, 1992 and 1993 Federal
tax returns. The Company is contesting the deficiency notice and
believes that any liability that may ultimately result is adequately
provided for at March 31, 1997.
7. RELATED PARTY TRANSACTION
On April 29, 1997, the Company and Fukutake Holdings (America), Inc.
("FHAI"), a wholly owned subsidiary of Benesse Corporation ("Benesse"),
signed a definitive contract whereby the Company agreed to sell to FHAI
250,000 shares of Common at $24.44 per share, the average market price
for the ten days ending on April 29, 1997. This transaction, which was
approved by the Disinterested Directors Committee of the Company's
Board of Directors, was closed on May 12, 1997. The Company used
250,000 of its treasury shares to complete this transaction, which was
a private placement exempt from registration under the Securities Act
of 1933. It is expected that proceeds of the sale will be used for
general corporate purposes. Following this private placement, Benesse
6
<PAGE>
beneficially owned 6,985,338 shares, or 72.34%, of the 9,656,013 shares
of Common then outstanding.
8. STOCK OPTION AND INCENTIVE PLANS
On April 17, 1997, the Compensation Committee of the Company's Board of
Directors approved a modification to the Company's 1996 Stock Option
Plan (the "Plan") whereby the total number of shares for which options
may be granted is 377,000. The Company plans to reserve 377,000 of its
treasury shares for use under the Plan. Subject to shareholder approval
of the Plan, the Company has agreed to grant 327,200 options on June
30, 1997 at an exercise price equal to the closing price of the
Company's common stock on the New York Stock Exchange on the date of
grant. Included within the 327,200 options are 100,250 options for
Soichiro Fukutake, Chairman of the Board of Directors, 50,000 of which
have been approved for grant in exchange for the complete
relinquishment by Mr. Fukutake of all benefits under the Company's
Supplemental Executive Retirement Plan ("SERP").
7
<PAGE>
BERLITZ INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
Consolidated Financial Statements and notes thereto and with the Company's
audited Consolidated Financial Statements and notes thereto for the fiscal year
ended December 31, 1996. Certain statements contained within this discussion
constitute forward looking statements. See "Special Note Regarding Forward
Looking Statements."
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 VS.
THREE MONTHS ENDED MARCH 31, 1996
Sales for the quarter ended March 31, 1997 were $88.4 million, 0.9% below the
same period in the prior year. This decline was due to unfavorable exchange rate
fluctuations of $5.1 million, (primarily the result of a strengthening dollar
against the Japanese yen, the German mark, and most other European currencies),
partially offset by operations increases in the Instruction and Translation
business segments.
Beginning in 1997, the Company split its Asia division into two operating
divisions: Japan, and Asia (the latter consisting of all other countries within
the region). The following discussion reflects this change.
Language Instruction sales, including franchising activity, for the quarter
ended March 31, 1997 were $65.0 million, 2.4% below the same period in 1996, as
decreases in Japan, Central/Eastern Europe and Western Europe were partially
offset by increases in the other geographic divisions. The sales decline in
Japan ($2.3 million, or 14.4%) primarily reflected unfavorable exchange rate
fluctuations ($2.0 million), and a decline in average revenue per lesson
("ARPL"). Central/Eastern Europe's decrease ($1.0 million, or 6.5%) primarily
reflects unfavorable exchange rate fluctuations ($1.9 million, principally
versus the German mark and Swiss franc) and a volume decline in Germany,
partially offset by ARPL increases in all countries within the division, and by
volume increases in Poland. The decline in Western Europe ($0.8 million, or
7.4%) was attributable to unfavorable exchange fluctuations, primarily for
France, Belgium and Spain. North America's sales increase ($1.1 million, or
8.0%) primarily resulted from volume and ARPL improvements, and the performance
of the Berlitz on Campus specialty program. The increase in Latin American
revenues ($0.9 million, or 10.2%) was primarily attributable to volume increases
in Brazil and ARPL improvements in Mexico.
During the three-month period ended March 31, 1997, the number of lessons given
was approximately 1.3 million, 1.7% above the same period in the prior year,
reflecting increases in most divisions. Lesson volume in North America increased
4.9% from the prior year. Japan's lesson volume remained flat with the prior
year. Lesson volume in Asia rose 9.7% from 1996, reflecting the startup of
operations in Singapore, partially offset by a decline in Thailand. Lesson
volume in Latin America increased by 4.0% from prior year, primarily reflecting
volume improvements in Brazil. Lesson volume in Central/Eastern Europe increased
1.2% over the prior year, primarily reflecting an increase in Poland, partially
8
<PAGE>
offset by a decline in Germany. Lesson volume in Western Europe declined 2.8%
from 1996, primarily due to a shortfall in Italy, which has been affected by an
unsettled political climate.
For the 1997 first quarter, ARPL was $42.17, as compared to $45.13 in the
comparable prior-year period. The decline reflected the effect of unfavorable
exchange rate fluctuations. ARPL ranged from a high of approximately $59.68 in
Brazil to a low of $17.32 in the Slovak Republic, reflecting effects of foreign
exchange rates and differences in the economic value of the service. The Company
opened one new language center during the 1997 first quarter in Peru and sold
two franchises in France and Mexico.
Translation segment sales were $19.6 million for the three-month period ended
March 31, 1997, an increase of $0.9 million, or 5.0%, from the same period in
1996, as results from operations were partially offset by unfavorable exchange
fluctuations of $0.3 million. The operations growth was primarily due to an
increase in Ireland, partially offset by declines in the U.S., Germany, Denmark
and Japan. Ireland's revenue increase resulted from continued growth in services
provided in software-related industries. The U.S. revenues were down as a result
of an unusually high sales month in March 1996 from one large contract. Results
in Germany, Japan and Denmark were affected by general slowdowns in local
markets. The 1997 quarterly revenue growth rate is not indicative of a trend for
the entire year.
