SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 7, 1998
BERLITZ INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 1-10390 13-355-0016
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(State or other Commission File (I.R.S.
jurisdiction Number Employer
of incorporation) Identification
Number)
400 ALEXANDER PARK, PRINCETON, NEW JERSEY 08540-6306
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(Address of principal executive offices)
(609) 514-9650
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Registrant's telephone number, including area code
NOT APPLICABLE
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Former name, former address and former fiscal year,
if changed since last report
Page 1 of 4
Exhibit Index on Page 4
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ITEM 5. OTHER EVENTS.
On October 7, 1998, Berlitz International, Inc. ("Berlitz" or the
"Company") announced that it had entered into a definitive investment agreement,
dated as of October 2, 1998, with Apollo Management IV, L.P. and its affiliates
(together, "Apollo"), a private investment firm. As part of the investment,
Apollo will purchase $100 million of convertible debentures from the Company. In
addition, Benesse Holdings International, Inc. ("Benesse Holdings"), the
Company's largest shareholder, will purchase $55 million of convertible
debentures on similar terms. In a separate transaction, Berlitz has agreed to
issue to Benesse Holdings a $50 million subordinated note. Proceeds from the
sale of the convertible debentures, as well as proceeds from the note issuance,
will be used to retire all of the Company's existing funded indebtedness.
The Apollo and Benesse Holdings investments were unanimously approved
by the Company's board of directors. The issuance of the convertible debentures
is subject to a shareholder vote, and proxy materials are expected to be mailed
to Berlitz shareholders within the next 60 days. In connection with the
investments, Benesse Corporation, on behalf of its wholly owned subsidiary
Benesse Holdings, has agreed with Apollo to vote Benesse Holdings' shares in
favor of the transaction.
Assuming conversion of all of the debentures (at the conversion price
of $33.05) issued in the transaction, Apollo would own approximately 20% of the
outstanding common stock of Berlitz and Benesse Holdings' ownership would be
reduced from approximately 73% to approximately 60% of the outstanding common
stock of Berlitz. Upon closing of the issuance of the convertible debentures,
Berlitz will expand its board of directors and will ask Mr. Antony Ressler and
Mr. Laurence Berg, both senior partners of Apollo, to join the Company's board
of directors.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Purchase Agreement (for $100 million 5% Convertible
Exchangeable Subordinated Debentures due 2010, Series A),
dated as of October 2, 1998, between Berlitz International,
Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas
Partners, IV, L.P.
99.2 Purchase Agreement (for $55 million 5% Convertible
Exchangeable Subordinated Debentures due 2010, Series B),
dated as of October 2,
Page 2 of 4
Exhibit Index on Page 4
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1998, between Berlitz International, Inc., and Benesse
Holdings International, Inc.
99.3 Registration Rights Agreement, dated as of October 2, 1998,
between Berlitz International, Inc., and Apollo Management IV,
L.P. on behalf of Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners, IV, L.P.
99.4 Registration Rights Agreement, dated as of October 2, 1998,
between Berlitz International, Inc., and Benesse Holdings
International, Inc.
99.5 Investors Agreement between Berlitz International, Inc., and
Apollo Management IV, L.P. on behalf of Apollo Investment Fund
IV, L.P. and Apollo Overseas Partners, IV, L.P.
99.6 Voting Agreement, dated as of October 2, 1998, between Benesse
Corporation, and Apollo Management IV, L.P. on behalf of
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners,
IV, L.P.
99.7 Commitment Letter, dated October 2, 1998, from Benesse
Holdings International, Inc. to the Company.
99.8 Press release of the Company, dated October 7, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BERLITZ INTERNATIONAL, INC.
Dated: October 9, 1998 By: /s/ Henry D. James
----------------------
Henry D. James
Executive Vice President and
Chief Financial Officer
Page 3 of 4
Exhibit Index on Page 4
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EXHIBIT INDEX
Exhibit
No. Description Page No.
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99.1 Purchase Agreement (for $100 million 5% Convertible
Exchangeable Subordinated Debentures due 2010, Series A),
dated as of October 2, 1998, between Berlitz International,
Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas
Partners, IV, L.P.
99.2 Purchase Agreement (for $55 million 5% Convertible
Exchangeable Subordinated Debentures due 2010, Series B),
dated as of October 2, 1998, between Berlitz International,
Inc., and Benesse Holdings International, Inc.
99.3 Registration Rights Agreement, dated as of October 2, 1998,
between Berlitz International, Inc., and Apollo Management IV,
L.P. on behalf of Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners, IV, L.P.
99.4 Registration Rights Agreement, dated as of October 2, 1998,
between Berlitz International, Inc., and Benesse Holdings
International, Inc.
99.5 Investors Agreement between Berlitz International, Inc., and
Apollo Management IV, L.P. on behalf of Apollo Investment Fund
IV, L.P. and Apollo Overseas Partners, IV, L.P.
99.6 Voting Agreement, dated as of October 2, 1998, between Benesse
Corporation, and Apollo Management IV, L.P. on behalf of
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners,
IV, L.P.
99.7 Commitment Letter, dated October 2, 1998, from Benesse
Holdings International, Inc. to the Company.
99.8 Press release of the Company, dated October 7, 1998.
Page 4 of 4
Exhibit Index on Page 4
Exhibit 99.1
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Berlitz International, Inc.
$100,000,000
5% Convertible Exchangeable Subordinated
Debentures due 2010, Series A
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PURCHASE AGREEMENT
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Dated as of October 2, 1998
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TABLE OF CONTENTS
Section Page
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1. AUTHORIZATION OF DEBENTURES................................................1
2. SALE AND PURCHASE OF DEBENTURES............................................1
3. CLOSING....................................................................2
4. CONDITIONS TO CLOSING......................................................3
4.1. Representations and Warranties.......................................3
4.2. Performance; No Default..............................................3
4.3. Compliance Certificates..............................................3
4.4. Opinions of Counsel..................................................3
4.5. Purchase Permitted By Applicable Law, etc............................4
4.6. Shareholders Approval................................................4
4.7. Other Agreements.....................................................4
4.8. Proceedings and Documents............................................4
4.9. Sale of Other Debentures.............................................4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................5
5.1. Organization; Power and Authority....................................5
5.2. Authorization, etc...................................................5
5.3. Capitalization.......................................................5
5.4. Organization and Ownership of Shares of
Subsidiaries.........................................................6
5.5. Filed Documents and Financial Statements.............................7
5.6. Compliance with Laws, Other Instruments,
etc..................................................................8
5.7. Governmental Authorizations, etc.....................................9
5.8. Litigation; Observance of Statutes and
Orders...............................................................9
5.9. Taxes...............................................................10
5.10. Title to Property; Leases...........................................10
5.11. Licenses, Permits, etc..............................................10
5.12. Compliance with ERISA...............................................11
5.13. Private Offering by the Company.....................................12
5.14. Use of Proceeds; Margin Regulations.................................12
5.15. Existing Indebtedness...............................................12
5.16. Status under Certain Statutes.......................................13
5.17. Swaps...............................................................13
5.18. Foreign Corrupt Practices Act.......................................13
5.19. No Brokers or Finders...............................................13
5.20. Agreements Between Benesse and the Company..........................14
5.21. "Berlitz" Trademark.................................................14
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6. REPRESENTATIONS OF THE PURCHASER..........................................14
6.1. Organization; Power and Authority...................................14
6.2. Authorization, etc..................................................15
6.3. Purchase for Investment.............................................15
7. INFORMATION AS TO COMPANY.................................................15
7.1. Financial and Business Information..................................15
7.2. Inspection..........................................................19
8. OPTIONAL REDEMPTION OF THE CONVERTIBLE DEBENTURES.........................19
8.1. Optional Redemption.................................................19
8.2. Election to Redeem; Notice to Holders...............................20
8.3. Debentures Payable on Redemption Date...............................20
9. CONVERSION OF CONVERTIBLE DEBENTURES......................................21
9.1. Conversion Privilege and Conversion Price...........................21
9.2. Exercise of Conversion Privilege....................................22
9.3. Fractions of Shares.................................................23
9.4. Adjustment of Conversion Price......................................24
9.5. Notice of Adjustments of Conversion Price...........................27
9.6. Notice of Certain Corporate Action..................................27