Publishing segment sales were $3.7 million for the three months ended March 31,
1997, $0.3 million or 8.0% below 1996, primarily reflecting a decrease in travel
related products in Western Europe. Exchange rate fluctuations were not
significant.
The Company's cost of services and products sold as a percentage of sales was
60.0% in the first three months of 1997, compared to 60.6% in the comparable
prior year quarter. This change from the prior year reflected decreased
percentages for certain center operating expenses, partially offset by increases
in percentages for translator costs. Selling, general and administrative
expenses as a percentage of sales were 33.0% in the 1997 first quarter, compared
with 31.4% in the comparable prior year period. This increase was affected
primarily by higher administrative salary percentages, due in part to changes in
allocations of responsibilities under matrix management.
EBITA/1/ for the 1997 first quarter was $6.2 million, or 7.0% of sales, compared
to $7.1 million, or 8.0% of sales, in the same prior year period, reflecting
EBITA declines in the Instruction and Translations segments and an increase in
non-segment related corporate expenses.
Instruction segment EBITA, including franchising activity, for the quarter ended
March 31, 1997 was $9.3 million, or 14.3% of segment sales, compared to $9.8
million, or 14.6% of segment sales, in the comparable prior year period. This
decline was largely due to increases (as a percentage of sales) for
administrative salaries and certain other administrative costs.
- ---------------------
/1/EBITA as used herein is defined as sales less cost of services and products
sold, and selling, general and administrative expenses. It is calculated using
amounts determined in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"). EBITA is not a defined term under U.S. GAAP and is not
indicative of operating income or cash flows from operations as determined under
U.S. GAAP.
9
<PAGE>
Translation segment EBITA for the three months ended March 31, 1997 was $ 1.3
million, or
6.4% of segment sales, compared to $1.8 million, or 9.5% of segment sales, in
the prior year. The 1997 results reflect an unfavorable product mix compared to
the prior year period, combined with lower volume in certain Asian and Western
European countries and certain one-time charges.
Publishing segment EBITA for the 1997 first quarter was $0.4 million, compared
to a break-even EBITA in the prior year. This improvement from the prior year
primarily is a result of improved production efficiencies and higher licensing
revenue.
Non-segment related corporate expenses included in EBITA were $4.7 million for
the three months ended March 31, 1997, compared with $4.4 million in the same
prior year period. This increase was primarily due to higher expenses in 1997
associated with the Company's Supplemental Executive Retirement Plan (the
"SERP"), and New Long-Term Executive Incentive Compensation Plan (the "New
LTIP").
Interest expense on long-term debt for the three months ended March 31, 1997
decreased by $0.3 million, or 12.7%, from the comparable prior year period,
primarily due to scheduled principal repayments and a lower average interest
rate on a portion of the Company's long-term debt.
Other expense, net for the three months ended March 31, 1997 increased $0.2
million primarily due to higher foreign exchange losses and the absence of gains
from currency coupon swap agreements which reduced expenses in 1996.
The Company recorded an income tax expense of $0.3 million, or an effective rate
of 57.2%, during the current period. This compared to an income tax expense of
$1.3 million, or an effective rate of 87.7%, in the prior year's quarter. The
effective tax rates in both 1997 and 1996 were above the U.S. Federal statutory
tax rate primarily as a result of nondeductible amortization charges.
FINANCIAL CONDITION
Historically, the primary source of the Company's liquidity has been the cash
provided by operations, and capital expenditures, working capital requirements
and acquisitions have been funded from internally generated cash. Although each
geographic area exhibits different patterns of lesson volume over the course of
the year, the Company's sales are generally not seasonal in the aggregate.
Net cash provided by operating activities was $7.7 million for the quarter ended
March 31, 1997, up $3.9 million from the comparable prior year period due
primarily to lower prepaid expenses and an increase in prepayment of fees by the
Company's customers.
Capital expenditures during the three-month period ended March 31, 1997 were
$3.1 million, primarily reflecting costs of refurbishments and purchases for
existing centers. Capital expenditures declined by $0.6 million from the
comparable prior year period, which included $1.5 million related to the April
1996 relocation of the Company's corporate headquarters to its new facility in
Princeton, New Jersey.
10
<PAGE>
Pursuant to a covenant under the Acquisition Debt Facilities, the Company is
party to five currency coupon swap agreements with a financial institution.
These agreements require the Company, in exchange for U.S. dollar receipts, to
periodically make foreign currency payments, denominated in the Japanese yen,
the Swiss franc, the Canadian dollar, the British pound, and the German mark.
Credit loss from counterparty nonperformance is not anticipated. The fair market
value of these swap agreements at March 31, 1997, representing the amount that
could be settled based on estimates obtained from a dealer, was a net asset of
approximately $0.3 million.
In October 1996, the Internal Revenue Service issued a deficiency notice to the
Company relating to its 1989, 1990, 1992 and 1993 Federal tax returns. Such
notice proposed adjustments which could result in additional tax payments of
approximately $9.3 million, plus accrued interest. The Company is contesting the
deficiency notice and intends to fund any deficiency that may ultimately result
through its cash resources. The Company believes that it has adequate cash
resources to pay any such deficiency and to pursue its business plan.
On March 28, 1997, the Company signed a nationwide interpreter service contract
with the Department of Justice, Executive Office for Immigration Review ("EOIR")
for the next two years, with three annual renewal options at the election of
EOIR. The time period within which a Government Accounting Office or Agency
Protest to this contract could have been made expired on April 7, 1997 and no
such Protest had been filed. The Department of Justice informed the Company that
any parties eligible to Protest have advised the Department of Justice in
writing that they would not do so.
On April 29, 1997, the Company and Fukutake Holdings (America), Inc. ("FHAI"), a
wholly owned subsidiary of Benesse Corporation, signed a definitive contract
whereby the Company agreed to sell to FHAI 250,000 shares of Common at $24.44
per share, the average market price for the ten days ending on April 29, 1997.
The Company used 250,000 of its treasury shares to complete this transaction,
which was closed on May 12, 1997. It is expected that proceeds of the sale will
be used for general corporate purposes.
At March 31, 1997, the Company's liquid assets of $25.6 million consisted of
cash and temporary investments. The Company does not currently have any material
commitments for capital expenditures. During 1997, the Company anticipates
capital expenditures to increase compared with historical trends in connection
with the refurbishment of the Company's language centers and the expansion of
the Company's Translations segment. The Company plans to meet its debt service
requirements and future working capital needs through funds generated from
operations.
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10Q constitute
"Forward-Looking Statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). The Company desires to take
advantage of certain "Safe Harbor" provisions of the Reform Act and is including
this special note to enable the Company to do so. Forward-Looking Statements
involve known and unknown risks, uncertainties, and other factors which could
cause the Company's actual results, performance (financial or operating) or
achievements to differ materially from the future results, performance
(financial or operating) or achievements expressed or implied by such
Forward-Looking Statements. Such risks, uncertainties and other factors include,
among others: the future continuation of the EOIR contract; the outcome of
future negotiations and/or litigation pertaining to the deficiency assessed by
the IRS; as well as more general factors affecting future cash flows, including
11
<PAGE>
fluctuations in foreign currency exchange rates; demand for the Company's
products and services; the impact of competition; the effect of changing
economic and political conditions; the level of success and timing in
implementing corporate strategies and new technologies; changes in governmental
and tax laws, regulations, tax audits and other factors (known or unknown) which
may affect the Company. As a result, no assurance can be given as to future
results, levels of activity and achievements.
BERLITZ INTERNATIONAL, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
All exhibits listed below are filed with this Quarterly Report on Form 10-Q.
Exhibit No.
10.1 Stock Purchase Agreement between Fukutake Holdings (America), Inc.
and Berlitz International, Inc., dated April 29, 1997.
10.2 1996 Stock Option Plan, as amended.
27 Financial Data Schedule, for the three months ended March 31, 1997.
b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Exchange Act the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BERLITZ INTERNATIONAL, INC.
(Registrant)
Date: May 15, 1997 By: /s/ HENRY D. JAMES
-------------------
Henry D. James
Executive Vice President and
Chief Financial Officer
12
================================================================================
STOCK PURCHASE AGREEMENT
between
FUKUTAKE HOLDINGS (AMERICA), INC.
AND
BERLITZ INTERNATIONAL, INC.
------------------------------
Dated April 29, 1997
------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions........................................................1
2. Sale and Transfer of Shares; Closing...............................2
2.1 Shares......................................................2
2.2 Purchase Price..............................................2
2.3 Closing.....................................................3
2.4 Closing Obligations.........................................3
3. Representations and Warranties of the Company......................3
3.1 Organization and Good Standing..............................3
3.2 Authority; No Conflict......................................3
3.3 Legal Proceedings; Orders...................................4
3.4 Private Offering............................................4
3.5 Commission Documents........................................4
3.6 Brokers or Finders..........................................4
4. Representations and Warranties of the Buyer........................5
4.1 Organization and Good Standing..............................5
4.2 Authority; No Conflict......................................5
4.3 Private Offering Representations............................5
4.4 Certain Proceedings.........................................6
4.5 Brokers or Finders..........................................6
5. Mutual Indemnification and Hold Harmless...........................6
6. General Provisions.................................................6
6.1 Expenses....................................................6
6.2 Notices.....................................................7
6.3 Jurisdiction; Service of Process; Choice of Forum...........7
6.4 GOVERNING LAW...............................................8
6.5 Further Assurances..........................................8
6.6 Waiver......................................................8
6.7 Entire Agreement and Modification...........................9
6.8 Successors and Assigns......................................9
6.9 Severability................................................9
6.10 Headings...................................................9
6.11 Counterparts...............................................9
i
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STOCK PURCHASE AGREEMENT
Stock Purchase Agreement, dated as of April 29, 1997, by FUKUTAKE
HOLDINGS (AMERICA), INC., a Delaware corporation (the "Buyer"), and BERLITZ
INTERNATIONAL, INC. (the "Company").
WHEREAS, the Buyer, together with its affiliates, currently owns
6,735,338 shares (71.6%) of the Company's common stock; and
WHEREAS, the Company desires to sell, and the Buyer desires to
purchase, 250,000 shares of common stock, par value $0.10 per share, of the
Company (the "Shares"), for the consideration and on the terms set forth in this
Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. DEFINITIONS.
As used in this Agreement, and unless the context requires a
different meaning, the following terms shall have the following meanings:
"AGREEMENT" means this Agreement, as the same may be amended,
supplemented, or modified, in accordance with the terms hereof.
"BYLAWS" means the bylaws of a corporation as in effect as of the
Closing Date.
"CERTIFICATE OF INCORPORATION" means the certificate of
incorporation of a corporation, as the same may have been amended and in effect
on the Closing Date.
"CLOSING" has the meaning assigned to such term in Section 2.3.
"CLOSING DATE" means the date and time upon which the Closing
actually takes place.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act and the
Exchange Act.
<PAGE>
2
"CONTRACT" means any material agreement, contract, or obligation
that is legally binding.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state,
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"ORDER" means any award, decision, injunction, judgment, order,
ruling, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Authority.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, estate,
trust, incorporated or unincorporated association, joint venture, joint stock
company, Governmental Authority, association, organization, labor union, or
other entity of any kind.