9.7. Company to Reserve Common Stock.....................................28
9.8. Taxes on Conversions................................................28
9.9. Covenant as to Common Stock.........................................29
9.10. Cancellation of Converted Debentures................................29
9.11. Provisions in Case of Consolidation, Merger
or Sale of Assets...................................................29
10. EXCHANGE OF CONVERTIBLE DEBENTURES FOR FIXED RATE
DEBENTURES................................................................30
10.1. Election for Fixed Rate Debentures.................................30
10.2. Procedure for Exercising Option to Receive
Fixed Rate Debentures..............................................31
10.3. Redemption of the Fixed Rate Debentures............................32
10.4. Redemption Pursuant to the Other Purchase
Agreement..........................................................33
11. AFFIRMATIVE COVENANTS.....................................................33
11.1. Compliance with Law................................................33
11.2. Insurance..........................................................33
11.3. Maintenance of Properties..........................................34
11.4. Payment of Taxes...................................................34
11.5. Corporate Existence, etc...........................................34
11.6. Repurchase of Debentures at the Option of
the Holder Upon a Change of Control................................35
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11.7. Debentures Subordinate to Senior
Obligations........................................................37
12. NEGATIVE COVENANTS........................................................40
12.1. Merger, Consolidation, etc.........................................41
12.2. Forbearance from Restrictions on Rights of
Holders of Convertible Debentures..................................41
12.3. Forbearance from Amending Japan
Shareholders Agreement and Other Understandings
between Benesse and Berlitz Japan..................................41
13. EVENTS OF DEFAULT.........................................................42
14. REMEDIES ON DEFAULT, ETC..................................................45
14.1. Acceleration.......................................................45
14.2. Other Remedies.....................................................45
14.3. Rescission.........................................................46
14.4. No Waivers or Election of Remedies,
Expenses, etc......................................................46
15. REGISTRATION; EXCHANGE; SUBSTITUTION OF DEBENTURES........................47
15.1. Registration of Debentures.........................................47
15.2. Transfer and Exchange of Debentures................................47
15.3. Replacement of Debentures..........................................48
16. PAYMENTS ON DEBENTURES....................................................48
16.1. Place of Payment...................................................48
16.2. Home Office Payment................................................49
17. EXPENSES, ETC.............................................................49
17.1. Transaction Expenses...............................................49
17.2. Survival...........................................................50
18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.................................................................50
19. AMENDMENT AND WAIVER......................................................51
19.1. Requirements.......................................................51
19.2. Solicitation of Holders of Debentures..............................51
19.3. Binding Effect, etc................................................52
19.4. Debentures held by Company, etc....................................52
20. NOTICES...................................................................52
21. REPRODUCTION OF DOCUMENTS.................................................53
22. APPROVALS, ETC............................................................53
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23. SUBSTITUTION OF PURCHASER.................................................54
24. MISCELLANEOUS.............................................................55
24.1. Successors and Assigns.............................................55
24.2. Payments Due on Non-Business Days..................................55
24.3. Severability.......................................................55
24.4. Construction.......................................................56
24.5. Counterparts.......................................................56
24.6. Governing Law......................................................56
24.7. Further Assurances.................................................56
24.8. Confidentiality....................................................57
SCHEDULE A -- DEFINED TERMS
SCHEDULE 5.3 -- Capitalization
SCHEDULE 5.4 -- Subsidiaries
SCHEDULE 5.4(a)(i) -- Shares of Subsidiary Capital Stock Owned by Nominees
SCHEDULE 5.4(a)(ii) -- Shares of Subsidiary Capital Stock Owned by Third
Persons
SCHEDULE 5.4(b) -- Liens on Certain Shares of Subsidiary
Capital Stock
SCHEDULE 5.4(d) -- Financial Statements of Berlitz Japan
SCHEDULE 5.5(b) -- Unaudited Interim Financial Statements of the Company
SCHEDULE 5.5(c) -- Financial Projections of the Company
SCHEDULE 5.10 -- Property Liens
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.17 -- Swaps
SCHEDULE 5.20(a) -- Agreements between Benesse and the Company
SCHEDULE 5.20(b) -- Certain Rights Existing between Benesse and the
Company
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SCHEDULE 5.21 -- Trademark
EXHIBIT 1 -- Form of 5% Convertible Exchangeable Subordinated
Debenture due 2010, Series A
EXHIBIT 2 -- Debenture Purchase Commitments
EXHIBIT 4.4 -- Form of Opinion of Paul, Weiss, Rifkind,
Wharton & Garrison
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Berlitz International, Inc.
400 Alexander Park
Princeton, New Jersey 08540-6306
$100,000,000
5.00% Convertible Exchangeable Subordinated
Debentures due 2010, Series A
As of October 2, 1998
Apollo Management IV, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Ladies and Gentlemen:
Berlitz International, Inc., a New York corporation (the "Company"),
agrees with Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV,
L.P. (collectively, "Apollo") as follows:
1. AUTHORIZATION OF DEBENTURES.
The Company has authorized the issue and sale of $100,000,000 aggregate
principal amount of its 5% Convertible Exchangeable Subordinated Debentures due
2010 (the "Convertible Debentures" and, together with any Fixed Rate Debentures
(as hereinafter defined) issued in exchange therefor pursuant to Section 10 of
this Agreement, the "Debentures", such term to include any such debentures
issued in substitution therefor pursuant to Section 15 of this Agreement). The
Convertible Debentures shall be substantially in the form set out in Exhibit 1,
with such changes therefrom, if any, as may be approved by Apollo Management IV,
L.P. on behalf of Apollo ("Management") and the Company. Certain capitalized
terms used in this Agreement are defined in Schedule A; references to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF DEBENTURES.
Subject to the terms and conditions of this Agree ment, the Company
will issue and sell to Apollo, and Apollo
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will purchase from the Company, at the Closing provided for in Section 3, an
aggregate of $100,000,000 in principal amount of Convertible Debentures at 100%
of the principal amount thereof and in the respective amounts as set forth in
Exhibit 2 hereto. Contemporaneously with entering into this Agreement, the
Company is entering into a separate purchase agreement substantially similar to
this Agreement except for differences which have been notified to and approved
by Management (the "Other Purchase Agreement") with Benesse Holdings
International, Inc. ("BHI") providing for the sale to and purchase by Benesse of
$55,000,000 aggregate principal amount of the Company's debentures at the
Closing. Apollo's obligations hereunder and the obligations of Benesse under the
Other Purchase Agreement are several and not joint agreements and Apollo and
Management shall have no obligation under the Other Purchase Agreement and no
liability to any Person for the performance or non-performance by Benesse
thereunder.
3. CLOSING.
The sale and purchase of the Convertible Debentures to be purchased by
Apollo shall occur at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004-2498, at 9:00 a.m., Eastern Standard Time, at a closing
(the "Closing") on the Business Day of or immediately following the satisfaction
of the conditions set forth in Section 4 (the "Issue Date") or on such other
Business Day thereafter on or prior to March 31, 1999 as may be agreed upon by
the Company and Management. At the Closing the Company will deliver to Apollo
the Convertible Debentures to be pur chased by Apollo in the form of a single
Convertible Debenture (or such greater number of Convertible Debentures in
denomina tions of at least $1,000,000 as Management may request) dated the Issue
Date and registered in Apollo's name (or in the name of Apollo's nominee),
against delivery by Apollo to the Company or its order of immediately available
funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to such bank account
as the Company shall have notified Management in writing. If at the Closing the
Company shall fail to tender such Convertible Debentures to Apollo as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to Apollo's satisfaction, Apollo shall, at Apollo's
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights Apollo may have by reason of such failure or such
nonfulfillment.
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4. CONDITIONS TO CLOSING.
Apollo's obligation to purchase and pay for the Convertible Debentures
to be sold to Apollo at the Closing is subject to the fulfillment or waiver,
prior to or at the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement and
the Other Agreements shall be correct in all material respects when made and at
the time of the Closing except where such representations and warranties
expressly relate to an earlier date.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Debentures (and the application of the proceeds thereof as contemplated
by Section 5.14) no Default or Event of Default shall have occurred and be
continuing.