"PROCEEDING" means any action, arbitration, audit, litigation, or
suit (whether civil, criminal, or administrative) commenced, brought, conducted,
or heard by or before, or otherwise involving, any Governmental Authority.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor law, and the rules and regulations of the Commission or any
successor thereunder.
"SHARES" has the meaning assigned to such term in the recitals of
this Agreement.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1 SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, the Company will sell and transfer the Shares to the
Buyer, and the Buyer will purchase the Shares from the Company.
2.2 PURCHASE PRICE. The per share purchase price for the
Shares will be the average closing price of the Company's shares on the New York
Stock Exchange for the ten business days prior to April 29, 1997.
<PAGE>
3
2.3 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, at 1285 Avenue of the Americas, New York, New York
10019, on May 12, 1997 (the "CLOSING DATE").
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) The Company will deliver to the Buyer the
certificates representing the Shares for transfer to the Buyer;
(b)The Buyer will deliver to the Company the aggregate
purchase price therefor by wire transfer of immediately available funds to the
account designated by the Company in writing prior to the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New York, with full corporate power and authority to
conduct its business as it is now being conducted, and to own or use the
properties or assets that it purports to own or use.
3.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the
legal, valid, and binding obligation of the Company, enforceable against it in
accordance with its terms. The execution and delivery of this Agreement and the
consummation or performance thereof by the Company (a) have been duly authorized
by all necessary corporate action of the Company; and (b) do not contravene the
terms of its Certificate of Incorporation or Bylaws.
<PAGE>
4
3.3 LEGAL PROCEEDINGS; ORDERS. There are no Proceedings pend
ing, or to the knowledge of the Company, threatened, at law, in equity, or
before any Governmental Authority against the Company that would, if adversely
determined, have a material adverse effect on the ability of the Company to
perform its obligations under this Agreement. To the knowledge of the Company,
no Order has been issued by a court or other Governmental Authority against the
Company purporting to enjoin or restrain the execution, delivery or performance
of this Agreement.
3.4 PRIVATE OFFERING. No form of general solicitation or
general advertising was used by the Company or its representatives in connection
with the offer or sale of the Shares.
3.5 COMMISSION DOCUMENTS. The Company has filed all registra
tion statements, proxy statements and other reports required to be filed by it
under the Securities Act and the Exchange Act, and all amendments thereto
(collectively, the "COMMISSION DOCUMENTS"); and the Company has furnished the
Purchaser correct and complete copies of all Commission Documents, each as filed
with the Commission, from and after January 1, 1997. Each Commission Document
was true and accurate in all material respects when filed with the Commission
and in compliance in all material respects with the requirements of its
respective report form.
3.6 BROKERS OR FINDERS. The Company and its officers and
agents have incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold the Buyer harmless
from any such payment alleged to be
<PAGE>
5
due by or through the Company as a result of the action of the Company or its
officers or agents.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents to the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of
Delaware.
4.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the
legal, valid, and binding obligation of the Buyer, enforceable against it in
accordance with its terms. The execution and delivery of this Agreement and the
consummation or performance thereof by the Buyer (a) have been duly authorized
by all necessary corporate action of the Buyer; and (b) do not contravene the
terms of its Certificate of Incorporation or Bylaws.
4.3 PRIVATE OFFERING REPRESENTATIONS. The Buyer confirms that
the Company has made available to the Buyer and its representatives and agents
the opportunity to ask questions of the officers and management employees of the
Company and to acquire such additional information about the business and
financial condition of the Company as Buyer has requested, and all such
information has been received. The Buyer understands that the purchase and sale
of the Shares has not been and is not being registered with the Commission or
with the governmental entity charged with regulating the offer and sale of
securities under the securities laws and regulations in the State of New York.
The Buyer is acquiring the Shares for its own account and not with a view to
their distribution in violation of the securities laws of the United States of
America or of any state or jurisdiction therein. If the Buyer should in the
future decide to dispose
<PAGE>
6
of any part of such Shares, the Buyer understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in effect.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that
has been commenced against the Buyer and that challenges, or may have the effect
of preventing, delaying, or making illegal, or otherwise interfering with, the
execution or consummation of this Agreement.
4.5 BROKERS OR FINDERS. The Buyer and its officers and agents
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold the Company harmless from any
such payment alleged to be due by or through the Buyer as a result of the action
of the Buyer or its officers or agents.
5. MUTUAL INDEMNIFICATION AND HOLD HARMLESS. The Company shall
indemnify and hold harmless the Buyer, and the Buyer shall indemnify and hold
harmless the Company, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by the other party in this
Agreement, or (b) any breach of any party of any covenant or obligation in this
Agreement.
6. GENERAL PROVISIONS.
6.1 EXPENSES. Each party to this Agreement will bear its
respective expenses incurred in connection with the preparation, execution, and
performance of this Agreement, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of this
Agreement,
<PAGE>
7
the obligation of each party to pay its own expenses will be subject to any
rights to such party arising form a breach of this Agreement by another party.
6.2 NOTICES. All notices, consents, waivers, and other communi
cations under this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by telecopier (with written confirmation of receipt), provided that a
copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by an internationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
The Company:Berlitz International, Inc.
400 Alexander Park
Princeton, New Jersey 08540
Attention: Robert C. Hendon, Jr., Esq.
Vice President and General Counsel
Facsimile: (609) 514-9670
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Facsimile No.: (212) 757-3990
The Buyer: Fukutake Holdings (America), Inc.
c/o Kazuo Yamakawa
Director, Accounting and General Administration
Benesse Corporation
3-7-17 Minamigata
Okayama-shi 700, Japan
Facsimile No.: 011-81-86-227-6112
6.3 JURISDICTION; SERVICE OF PROCESS; CHOICE OF FORUM. Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of,
<PAGE>
8
this Agreement must be brought against any of the parties in the courts of the
State of New York, or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of New York, and each of the
parties expressly consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
6.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF.
6.5 FURTHER ASSURANCES. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
6.6 WAIVER. No failure or delay on the part of the Company or
the Buyer in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of
<PAGE>
9
any remedies that may be available to the Company or the Buyer at law, in equity
or otherwise.
6.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
constitutes a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
6.8 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. No Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement. No party
hereto may assign its rights under this Agreement without the prior written
consent of the other party hereto.
6.9 SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
6.10 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, all
of which when so executed shall be deemed to be an original and both of which
taken together shall constitute one and the same agreement.
<PAGE>
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first written above.
BERLITZ INTERNATIONAL, INC.
By:
--------------------------
Name:
Title:
FUKUTAKE HOLDINGS (AMERICA), INC.
By:
--------------------------
Name:
Title:
BERLITZ INTERNATIONAL, INC.
STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 GENERAL..................................................1
1.1 Purpose..................................................1
1.2 Definitions of Certain Terms.............................1
1.3 Administration...........................................3
1.4 Persons Eligible for Awards..............................3
1.5 Types of Awards Under Plan...............................4
1.6 Shares Available for Awards..............................4
1.7 Agreements Evidencing Awards.............................4
ARTICLE 2 OPTIONS..................................................5
2.1 Grant of Options.........................................5
2.2 Exercisability of Options................................5
2.3 Method of Exercise.......................................6
2.4 Default Rules Concerning Termination of Service..........7
2.5 Term of Options. .......................................7
ARTICLE 3 MISCELLANEOUS............................................8
3.1 Amendment of the Plan; Modification of Awards............8
3.2 Restrictions.............................................8
3.3 Nontransferability.......................................9
3.4 Withholding Taxes........................................9
3.5 Adjustments Upon Changes in Capitalization...............9
3.6 Right of Discharge Reserved.............................10
3.7 No Rights as a Stockholder..............................10
3.8 Nature of Payments......................................10
3.9 Non-Uniform Determinations..............................11
3.10 Other Payments or Awards................................11
3.11 Severability............................................11
3.12 Section Headings........................................11
3.13 Effective Date..........................................11
3.14 Expiration Date.........................................12
3.15 Governing Law...........................................12
<PAGE>
BERLITZ INTERNATIONAL, INC.
STOCK OPTION PLAN
ARTICLE 1
GENERAL
1.1 PURPOSE.
The purpose of this Berlitz International, Inc. Stock Option Plan
(the "Plan") is to provide for certain officers, directors and key personnel of
Berlitz International, Inc. (the "Company") and certain of its Affiliates an
equity-based incentive to maintain and enhance the performance and profitability
of the Company. It is the further purpose of this Plan to permit the granting of
awards that will constitute qualified performance-based compensation for certain
executive officers, as described in section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder.
1.2 DEFINITIONS OF CERTAIN TERMS.
(a) "Affiliate" means any person or entity which, at the time
of reference, directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means (i) serious and repeated willful misconduct
in respect of a grantee's duties which has resulted in material, economic
damages to the Company or any Affiliate, and, to the extent such misconduct is
susceptible to being cured, such misconduct continues for thirty days following
written notice to the grantee by the Company detailing such misconduct, (ii) the
final, unappealable conviction in a court of law of any crime or offense (A) for
which the grantee is imprisoned for a term of six months or more or (B) that
involves the commission of fraud or theft against, or embezzlement from, the
Company or any Affiliate, or (iii) chronic alcoholism or abuse of controlled
substances.
(d) "Change of Control" means the happening of any of the
following:
(i) A change of control of a nature that would be
required to be reported in response to any form or report to the Securities and
Exchange Commission or any stock exchange on which any of the Company's equity
<PAGE>
2
securities are listed that requires the reporting of a change in control of the
Company; or
(ii) A majority of the members of the Board in office
prior to the happening of any event determines in its sole discretion that as a
result of such event there has been a Change of Control;
PROVIDED, HOWEVER, that a Change of Control shall not include a Going Private
Transaction (as defined below).
(e) "Committee" means the Compensation Committee of the Board,
as constituted from time to time or such other committee as may be designated by
the Board from time to time. Notwithstanding the foregoing, the Board may, in
its sole discretion, at any time and from time to time, resolve to administer
the Plan; in such event, the term Committee as used herein shall be deemed to
mean the Board.
(f) "Common Stock" means the shares of common stock of the
Company, par value $.10 per share, and any other shares into which such common
stock shall thereafter be changed by reason of a recapitalization, merger,
consolida tion, split-up, combination, exchange of shares or the like.
(g) "Effective Date" shall have the meaning set forth in
Section 3.13 hereof.
(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(i) "Expiration Date" means the date the Plan expires, as set
forth in Section 3.13 hereof.
(j) "Fair Market Value" as of any determination date and in
respect of any share of Common Stock shall be the mean between the high and low
sales prices of a share of Common Stock as reported on the New York Stock
Exchange on such determination date if shares of Common Stock are then trading
on such exchange or if not, then such mean on such other stock exchange on which
shares of Common Stock are principally trading on such determination date. If no
shares of Common Stock are trading on such determination date, the Fair Market
Value shall be determined by reference to the next preceding date on which such
shares were trading or shall be determined by the Committee in its sole
discretion. In no event shall the fair market value of any share of Common Stock
be less than its par value.