4.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to
Management an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to
Management a certificate of the secretary of the Company certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Debentures and this Agreement and
the approval of the issuance of the Debentures pursuant to this Agreement and of
debentures pursuant to the Other Purchase Agreement by shareholders of the
Company.
4.4. OPINIONS OF COUNSEL.
Management shall have received an opinion, dated the date of the
Closing, from Paul, Weiss, Rifkind, Wharton & Garrison, special counsel for the
Company, in the form set
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forth in Exhibit 4.4 (and the Company hereby instructs its counsel to deliver
such opinion to Management).
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing Apollo's purchase of Debentures shall (i)
not violate any applicable law or regulation (including, without limitation,
Regulation U, T or X of the Board of Governors of the Federal Reserve System)
and (ii) not subject Apollo to any tax, penalty or liability under or pursuant
to any applicable law or regulation.
4.6. SHAREHOLDERS APPROVAL.
The shareholders of the Company shall have approved the issuance of the
debentures pursuant to the Other Purchase Agreement and of Debentures pursuant
to this Agreement at the Company Shareholder Meeting.
4.7. OTHER AGREEMENTS.
The Other Agreements and the Voting Agreement shall be in full force
and effect and the Company and Benesse, as applicable, shall have delivered to
Management a true and complete copy of each Other Agreement and the Voting
Agreement.
4.8. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement, the Other Agreements and the Voting Agreement
and all documents and instruments incident to such transactions shall be satis
factory to Management and Sullivan & Cromwell, Management's and Apollo's special
counsel, and Management and Management's special counsel shall have received all
such counterpart originals or certified or other copies as Management or they
may reasonably request of such documents.
4.9 SALE OF OTHER DEBENTURES.
Contemporaneously with the sale of Convertible Debentures to Apollo,
the Company shall sell to BHI under the Other Purchase Agreement $55,000,000
principal amount of the Company's 5% Convertible Exchangeable Subordinated
Debentures due 2010, Series B.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Apollo that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, and is duly qualified as
a foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement, the Other
Agreements and the Debentures and to perform the provisions hereof and thereof.
5.2. AUTHORIZATION, ETC.
This Agreement, the Other Agreements, and the Debentures have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agree ment constitutes, and upon execution and delivery thereof each Other
Agreement and Debenture will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Common Stock issuable upon conversion of the Convertible
Debentures has been duly authorized and reserved for issuance and upon issuance
upon conversion of the Convertible Debentures will be validly issued, fully paid
and nonassessable.
5.3. CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the Company
consists of: (i) 40,000,000 shares of common stock, par value $.10 per share
("Common Stock"), of which 9,529,788 shares are issued and outstanding and (ii)
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180,000 shares of preferred stock, par value $1.00 per share ("Preferred
Shares"), of which no shares are issued and outstanding. Of the authorized
Preferred Shares, 180,000 shares have been authorized as a separate series
designated as "7% Non-Cumulative Preferred Shares."
(b) The outstanding shares of Common Stock of the Company have been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, except as disclosed
in the previous paragraph and in Schedule 5.3, there are no other shares of
capital stock of the Company authorized and reserved for issuance and the
Company does not have any commitment to authorize, issue or sell any of its
capital stock or securities convertible into its capital stock. The number of
shares of Common Stock which are issuable and reserved for issuance upon
exercise of stock options of the Company as of the date hereof (and the exercise
price thereof) are disclosed in Schedule 5.3. The Company has no outstanding
securities convertible into capital stock of the Company.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) The Company has disclosed in Schedule 5.4 a list of all of its
Subsidiaries together with the jurisdiction of organization of each such
Subsidiary. All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary of the Company have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Subsidiary
(except for certain shares owned by nominees and third parties as disclosed on
Schedules 5.4(a)(i) and (ii), respectively) free and clear of any Lien, except
for liens on certain Subsidiaries' shares as indicated on Schedule 5.4(b).
(b) Each Subsidiary of the Company is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each juris diction in which
such qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Each such Subsidiary has the corporate or other power and authority to own or
hold under lease the
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properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact.
(c) With respect to Berlitz Japan, Inc., formerly The Berlitz Schools
of Languages (Japan) Inc. ("Berlitz Japan"), the Company has disclosed in
Schedule 5.4(c): (i) the formula for calculating the minority interest of
Benesse in Berlitz Japan and the calculation for such minority interest for the
four years ended December 31, 1997; (ii) the formula for calculating royalty
payments payable by Berlitz Japan to the Company; and (iii) the amount of
minority interest relating to Berlitz Japan as of June 30, 1998, as reflected on
the balance sheet of the Company. The formula set forth in clauses (i) and (ii)
may not be amended unless approved by the disinterested directors of the
Company's board of directors. Benesse has no contractual or other right to
receive a dividend or other payment with respect to such minority interest
without the approval of the Board of Directors of Berlitz Japan. The only
agreement or arrangement relating to Benesse's rights as a shareholder of
Berlitz Japan with respect to Berlitz Japan is the Japan Shareholders Agreement.
(d) Berlitz Japan is the same subsidiary referred to in the Japan
Shareholders Agreement as The Berlitz Schools of Languages (Japan) Inc. The
operations of Berlitz Japan include instruction, translation and publishing
activities originating in Japan, and do not include any of the Company's
operations originating in non-Japan Asia. As of the date hereof, no agreements
or understandings exist which would require the Company to merge any future
acquisition made in Japan or in non-Japan Asia into Berlitz Japan, or which
would prohibit the Company from forming any additional subsidiaries with
operations in Japan or non-Japan Asia. The historical financial statements
provided to Apollo with respect to Berlitz Japan, included within the
information listed in Schedule 5.4(d), fairly present the operational results of
all of the operations included within Berlitz Japan and were prepared in all
material respects consistent with past accounting practices.
5.5. FILED DOCUMENTS AND FINANCIAL STATEMENTS.
(a) Each of the documents filed with the SEC since January 1, 1998
complied as to form in all material respects with all of the requirements of the
Securities Act or the Exchange Act, as applicable, and did not contain any
untrue statement of a material fact or omit to state any material
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fact required to be contained therein or necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading. Any financial statements contained in such filings
(including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates and the consolidated results of their
operations and cash flows for the respective periods and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments). Since December 31, 1997, there has
been no change in the financial condition, operations, business or properties of
the Company or any of its Subsidiaries except as disclosed in the Company's
consolidated financial statements prior to the date hereof or changes that
individually or in the aggregate would not reasonably be ex pected to have a
Material Adverse Effect. Since October 2, 1998, the Company has conducted its
business in the usual, regular and ordinary course.
(b) The Company's unaudited interim financial statements, included in
the information listed in Schedule 5.5(b) and delivered to Apollo, were prepared
in all material respects on the same basis as the financial statements contained
in the documents filed with the SEC and fairly present the financial position of
the Company as of the dates referenced therein.
(c) The Company's financial projections, included in the information
listed in Schedule 5.5(c) and delivered to Apollo (as verbally modified prior to
the date hereof with respect to 1998 EBITDA), were prepared in good faith based
on assumptions believed to have been reasonable at the time made and were
prepared in all material respects consistent with past accounting practices;
however, no representation or warranty is made with respect to actual financial
results which will vary and may vary materially from such projections.
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Other Agreements and the Debentures will not (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any
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Subsidiary under, any indenture, Material mortgage, deed of trust, loan, credit
agreement, corporate charter or by-laws, or any other agreement, lease or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judg ment, decree, or ruling of any
court, arbitrator or Govern mental Authority applicable to the Company or any
Subsidiary or (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary, which violation would reasonably be expected to have a Material
Adverse Effect. No representation or warranty is made with respect to the
Company's agreement with NationsBank, National Association, which will be repaid
on or prior to the date of the Closing.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement, the Other
Agreements and the Debentures, except (i) the filing of a proxy statement with
the SEC in connection with the Company's Shareholder Meeting and (ii) a filing
pursuant to the HSR Act as may be required in connection with the conversion of
the Convertible Debentures.