(k) "Going Private Transaction" means when Benesse
Corporation, together with any of its Affiliates, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of
securities of
<PAGE>
3
the Company representing 90 percent or more of the combined voting power of the
Company's then outstanding securities.
(l) "Option" means a right to purchase shares from the Company
that is granted pursuant to Article 2 of the Plan.
(m) "Option Exercise Price" means the amount payable by the
grantee to the Company in connection with the exercise of an Option.
1.3 ADMINISTRATION.
(a) The Plan shall be administered by the Committee. It is
intended that the members of the Committee shall be (i) "non-employee directors"
within the meaning of Rule 16b-3 and (ii) "outside directors" (within the
meaning of Code section 162(m)), to the extent Rule 16b-3 and Code section
162(m), respectively, are applicable to the Company. However, the mere fact that
a Committee member may fail to qualify as an outside director or non-employee
director will not invalidate any award that is otherwise validly made under the
Plan.
(b) The Committee shall have the authority (i) to exercise all
of the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and any Plan agreements executed pursuant to the Plan, (iii)
to prescribe, amend and rescind rules relating to the Plan, (iv) to make any
determination necessary or advisable in administering the Plan and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
(c) The determination of the Committee on all matters relating
to the Plan or any Plan agreement shall be conclusive.
(d) No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any award
hereunder.
1.4 PERSONS ELIGIBLE FOR AWARDS.
Awards under the Plan may be made to such directors (whether or not
employees), officers and other key personnel of the Company or an Affiliate as
the Committee shall from time to time in its sole discretion select.
1.5 TYPES OF AWARDS UNDER PLAN.
Awards under the Plan will be made in the form of Options. All
Options granted pursuant to the Plan shall be "non-qualified" stock options
subject to the provisions of Code section 83, and shall not be "incentive stock
options" within the meaning of Code section 422, all as more fully set forth in
Article 2.
<PAGE>
4
1.6 SHARES AVAILABLE FOR AWARDS.
(a) Subject to Section 3.5 (relating to adjustments upon
changes in capitalization), as of any date the total number of shares of Common
Stock with respect to which Options may be granted under the Plan, shall be the
excess of 377,000 shares, over the sum of (i) the number of shares of Common
Stock subject to outstanding Options and (ii) the number of shares in respect of
which Options have been exercised. In accordance with (and without limitation
upon) the preceding sentence, awards may be granted in respect of shares covered
by previously-granted awards that have expired, terminated or been canceled for
any reason whatsoever (other than by reason of exercise).
(b) Shares of Common Stock that shall be subject to issuance
pursuant to the Plan shall be authorized and unissued or treasury shares of
Common Stock.
(c) Without limiting the generality of the foregoing, the
Committee may, with the grantee's consent, cancel any Option under the Plan and
issue a new Option in substitution therefor upon such terms as the Committee may
in its sole discretion determine, provided that the substituted Option shall
satisfy all applicable Plan requirements as of the date such substituted Option
is granted. The foregoing is not intended to prevent or limit the Committee's
authority to make equitable adjustments to Options upon the occurrence of
certain events as herein provided, including without limitation, adjustments
pursuant to Section 3.5.
1.7 AGREEMENTS EVIDENCING AWARDS.
(a) Options granted under the Plan shall be evidenced by
written agreements. Any such written agreement shall (i) contain such provisions
not inconsistent with the terms of the Plan as the Committee may in its sole
discretion deem necessary or desirable and (ii) be referred to herein as "Plan
agreements."
(b) Each Plan agreement shall set forth the number of shares
of Common Stock subject to the Option granted thereby and the Option Exercise
Price payable in connection with the Option.
ARTICLE 2
OPTIONS
2.1 GRANT OF OPTIONS.
The Committee may grant Options to purchase shares of Common Stock
in such amounts and subject to such terms and conditions as the Committee shall
from time to time in its sole discretion determine, subject to the terms of the
<PAGE>
5
Plan. In no event may an employee be granted Options with respect to more than
125,000 shares of Common Stock in any one calendar year.
2.2 EXERCISABILITY OF OPTIONS.
(a) GENERAL RULE. Subject to the other provisions of the Plan,
each Plan agreement shall set forth the period during which, and the conditions
subject to which, the Option evidenced thereby shall be exercisable, as
determined by the Committee in its sole discretion.
(b) DEFAULT RULE. Unless an applicable Plan agreement
otherwise provides and subject to the other provisions of the Plan:
(i) no Option shall be exercisable prior to (i) for grants
made on the Effective Date, January 1, 1999 and (ii) for all other grants,
the third anniversary of the date of grant;
(ii) each Option shall become fully (100%) exercisable on
(i) for grants made on the Effective Date, January 1, 1999 and (ii) for
all other grants, the third anniversary of the date of grant; and
(iii) each Option shall remain fully exercisable through the
day prior to the seventh anniversary of the date of the grant, after which
such Option shall terminate and cease to be exercisable.
(c) PARTIAL EXERCISE PERMITTED. Unless an applicable Plan
agreement otherwise provides, an Option granted under the Plan may be exercised
from time to time as to all or part of the full number of shares as to which
such Option shall then be exercisable.
(d) NOTICE OF EXERCISE; EXERCISE DATE.
(i) An Option shall be exercisable by the filing of a
written notice of exercise with the Company, on such form and in such
manner as the Committee shall in its sole discretion prescribe, and by
payment of the Option Exercise Price in accordance with Section 2.3(b).
(ii) Unless the applicable Plan agreement otherwise
provides or the Committee in its sole discretion otherwise determines, the
date of exercise of an Option shall be the date the Company receives such
written notice of exercise accompanied by payment of the Option Exercise
Price in accordance with Section 2.3.
<PAGE>
6
(e) CHANGE IN CONTROL. Notwithstanding any other provision of
the Plan to the contrary, upon a Change of Control, the Committee may, in its
sole discretion:
(i) provide that any acquiring or successor
corporation will assume the Option, to the extent then outstanding, or
substitute an equivalent Option or other benefit of equivalent value;
(ii) accelerate the exercisability of all or a portion
of any outstanding Option, in which case the Committee may also accelerate
the termination date of the Option to a date no earlier than 30 days
following the acceleration of exercisability; and/or
(iii) provide for a cash payment to the grantee equal to
the excess, if any, of the Fair Market Value of the shares covered by the
Option on the date of the Change of Control OVER the Option Exercise
Price. If a cash payment is made to a grantee pursuant to this Section,
the Committee may hold such amounts until the Expiration Date and such
amounts will be credited with interest each June 30 and December 31 until
paid, at the lesser of (i) an annual rate, compounded daily, for each
calendar year equal to the prime rate set by the Federal Reserve Bank of
New York on January 1 of that year, or (ii) ten percent (10%) per annum,
compounded daily.
2.3 METHOD OF EXERCISE.
(a) TENDER DUE UPON NOTICE OF EXERCISE. Unless the applicable
Plan agreement otherwise provides or the Committee in its sole discretion
otherwise determines, any written notice of exercise of an Option shall be
accompanied by payment of the Option Exercise Price for the shares being
purchased, and the grantee shall have no right to receive shares of Common Stock
with respect to an Option exercise prior to such payment.
(b) MANNER OF PAYMENT. Payment of the Option Exercise
Price shall be made in any combination of the following:
(i) by certified or official bank check payable to the
Company (or the equivalent thereof acceptable to the Committee); or
(ii) with the consent of the Committee in its sole
discretion, by personal check (subject to collection), which may in the
Committee's discretion be deemed conditional; or
(iii) by delivery of shares held by the grantee for at
least six months (or such other period as the Committee may determine)
<PAGE>
7
having a Fair Market Value (determined as of the date of such delivery by
the grantee) equal to all or a portion of the Option Exercise Price.
Subject to such rules as may be established by the Committee,
payment may be deemed to be satisfied if the grantee authorizes a broker or
selling agent to pay all or a portion of the Exercise Price to the Company by
delivery to the Company of an assignment of a sufficient amount of the proceeds
from the sale of shares acquired upon exercise by the grantee.
(c) ISSUANCE OF SHARES. As soon as practicable after receipt
of full payment, the Company shall, subject to the provisions of Section 3.2,
deliver to the grantee one or more certificates for the shares of Common Stock
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
2.4 DEFAULT RULES CONCERNING TERMINATION OF SERVICE. Subject to the
other provisions of the Plan, and unless an applicable Plan agreement otherwise
provides:
(a) GENERAL RULE. All Options granted to an employee which
are not exercisable upon termination of service shall immediately terminate and
expire upon such termination of service for any reason, except as provided in
subpara graph (b) below.
(b) TERMINATION DUE TO DEATH, DISABILITY OR TERMINATION BY
THE COMPANY OTHER THAN FOR CAUSE. If a grantee's service terminates by reason of
his death or disability, or if a grantee's service with the Company is
terminated by the Company other than for Cause, the Options granted to such
grantee may be exercised in accordance with Section 2.2 hereof, notwithstanding
such termination of employment, until the date on which such Options terminate
or expire in accordance with the terms of the Plan (other than this Section 2.4)
and the Plan agreement.
2.5 TERM OF OPTIONS. Notwithstanding anything to the contrary
herein, no Options shall be exercisable after seven years from the date of
grant.
<PAGE>
8
ARTICLE 3
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS.
(a) PLAN AMENDMENTS AND TERMINATION. The Board may, without
stockholder approval, amend, suspend, discontinue or terminate the Plan or any
portion thereof at any time; provided that no such amendment, alteration,
suspension, discontinuation or termination shall be made without shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement (including any approval requirement which is a prerequisite for
exemptive relief under Rule 16b-3, to the extent Section 16 of the Exchange Act
is applicable to the Company and any requirement of any securities exchange on
which the Company's shares are listed).
(b) MODIFICATION OF AWARDS. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Option theretofore granted, provided that unless
otherwise provided for herein any such action by the Committee that would impair
the rights of any grantee or beneficiary of any outstanding Option shall not be
effective without the consent of the affected person.
3.2 RESTRICTIONS.
(a) CONSENT REQUIREMENTS. If the Committee shall at any time
determine that any Consent (as hereinafter defined) is necessary or desirable as
a condition of, or in connection with, the granting of any Option under the
Plan, the acquisition, issuance or purchase of shares or other rights hereunder
or the taking of any other action hereunder (each such action being hereinafter
referred to as a "Plan Action"), then such Plan Action shall not be taken, in
whole or in part, unless and until such Consent shall have been effected or
obtained to the full satisfaction of the Committee.
(b) CONSENT DEFINED. The term "Consent" as used herein with
respect to any Plan Action means (i) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or other
self-regulatory organization or under any federal, state, local or foreign law,
rule or regulation, (ii) the expiration, elimination or satisfaction of any
prohibitions, restrictions or limitations under any federal, state or local law,
rule or regulation or the rules of any securities exchange or other
self-regulatory organization, (iii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing,
<PAGE>
9
qualification or registration be made and (iv) any and all consents, clearances
and approvals in respect of a Plan Action by any governmental or other
regulatory bodies or any parties to any loan agreements or other contractual
obligations of the Company or any Affiliate.
(c) RESTRICTION ON DISPOSITION. Unless an applicable Plan
agreement otherwise provides, a grantee may not sell or otherwise transfer
within any thirty-day period more than one-third of the total number of shares
subject to any Option granted to such grantee, unless otherwise determined by
the Committee.