5.8. LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individu-
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ally or in the aggregate, would reasonably be expected to have a Material
Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all income tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
payable by them, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (i) the amount of which, or the failure to file with respect to
which, is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Federal income tax liabilities of the Company and its Subsidiaries have been
audited by the Internal Revenue Service for all fiscal years up to and including
the fiscal year ended 1994.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good title to their respective
properties, including all such properties reflected in the audited balance sheet
as of December 31, 1997 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of), in each
case free and clear of Liens, except for those defects in title and Liens that,
individually or in the aggregate, would not have a Material Adverse Effect or as
otherwise set forth on Schedule 5.10. All Material leases are valid and
subsisting and are in full force and effect in all material respects.
5.11. LICENSES, PERMITS, ETC.
The Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that are Material, without conflict with the
rights of others, except for those conflicts that, individually or in the
aggregate, would not have a Material Adverse Effect.
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5.12. COMPLIANCE WITH ERISA.
(a) The Company has operated and administered each Plan in substantial
compliance with all applicable laws. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that would reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the benefit liabilities under each of the
Plans subject to Title IV of ERISA (other than Multiemployer Plans), determined
as of the end of each such Plan's most recently ended plan year on the basis of
the actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the current value of the
assets of such Plan allocable to such benefit liabilities. The term "benefit
liabilities" has the meaning specified in section 4001 of ERISA and the terms
"current value" and "present value" have the meaning specified in section 3 of
ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The postretirement benefit obligation (determined as of the last
day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not expected to exceed
$1,750,000.
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5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Debentures or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than Apollo and BHI, each of which has been offered the
Debentures at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Debentures to the registration requirements of Section 5
of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will as promptly as practicable apply substantially all the
proceeds of the sale of the Convertible Debentures to retire existing
indebtedness in accordance with Schedule 5.14. No part of the proceeds from the
sale of the Convertible Debentures hereunder will be used, directly or in
directly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220).
5.15. EXISTING INDEBTEDNESS.
Neither the Company nor any Subsidiary is in default and no waiver of
default is currently in effect, in the payment of any principal of or interest
on any Indebtedness of the Company or such Subsidiary in an aggregate principal
amount in excess of $3,000,000 and no event or condition exists with respect to
any such Indebtedness of the Company or any Subsidiary that would (i) permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment or (ii) prevent the
Company or any Subsidiary from prepaying any such Indebtedness without
prepayment penalty or premium (except for (A) the Company's agreement with
NationsBank, National Association, which will be repaid on or prior to the date
of the Closing and (B) that a prepayment
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penalty or premium might become payable in connection with any early termination
of the Company's Swaps).
5.16. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.17. SWAPS.
The Company has listed on Schedule 5.17 all of the Swaps (and the value
of each such Swap) that either the Company or any of its Subsidiaries is
currently a party to. All of such Swaps have been entered into in connection
with the Company's existing and prior Indebtedness and not for speculative
purposes. Except as set forth on Schedule 5.17, the Company has not entered into
or otherwise effected or permitted to remain outstanding any Swap that is
intended to reduce the Company's exposure to fluctuations in foreign currency
exchange rates and interest rates.
5.18. FOREIGN CORRUPT PRACTICES ACT.
The Company is not in violation of Section 30A of the Exchange Act.
5.19. NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker (other
than Goldman, Sachs & Co., as to whose fees and expenses the Company shall have
full responsibility and Apollo and Management shall have no responsibility) or
other Person or firm engaged by or acting on behalf of the Company or any
Subsidiary in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or such transactions. A true and correct copy of the
engagement letter with Goldman, Sachs & Co. has been provided to Management.
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<PAGE>
5.20. AGREEMENTS BETWEEN BENESSE AND THE COMPANY.
(a) Except for the Japan Shareholders Agreement and the agreements set
forth in Schedule 5.20(a), no agreements or understandings exist between the
Company and Benesse.
(b) Except for the rights set forth in Schedule 5.20(b), no rights
exist pursuant to the Japan Shareholders Agreement or the agreements or
understandings set forth in Schedule 5.20(a) or otherwise that would enable
Benesse to cause the Company to transfer or dispose of any of the Company's
securities or the securities owned by the Company or by Benesse or any of
Benesse's Affiliates in Berlitz Japan.
5.21. "BERLITZ" TRADEMARK.
Except as disclosed in Schedule 5.21 hereto or as would not be expected
to have a Material Adverse Effect, the Company has valid title and ownership of,
and has properly registered, the "Berlitz" trademark, and use of such trademark
in the Company's business as now conducted or as currently proposed to be
conducted causes no conflict with or infringement of the rights of others.
Except as disclosed in Schedule 5.21, neither the Company nor any Subsidiary has
received any written notice challenging the Company's rights or making any other
claim with respect to the "Berlitz" trademark or is aware of any such threatened
challenge or claim; and such trademark is free and clear of any Liens except as
disclosed in Schedule 5.21.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. ORGANIZATION; POWER AND AUTHORITY.
Each Apollo entity represents that it is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified and in good standing in each jurisdiction in
which such qualification is required by law, other than those jurisdictions as
to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on its ability to perform its obligations under the Agreement and
the Other Agreements to which it is or becomes a party, or the validity or
enforceability of this Agreement or the Other Agreements to which it is or
becomes a party. Each Apollo
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<PAGE>
entity represents that it has the organizational power and authority to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements to which it is or becomes a party, and to
perform the provisions hereof and thereof.
6.2. AUTHORIZATION, ETC.
Each Apollo entity represents that this Agreement and the Other
Agreements to which it is or becomes a party, has been duly authorized by all
necessary organizational action on the part of it, and this Agreement and the
Other Agreements to which it is or becomes a party, constitutes, and upon
execution and delivery by the Company of such Agreements, will constitute,
legal, valid and binding obligations of it enforceable against it in accordance
with their terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
6.3. PURCHASE FOR INVESTMENT.
Each Apollo entity represents that it is purchasing the Debentures for
its own account or for one or more separate accounts maintained by it and not
with a view to the distribution thereof, provided that the disposition of its or
their property shall at all times be within its or their control. Each Apollo
entity understands that the Debentures have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that the Company is not required to register the
Debentures.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Debentures or, in the case
of clause (a) below, to each holder of a minimum of $10,000,000 in principal
amount of the Convertible Debentures:
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(a) Monthly Statements --
(i) within 15 days after the end of each month, duplicate
copies of, preliminary flash financial reports prepared monthly in the
normal course of business for Company management and/or board of
directors with respect to the Company's operations by region and
business segment, and
(ii) within 30 days after the end of each month, duplicate
copies of, operational summaries prepared monthly in the normal course
of business for Company management and/or board of directors with
respect to the Company's regional and geographical results of
operations;
(b) Quarterly Statements -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the SEC shall be deemed to satisfy
the requirements of this Section 7.1(b);
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(c) Annual Statements -- within 90 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations and cash flows
and have been pre pared in conformity with GAAP, and that the examination of
such accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, provided that
the Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and sent to shareholders with the annual proxy statement and filed with the SEC
shall be deemed to satisfy the requirements of this Section 7.1(c);
(d) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial state ment, report, notice or proxy statement
sent by the Company or any Subsidiary to public securities holders generally,
and (ii) each regular or periodic report, each registration statement that shall
have become effective (without exhibits except as expressly requested by such
holder), and each final prospectus and all amendments thereto filed by the
Company or any Subsidiary with the SEC;
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(e) Notice of Default or Event of Default -- promptly, and in any event
within five days after a Responsible Officer becoming aware of the existence of
any Default or Event of Default, a written notice specifying the nature and
period of existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within ten days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with re spect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the institution of proceedings under sec tion 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) the incurrence of any liability by the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax pro visions of the Code relating to employee benefit plans,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV
of ERISA or such penalty or excise tax provisions; and
(g) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Sub sidiaries or
relating to the ability of the Company to perform its obligations under this
Agreement, the Other Agreements and the Debentures as from time to time may be
reasonably requested by any such holder of Debentures.
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7.2. INSPECTION.
The Company shall permit the representatives of each holder of a
minimum of $10,000,000 in principal amount of Convertible Debentures:
(a) No Default -- if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with the Company's officers,
and, with the consent of the Company (which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and each
Significant Sub sidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or properties of
the Company or any Significant Subsidiary, to examine all their respective books
of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Significant Subsidiaries), all at
such times and as often as may be requested.
8. OPTIONAL REDEMPTION OF THE CONVERTIBLE DEBENTURES.
8.1. OPTIONAL REDEMPTION.
If for the 30 trading days following the third anniversary of the Issue
Date the average of the closing prices of the Company's Common Stock on the New
York Stock Exchange exceeds 120.0% of the Conversion Price, the Company may, at
any time after the 60th trading day after the third anniversary of the Issue
Date, subject to any holder's right to first convert Convertible Debentures into
Common Stock, redeem the Convertible Debentures in whole, but not in part, at a
redemption price equal to 100.0% of the principal amount of such Convertible
Debentures, together with accrued interest to the Redemption Date. In addition,
if for the 30 trading
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days following the third anniversary of the Issue Date the average of the
closing prices of the Company's Common Stock on the New York Stock Exchange does
not exceed 120.0% of the Conversion Price, the Company may, at any time after
the 60th trading day after the third anniversary of the Issue Date, subject to
any holder's right to first convert Convertible Debentures into Common Stock,
redeem the Convertible Debentures in whole, but not in part, at a redemption
price equal to (i) 104.0% of the principal amount of such Convertible
Debentures, if such redemption occurs during the period from the third
anniversary to and including the fourth anniversary of the Issue Date, (ii)
102.0% of the principal amount of such Convertible Debentures, if such
redemption occurs during the period from the fourth anniversary to and including
the fifth anniversary of the Issue Date, and (iii) 100.0% of the principal
amount of such Convertible Debentures, if such redemption occurs after the fifth
anniversary of the Issue Date, in each case together with accrued interest to
the Redemption Date.
8.2. ELECTION TO REDEEM; NOTICE TO HOLDERS.
The Company shall give each holder of Convertible Debentures written
notice of an optional redemption pursuant to Section 8.1 or Section 10.3 hereof
not less than 30 days prior to the date fixed for such redemption (the
"Redemption Date"), specifying the Redemption Date and the redemption price
applicable to such redemption. During such 30 day period, in the case of a
Redemption pursuant to Section 8.1 only, a holder of Convertible Debentures may
inform the Company of the intent to exercise the holder's right to convert
Convertible Debentures into Common Stock. If such notice is given, the
conversion of the Convertible Debentures will be carried out in accordance with
the provisions of Section 9 of this Agreement.
8.3. DEBENTURES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given, the Convertible Debentures
shall, on the date fixed for such redemption, become due and payable at the
applicable price therein specified, and from and after such date (unless the
Company shall default in the payment of such price and accrued interest) such
Convertible Debentures shall cease to bear interest. The amount to be paid in
respect of each such Convertible Debenture shall be paid by the Company at such
price together with accrued interest to such date; provided,
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however, that installments of interest due on or prior to such date shall be
payable to the holders of such Convertible Debentures or portions registered at
the close of business on the relevant record dates according to their terms. If
the amount payable in respect of any Convertible Debenture selected for
redemption shall not be so paid or made available for payment, the unpaid amount
shall, until paid, bear interest from the date fixed for such redemption at 7.0%
per annum. The Company will promptly cancel all Debentures redeemed by it and no
Debentures may be issued in substitution or exchange for any such Convertible
Debentures.
9. CONVERSION OF CONVERTIBLE DEBENTURES.
9.1. CONVERSION PRIVILEGE AND CONVERSION PRICE.
Subject to and upon compliance with the provisions of this Section, at
the option of the holder thereof, any Convertible Debenture or any portion of
the principal amount thereof may be converted into fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100 of a share) of
Common Stock of the Company, at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. Such conversion right shall
expire at the close of business on the twelfth anniversary of the Issue Date. In
case the Convertible Debentures are called for redemption, such conversion right
in respect of the Convertible Debentures shall expire at the close of business
on the Redemption Date, unless (i) notice of conversion under Section 9.2 has
been given prior to such time, or (ii) the Company defaults in making the
payment due upon redemption. In the event any Convertible Debentures are
exchanged for Fixed Rate Debentures, such conversion right shall expire upon
such exchange.
The price at which shares of Common Stock shall be delivered upon
conversion shall be initially $33.05 per share of Common Stock (the "Conversion
Price"). The Conversion Price shall be adjusted in certain instances as provided
in paragraphs (a) through (g) of Section 9.4.
In the case of any Convertible Debenture which is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment Date
(other than any Debenture whose maturity is prior to such Interest Payment
Date), interest that is due on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding
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such conversion, and such interest (whether or not punctually paid or duly
provided for) shall be paid to the Person in whose name that Debenture is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Convertible Debenture which is converted, interest which would become
payable on an Interest Payment Date falling after the date of conversion of such
Debenture shall not be payable.
9.2. EXERCISE OF CONVERSION PRIVILEGE.
The holder of any Convertible Debenture wishing to exercise the
conversion privilege shall give the Company irrevocable written notice of such
election at least 20 days prior to the Business Day designated in such notice as
the date of conversion (the "Conversion Date"). Such notice shall also specify
the principal amount of Convertible Debentures to be converted. Within 7 days of
receipt of any such notice, the Company shall give to all other registered
holders of Convertible Debentures and all registered holders of convertible
debentures issued under the Other Purchase Agreement written notice of the
receipt and contents of such notice of conversion. All such holders of
Convertible Debentures and such other convertible debentures shall have the
right, exercisable by written notice to the Company within 12 days of receipt of
such notice from the Company, to convert on the Conversion Date any or all of
the Convertible Debentures or such other convertible debentures held by them.
The holder of any Convertible Debenture to be converted shall, on or before the
Conversion Date, surrender such Convertible Debenture, duly endorsed or assigned
to the Company or in blank, at the principal executive office of the Company.
Convertible Debentures converted during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date shall (except in the case of
Convertible Debentures or portions thereof which have been called for redemption
on a Redemption Date within such period) be accompanied by payment in
immediately available funds or other funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Convertible Debentures being surrendered for conversion.
Except as provided in the preceding sentence and subject to the third paragraph
of Section 9.1, no payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Convertible Debentures surrendered
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for conversion or on account of any dividends on the Common Stock issued upon
conversion.
Convertible Debentures shall be deemed to have been converted
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holders of such Convertible Debentures as holders shall
cease, and the Person or Persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on or
after the Conversion Date, the Company shall issue and shall deliver at such
office or agency a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in Section 9.3.
In the case of any Convertible Debenture which is converted in part
only, upon such conversion the Company shall execute and deliver to the holder
thereof, at the expense of the Company, a new Convertible Debenture or
Debentures of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Convertible Debenture.
9.3. FRACTIONS OF SHARES.
No fractional shares of Common Stock shall be issued upon conversion of
Convertible Debentures. If more than one Convertible Debenture shall be
surrendered for conversion at one time by the same holder, the number of full
shares which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Convertible Debentures (or
specified portions thereof) so converted. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any
Convertible Debenture or Convertible Debentures (or specified portions thereof),
the Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the market price per share of Common Stock (as
determined by the Board of Directors or in any manner prescribed by the Board of
Directors) at the close of business on the day of conversion.
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9.4. ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this paragraph, the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(b) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per share
(determined as provided in paragraph (f) of this Section) of the Common Stock on
the date fixed for the determination of stockholders entitled to receive such
rights or warrants, the Conversion Price in effect at the opening of business on
the day following the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
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Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights or warrants in respect of shares of Common Stock held
in the treasury of the Company. If any such rights or warrants shall expire
without having been exercised, the Conversion Price shall thereupon be
readjusted to eliminate the amount of its adjustment due to their issuance.
(c) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (b) of this Section, any dividend or distribution paid in cash out of
the retained earnings of the Company and any dividend or distribution referred
to in paragraph (a) of this Section), the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph (f) of this Section) of the Common Stock on
the date fixed for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a board resolution delivered to each holder of Convertible
Debentures) of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such
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adjustment to become effective immediately prior to the opening of business on
the day following the date fixed for the determination of stockholders entitled
to receive such distribution.
(e) The reclassification of Common Stock into securities including
other than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 9.11 applies) shall be deemed to involve (i) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within the meaning of
paragraph (d) of this Section), and (ii) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section).