3.3 NONTRANSFERABILITY.
No Option granted to any grantee under the Plan shall be assignable
or transferable by the grantee other than by will or by the laws of descent and
distribution. During the lifetime of the grantee, all rights with respect to any
Option granted to the grantee under the Plan shall be exercisable only by him.
3.4 WITHHOLDING TAXES.
(a) Whenever under the Plan shares of Common Stock are to be
delivered pursuant to an Option, the Committee may require as a condition of
delivery that the grantee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirements related thereto.
Whenever amounts are to be paid in cash under the Plan, the Company may, as a
condition of its payment, deduct therefrom, or from any salary or other payments
due to the grantee, an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto or to the delivery of
any shares of Common Stock under the Plan.
(b) Without limiting the generality of the foregoing, (i) a
grantee may elect to satisfy all or part of the foregoing withholding
requirements by delivery of shares of Common Stock owned by the grantee for at
least six months (or such other period as the Committee may determine) having a
Fair Market Value (determined as of the date of such delivery by the grantee)
equal to all or part of the amount to be so withheld and (ii) the Committee may
permit any such delivery to be made by withholding shares of Common Stock from
the shares otherwise issuable pursuant to the award giving rise to the tax
withholding obligation (in which event the date of delivery shall be deemed the
date such award was exercised).
3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If and to the extent specified by the Committee, the number of
shares of Common Stock which may be issued pursuant to Options under the Plan,
the number of shares of Common Stock subject to outstanding Options and the
Option Exercise Price of outstanding Options shall be appropriately adjusted (as
the
<PAGE>
10
Committee may determine) for any change in the number of issued shares of Common
Stock resulting from the subdivision or combination of shares of Common Stock or
other capital adjustments, or the payment of a stock dividend after the
effective date of the Plan, or other change in such shares of Common Stock, in
each case effected without receipt of consideration by the Company; provided
that any awards covering fractional shares of Common Stock resulting from any
such adjustment shall be eliminated. Adjustments under this Section shall be
made by the Committee, whose determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding and conclusive.
3.6 RIGHT OF DISCHARGE RESERVED.
Nothing in the Plan or in any Plan agreement shall confer upon any
person the right to continue in the service of the Company or an Affiliate or
affect any right which the Company or an Affiliate may have to terminate the
service of such person.
3.7 NO RIGHTS AS A STOCKHOLDER.
No grantee or other person shall have any of the rights of a
stockholder of the Company with respect to shares subject to an Option until the
issuance of a stock certificate to him for such shares. Except as otherwise
provided in Section 3.5, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
3.8 NATURE OF PAYMENTS.
(a) Any and all awards or payments hereunder shall be granted,
issued, delivered or paid, as the case may be, in consideration of services
performed for the Company or for its Affiliates by the grantee.
(b) All such awards and payments shall be considered special
incentive payments to the grantee and shall not, unless otherwise determined by
the Committee, be taken into account in computing the grantee's salary or
compensation for the purposes of determining any benefits under (i) any pension,
retirement, life insurance or other benefit plan of the Company or any Affiliate
or (ii) any employment or similar agreement between the Company or any Affiliate
and the grantee.
(c) By accepting an award under the Plan, the grantee shall
thereby waive any claim to continued exercise of an award or to damages or
severance entitlement related to non-continuation of the award beyond the period
provided herein or in the applicable Plan agreement, notwithstanding any
contrary
<PAGE>
11
provision in any written employment or similar contract with the grantee,
whether any such contract is executed before or after the grant date of the
award.
3.9 NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan agreements, as
to (a) the persons to receive awards under the Plan and (b) the terms and
provisions of awards under the Plan.
3.10 OTHER PAYMENTS OR AWARDS.
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company, any Affiliate or the Committee from making any award or
payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
3.11 SEVERABILITY.
If any provision of the Plan is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or as to any person or
Option, or would disqualify the Plan or any Option under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to the applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan such provision will be stricken as to such jurisdiction,
person or Option and the remainder of the Plan shall remain in full force and
effect.
3.12 SECTION HEADINGS.
The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
sections.
3.13 EFFECTIVE DATE.
The Plan is effective as of September 16, 1996 (the
"Effective Date"), subject to approval by the holders of a majority of the
Company's voting stock and entitled to vote at the first stockholders meeting
thereafter. Prior to such stockholder approval, any Options granted under the
Plan shall not be exercisable.
<PAGE>
12
3.14 EXPIRATION DATE.
The Plan shall expire on September 15, 2003 (the "Expiration Date")
and no Options shall thereafter be granted under the Plan. Any Options granted
before the Expiration Date shall continue to be exercisable (pursuant to the
terms of the Plan) thereafter.
3.15 GOVERNING LAW.
The Plan shall be governed by the laws of the State of New York
applicable to agreements made and to be performed entirely within such state.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q OF
BERLITZ INTERNATIONAL, INC. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 25,599
<SECURITIES> 0
<RECEIVABLES> 38,726
<ALLOWANCES> 2,193
<INVENTORY> 8,736
<CURRENT-ASSETS> 83,630
<PP&E> 43,581
<DEPRECIATION> 14,303
<TOTAL-ASSETS> 552,150
<CURRENT-LIABILITIES> 74,989
<BONDS> 0
0
0
<COMMON> 1,003
<OTHER-SE> 349,910
<TOTAL-LIABILITY-AND-EQUITY> 552,150
<SALES> 0
<TOTAL-REVENUES> 88,429
<CGS> 0
<TOTAL-COSTS> 53,066
<OTHER-EXPENSES> 3,149
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,759
<INCOME-PRETAX> 565
<INCOME-TAX> 323
<INCOME-CONTINUING> 168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