(f) For the purpose of any computation under paragraphs (b) and (d) of
this Section, the current market price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 10
consecutive Business Days selected by the Company commencing not less than 10
nor more than 20 Business Days before the day in question. The closing price for
each day shall be the closing price for such day reported in the Wall Street
Journal or, if not so reported, the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, on the National Association of Securities
Dealers Automated Quotations National Market System or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or quoted
on such National Market System, the average of the closing bid and asked prices
in the
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over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose.
(g) The Company may make such reductions in the Conversion Price, in
addition to those required by paragraphs (a), (b), (c) and (d) of this Section,
as it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients.
9.5. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price in
accordance with Section 9.4 and shall prepare a certificate signed by a Senior
Financial Officer of the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed at each office or agency maintained
for the purpose of conversion of Debentures pursuant to Section 15; and
(b) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be required, and as
soon as practicable after it is required, such notice shall be mailed by the
Company together with a copy of the certificate prepared in accordance with
Section 9.5(a) to all holders at their last addresses as they shall appear in
the Debenture Register.
9.6. NOTICE OF CERTAIN CORPORATE ACTION.
In case:
(a) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable otherwise than in cash out of its retained earnings; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
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(c) of any reclassification of the Common Stock of the Company, or of
any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purposes of conversion of Debentures pursuant to Section 15, and shall cause
to be mailed to all holders at their last addresses as they shall appear in the
Debenture Register, at least 20 days (or 10 days in any case specified in clause
(a) or (b) above) prior to the applicable record or effective date hereinafter
specified, a notice describing such event in reasonable detail and stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.
9.7. COMPANY TO RESERVE COMMON STOCK.
The Company shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Convertible Debentures, the full number
of shares of Common Stock then issuable upon the conversion of all outstanding
Convertible Debentures.
9.8. TAXES ON CONVERSIONS.
The Company will pay any and all transfer or stamp taxes that may be
payable in respect of the issue or delivery of shares of Common Stock on
conversion of Convertible Debentures pursuant hereto. The Company shall not,
however,
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be required to pay any income tax payable with respect to conversion of
Convertible Debentures or any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the holder of the Convertible Debenture or Convertible
Debentures to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such
tax has been paid.
9.9. COVENANT AS TO COMMON STOCK.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Convertible Debentures will upon issue be fully paid
and nonassessable and, except as provided in Section 9.8, the Company will pay
all taxes, liens and charges with respect to the issue thereof.
9.10. CANCELLATION OF CONVERTED DEBENTURES.
All Convertible Debentures delivered for conversion shall be delivered
to and canceled by the Company.
9.11. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any sale or transfer of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver a
supplement to this Agreement providing that the holder of each Convertible
Debenture then outstanding shall have the right thereafter, during the period
such Convertible Debenture shall be convertible as specified in Section 9.1, to
convert such Debenture only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares (including fractional shares) of Common Stock of
the Company into which such Debenture might have been converted immediately
prior to such consolidation, merger, sale or
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transfer, assuming such holder of Common Stock of the Company (i) is not a
Person with which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was made, as the
case may be ("constituent Person"), or an Affiliate of a constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer is not the same for each share of Common Stock of the Company held
immediately prior to such consolidation, merger, sale or transfer by others than
a constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this Section the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such supplement to this
Agreement shall provide for adjustments which, for events subsequent to the
effective date of the event which triggers the requirement of such supplemental
indenture, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The above provisions of this Section
9.11 shall similarly apply to successive consolidations, mergers, sales or
transfers.
10. EXCHANGE OF CONVERTIBLE DEBENTURES FOR FIXED RATE DEBENTURES.
10.1. ELECTION FOR FIXED RATE DEBENTURES.
If for the 30 trading days immediately preceding the third anniversary
of the Issue Date, the average of the closing prices of the Company's Common
Stock on the New York Stock Exchange does not exceed the Conversion Price,
Apollo may elect to exchange its Convertible Debentures (when completed, the
"Exchange"), in whole, into fixed-rate non-convertible debentures (the "Fixed
Rate Debentures") with a principal amount equal to the principal amount of the
Convertible Debentures, and with a maturity date on the seventh anniversary of
the date of the Exchange.
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10.2. PROCEDURE FOR EXERCISING OPTION TO RECEIVE FIXED RATE DEBENTURES.
(a) Apollo may exercise its option to receive Fixed Rate Debentures by
delivering a written notice to the Company no later than 10 trading days
following the third anniversary of the Issue Date. Upon receipt of such notice,
the Company will retain (and be responsible for the fees and expenses of) one or
more nationally recognized investment or commercial banking institutions (to be
selected by the Company and reasonably agreed to by Apollo) to determine an
interest rate for the Fixed Rate Debentures which would accurately price the
Fixed Rate Debentures at par if such Fixed Rate Debentures were sold to an
unaffiliated third party purchaser at such time.
(b) The interest rate for the Fixed Rate Debentures will be determined
by the selected financial institution by reference to several factors, including
but not limited to, the Company's credit rating at the time, the redemption
features of the Fixed Rate Debentures and the ranking and maturity of such Fixed
Rate Debentures. Such determination shall be made for senior debt, senior
subordinated debt and subordinated debt and for the alternatives where (x) only
Apollo Exchanges and (y) both Apollo and BHI Exchange. Notwithstanding the
foregoing, such interest rate on Fixed Rate Debentures which are senior or
senior subordinated debt will not exceed (a) the lower of (i) 13% and (ii) the
then rate of return on the appropriate maturity U.S. treasury securities plus 5%
only if Benesse does not exchange its debentures pursuant to the Other Purchase
Agreement or (b) otherwise the lower of (i) 14% and (ii) the then rate of return
on the appropriate maturity U.S. treasury securities plus 7%; provided if the
interest rate is limited by clause (a) or (b), the Fixed Rate Debentures will be
senior debt unless the application of such clause is waived by the Company in
the exercise of its sole discretion.
(c) The investment or commercial banking advisor will advise the
Company and Apollo in writing no later than 10 business days after its
appointment as to the market interest rate applicable to the Fixed Rate
Debentures. Apollo must elect to proceed with the Exchange within 10 days of
such advisement. If Apollo elects to effect the Exchange, such election becomes
irrevocable and the Company, no later than 150 days from the third anniversary
of the Issue Date, shall at its option either (i) redeem all the Convertible
Debentures
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held by Apollo at 100% of the principal amount of such Convertible Debentures
plus accrued interest to the Redemption Date or (ii) deliver its duly executed
promissory note for the Fixed Rate Debentures to Apollo and a payment for
accrued interest on the Convertible Debentures to the date of the Exchange.
(d) If the Exchange should occur, (i) the Deben tures will forfeit all
Common Stock conversion rights; (ii) Apollo will forfeit all rights to board
membership set forth in the Investors Agreement; (iii) Apollo will forfeit all
voting rights in the Investors Agreement and (iv) the Fixed Rate Debentures will
contain negative and affirmative debt covenants to be reasonably set by the
investment or commercial banking advisor, which covenants taken as a whole will
be no less restrictive than the covenants applicable to the Convertible
Debentures and which are appropriate to (i) the type of debt and (ii) the
Company's credit rating at the time and may include, but not be limited to,
covenants with respect to limitations on indebtedness, limitations on sale of
assets, limitations on transactions with affiliates and limitations on liens and
sale leaseback transactions; and (iv) the Fixed Rate Debentures will be senior,
senior subordinated or subordinated debt of the Company as determined by the
Company after consultation with investment or commercial banking advisors and
will rank senior to all classes of Common Stock and Preferred Stock of the
Company.
10.3. REDEMPTION OF THE FIXED RATE DEBENTURES.
Following the third anniversary of the Exchange, the Company may, in
whole, but not in part, redeem the Fixed Rate Debentures for a redemption price
equal to (i) the sum of 100% of the principal amount of such Fixed Rate
Debentures plus an additional percentage of the principal amount, such
percentage being 50% of the interest rate on such Fixed Rate Debentures, if such
redemption occurs during the period from the third anniversary of the Exchange
to and including the fourth anniversary of the Exchange, (ii) the sum of 100% of
the principal amount of such Fixed Rate Debentures plus an additional percentage
of the principal amount, such percentage being 25% of the interest rate on such
Fixed Rate Debentures, if such redemption occurs during the period from the
fourth anniversary to and including the fifth anniversary of the Exchange, and
(iii) 100.0% of the principal amount of such Fixed Rate Debentures, if such
redemption occurs after the
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fifth anniversary of the Exchange, in each case together with accrued interest
to the Redemption Date.
10.4. REDEMPTION PURSUANT TO THE OTHER PURCHASE AGREEMENT.
The Company shall not redeem the Fixed Rate Debentures or Convertible
Debentures pursuant to this Agreement unless the Company redeems the fixed rate
debentures or convertible debentures pursuant to the Other Purchase Agreement
and shall not redeem any fixed rate debentures or convertible debentures
pursuant to the Other Purchase Agreement unless the Company redeems the Fixed
Rate Debentures or Convertible Debentures pursuant to this Agreement.
11. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Convertible Debentures
are outstanding:
11.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsid iaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
11.2. INSURANCE.
The Company will and will cause each of its Sub sidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective proper ties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
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11.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Sub sidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance would not, individually
or in the aggregate, have a Material Adverse Effect.
11.4. PAYMENT OF TAXES.
The Company will and will cause each of its Sub sidiaries to file all
income tax or similar tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on such returns and
all other taxes, assessments, governmental charges, or levies payable by any of
them, to the extent such taxes and assessments have become due and payable and
before they have become delinquent, provided that neither the Company nor any
Subsidiary need pay any such tax or assessment if (i) the amount, applicability
or validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or such Subsidiary or (ii) the nonpayment of all such
taxes and assessments in the aggregate would not reasonably be expected to have
a Material Adverse Effect.
11.5. CORPORATE EXISTENCE, ETC.
Except as provided in Section 12.1, the Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Section 12.1, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries (unless merged or
consolidated into the Company or a Subsidiary) and all rights and franchises of
the Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and
effect such corporate existence, right or franchise would
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not, individually or in the aggregate, have a Material Adverse Effect.
11.6. REPURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL.
(a) Upon the occurrence of a Change of Control or a Benesse Sale Event,
each holder of Debentures shall have the right, at such holder's option,
pursuant to an offer (subject only to conditions required by applicable law, if
any) by the Company (the "Change of Control Offer"), to require the Company to
repurchase for cash all or any part of such holder's Debentures (provided, that
the principal amount of such Debentures must be $1,000,000 or an integral
multiple thereof) on a date (the "Change of Control Purchase Date") that is no
later than 150 days after the occurrence of such Change of Control or Benesse
Sale Event, whichever it may be, at the Change of Control Purchase Price
specified below, plus accrued and unpaid interest to the Change of Control
Purchase Date. The Change of Control Offer shall be made within 15 business days
following a Change of Control or Benesse Sale Event, whichever it may be, and
shall remain open for 20 Business Days following its commencement (the "Change
of Control Offer Period"). Upon expiration of the Change of Control Offer
Period, the Company promptly, but, in any event, no later than 150 days from the
Change of Control, shall purchase all Debentures properly tendered in response
to the Change of Control Offer.
(b) As used herein, a "Change of Control" means:
(i) any merger or consolidation of the Company with or into
any Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), other than BHI, Benesse Corporation ("Benesse") or any
of their Affiliates (collectively, the "Benesse Group"), is or becomes
the beneficial owner (as such term is used in Rule 13d-3 of the
Exchange Act or any successor provision thereto), directly or
indirectly, of more than 50% of the total voting power in the aggregate
normally entitled to vote in the election of directors, managers or
trustees,
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as applicable, of the transferee(s) or surviving entity or entities,
(ii) any "person" or "group," other than the Benesse Group,
becomes the beneficial owner, directly or indirectly, of more than 50%
of the total voting power in the aggregate of all classes of capital
stock of the Company then outstanding normally entitled to vote in
elections of directors, or
(iii) during any period of 12 consecutive months after the
Issue Date, individuals, together with successors selected by such
individuals, who at the beginning of any such 12-month period
constituted the Board of Directors of the Company cease for any reason
(other than a planned retirement) to constitute a majority of the Board
of Directors of the Company then in office, as applicable.
A "Benesse Sale Event" means the sale by Benesse of 80% or
more of the aggregate number of shares of Common Stock directly or
indirectly owned by Benesse on the date of this Agreement.
The "Change of Control Purchase Price" means
(i) 110% of the principal amount of the Debentures, if a
Benesse Sale Event occurs prior to the third anniversary of the Issue
Date, or
(ii) 101% of the principal amount of the Debentures, if (A) a
Change of Control occurs and clause (i) is inapplicable prior to the
third anniversary of the Issue Date or (B) a Benesse Sale Event or
Change of Control occurs on or after the third anniversary of the Issue
Date.
(c) On or before the Change of Control Purchase Date, the Company will
(i) accept for payment Debentures or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) promptly pay the holders of Debentures so
accepted an amount equal to the Change of Control Purchase Price (together with
accrued and unpaid interest, if any), and (iii) authenticate and deliver to such
holders a new Debenture equal in principal amount to any unpurchased portion of
the Debenture surrendered. Any Debentures not so accepted will be delivered
promptly by the Company to the holder thereof.
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(d) If the Change of Control Purchase Date hereunder is on or after a
Regular Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest due on such Interest Payment Date will be paid to
the Person in whose name a Debenture is registered at the close of business on
such Regular Record Date, and such interest will not be payable to holders who
tender the Debentures pursuant to such Change of Control Offer.
11.7. DEBENTURES SUBORDINATE TO SENIOR OBLIGATIONS.
The Company covenants and agrees, and each holder of a Convertible
Debenture, by acceptance thereof, likewise covenants and agrees, (i) that, to
the extent and in the manner set forth in this Section 11.7, the Company's
Senior Obligations, if any, will be senior in right of payment to the
Convertible Debentures, and (ii) that the subordination provisions set forth in
this Section 11.7 are, and are intended to be, an inducement and a consideration
to each holder of any Senior Obligation, whether such Senior Obligation was
created or acquired before or after the date of this Agreement, to acquire and
continue to hold, or to continue to hold, such Senior Obligation and such holder
of Senior Obligations shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or continuing to
hold, such Senior Obligations.
(a) As used herein, "senior in right of payment to the Convertible
Debentures" means that:
(i) no part of the Debt shall have any claim to the assets of
the Company on a parity with or prior to the claim of the Senior
Obligations; and
(ii) unless and until the Senior Obligations have been paid in
full, without the express prior written consent of all holders of such
Senior Obligations, no Holder will take, demand (including by means of
any legal action) or receive from the Company, and the Company will not
make, give or permit, directly or indirectly, by set-off, redemption,
purchase or in any other manner, any payment of or security for the
whole or any part of the Debt; provided, however, that (x) at any time,
the Company may make, and the Holders may receive, scheduled payments
on account of the Debt in accordance with the terms hereof, except if a
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default in the performance or observance of any term or condition
relating to any Senior Obligations (other than a default in the payment
of any principal of, premium if any, or interest on the Senior
Obligations) has occurred and is continuing that permits the holders of
the Senior Obligations to declare such Senior Obligations to be due and
payable, the holders of Senior Obligations may give notice (a "Senior
Blockage Notice") to the Company (provided, however, no more than one
Senior Blockage Notice may be given during any 365 consecutive day
period) that until all Senior Obligations are paid in full, no
scheduled payments may be made by the Company on account of the Debt
during the period ("Senior Blockage Period") commencing on the date of
such Senior Blockage Notice and ending on the earliest of: (A) 180 days
after the date of such Senior Blockage Notice; (B) the date such
default is cured or waived; and (C) the date that the holders of the
Senior Obligations shall have given notice to the Company of
termination of the Senior Blockage Period, and except when a default in
the payment of any principal of, premium if any, or interest on the
Senior Obligations has occurred and is continuing or would result
therefrom, (y) at any time permitted under Sections 10.1 and 10.2 the
Convertible Debentures may be exchanged for Fixed Rate Debentures or at
any time converted in accordance with the terms hereof, and (z) upon
the acceleration of the maturity of any Senior Obligations, the Holders
may accelerate the scheduled maturities of the Convertible Debentures
if and to the extent permitted hereby at such time but such
acceleration shall not give any Holder any right to take, demand
(including by means of any legal action) or receive from the Company,
or the Company the right to make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any other manner,
any payment of or security for the whole or any part of the Convertible
Debentures unless and until the Senior Obligations have been paid in
full.
(b) Any payment or distribution of assets of the Company, whether in
cash, property or securities, to which any Holder would be entitled except for
the provisions hereof,
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shall be paid or delivered by the Holder, or any receiver, trustee in
bankruptcy, liquidating trustee, disbursing agent or other Person making such
payment or distribution, to the holders of the Senior Obligations or their
representative, ratably in accordance with the amounts thereof, to the extent
necessary to pay in full all Senior Obligations, before any payment or
distribution shall be made to any Holder.
(c) The expressions "prior payment in full," "payment in full," "paid
in full" and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full in cash, in immediately
available funds, of all of the Senior Obligations; and the expression "any
payment of or security for the whole or any part of the Debt" and any other
similar terms or phrases when used herein shall not be deemed to include a
payment or distribution of stock or securities of the Company provided for by a
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law or of any other corporation provided for by such plan
of reorganization or readjustment, which stock or securities are subordinated in
right of payment to all then outstanding Senior Obligations to substantially the
same extent as the Convertible Debentures are so subordinated as provided in
this Section 11.7. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of all or substantially all of its
properties and assets as an entirety to another Person upon the terms and
conditions set forth in Section 12.1 shall not be deemed a "proceeding" for the
purposes of this Section 11.7 if the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Section 12.1.
(d) If any payment or distribution, whether consisting of money,
property or securities, is collected or received by any Holder in respect of the
Debt, except payments permitted hereunder, such Holder forthwith shall deliver
the same to the holders of the Senior Obligations or their representative,
ratably in accordance with the amounts thereof, in the form received, duly
endorsed to such holders or representative, if required, to be applied to the
payment
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or prepayment of the Senior Obligations until the Senior Obligations are paid in
full. Until so delivered, such payment or distribution shall be held in trust by
such Holder as the property of such holders of Senior Obligations, segregated
from other funds and property held by the Holder.
(e) As used herein, "Senior Obligations" shall mean collectively the
unpaid principal of, premium, if any, and interest on (including, without
limitation, interest accruing after the maturity date of any Senior Obligation
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) all Indebtedness of the Company having an initial
principal amount in excess of $5,000,000 whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, in each
case whether on account of principal, premium, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise which by its
express terms states it is a "Senior Obligation."
(f) As used herein, "Debt" shall mean collectively the unpaid principal
of, premium, if any, and interest on (including, without limitation, interest
accruing after the maturity date of any Convertible Debenture and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Company,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Convertible Debentures, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, in each case whether on account of principal, premium, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise.
(g) Notwithstanding anything herein to the contrary, the 5% Convertible
Exchangeable Subordinated Debentures of the Company due 2010, Series B, issued
to BHI under the Other Purchase Agreement shall not be Senior Obligations and
such debentures shall rank in all respects pari passu with the Convertible
Debentures.
12. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Convertible Debentures
are outstanding:
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12.1. MERGER, CONSOLIDATION, ETC.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case may
be, shall be a solvent corporation organized and existing under the laws of the
United States or any State thereof (including the District of Columbia), and, if
the Company is not such corporation, such corporation shall have executed and
delivered to each holder of any Convertible Debentures its assumption of the due
and punctual performance and observance of each covenant and condition of this
Agreement, the Other Agreements and the Convertible Debentures; and
(b) immediately after giving effect to such trans action, no Default or
Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall there tofore have become such in the manner prescribed in
this Section 12.1 from its liability under this Agreement, the Other Agreements
or the Convertible Debentures.
12.2. FORBEARANCE FROM RESTRICTIONS ON RIGHTS OF HOLDERS OF CONVERTIBLE
DEBENTURES.
The Company will not enter into any agreement or instrument or
otherwise agree to any covenant that would in any way limit the right of the
holders of the Convertible Debentures to convert the Convertible Debentures into
Common Stock or exchange the Convertible Debentures for Fixed Rate Debentures.
12.3. FORBEARANCE FROM AMENDING JAPAN SHAREHOLDERS AGREEMENT AND OTHER
UNDERSTANDINGS BETWEEN BENESSE AND BERLITZ JAPAN.
The Company will not:
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(i) amend or modify the Japan Shareholders Agreement;
(ii) amend the formula for calculating the minority interest
of Benesse in Berlitz Japan as set forth in Schedule 5.4(c);
(iii) amend the formula for calculating royalty payments by
Berlitz Japan to the Company as set forth in Schedule 5.4(c); or
(iv) effect the initial public offering of Berlitz Japan or
the registration of any securities of Berlitz Japan for trading on any
stock markets;
if such amendment, change or effect is in any way materially adverse to the
Company and its minority shareholders. In addition, the Company will not grant
any additional rights to Benesse or any of its affiliates with respect to its
shares in Berlitz Japan or otherwise increase the rights of Benesse as a
shareholder of Berlitz Japan. Notwithstanding anything in this Section 12.3, the
Company may repurchase Benesse's interest in Berlitz Japan, in whole or in part,
provided, that the purchase price and the terms of the repurchase are approved
by the disinterested directors of the Company's Board of Directors, the Board of
Directors and Apollo.
13. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
premium on any Debenture when the same becomes due and payable; or
(b) the Company defaults in the payment of any interest on any
Debenture for more than ten Business Days after the same becomes due
and payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Section 12.1; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 13) and such default is not
remedied within 30
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days after the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving written notice
of such default from any holder of a Debenture (any such written notice
to be identified as a "notice of default" and to refer specifically to
this paragraph (d) of Section 13); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made if a date is
specified, or as of Closing; or
(f) (i) the Company or any Significant Subsidiary is in
default (as principal or as guarantor or other surety) in the payment
of any principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of at
least $25,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Significant Subsidiary is in
default in the performance of or com pliance with any term of any
evidence of any Indebtedness in an aggregate outstanding principal
amount of at least $25,000,000 or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and as a
consequence of such default or condition such Indebtedness has become,
or has been declared due and payable before its stated maturity or
before its regularly scheduled dates of payment; or
(g) the Company or any Significant Subsidiary (i) is generally
not paying, or admits in writing its inability to pay, its debts as
they become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorgan ization or
arrangement or any other petition in bank ruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) con sents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
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liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any of its Significant Subsidiaries, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering the
dis solution, winding-up or liquidation of the Company or any of its
Significant Subsidiaries, or any such petition shall be filed against
the Company or any of its Significant Subsidiaries and such petition
shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $10,000,000 are rendered against one or more
of the Company and its Significant Subsidiaries and which judgments are
not, within 60 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(j) (i) with respect to any Plan, a prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of ERISA
shall occur which has a reasonable likelihood of resulting in direct or
indirect liability to the Company, (ii) with respect to any Plan
subject to Title IV of ERISA, the filing of a notice by the Company or
an ERISA Affiliate to voluntarily terminate any such Plan in a distress
termination, (iii) with respect to any Multiemployer Plan, the Company
or any ERISA Affiliate shall incur any withdrawal liability in excess
of $50,000 or (iv) with respect to any Plan subject to Title IV of
ERISA, the Company or any ERISA Affiliate shall incur an accumulated
funding deficiency or request a funding waiver from the Internal
Revenue Service, provided that an event listed in clauses (i) through
(iv) hereof shall constitute an Event of Default only if it has a
Material Adverse Effect.
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14. REMEDIES ON DEFAULT, ETC.
14.1. ACCELERATION. Subject to Section 11.7.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 13 (other than an Event of Default described in
clause (i) of para graph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Debentures then out standing shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Debentures at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Debentures then outstanding to be immediately due
and payable.
(c) If any Event of Default described in para graph (a) or (b) of
Section 13 has occurred and is continuing, any holder or holders of Debentures
at the time outstanding affected by such Event of Default may at any time, at
its or their option, by notice or notices to the Company, declare all the
Debentures held by it or them to be immediately due and payable.
Upon any Debentures becoming due and payable under this Section 14.1,
whether automatically or by declaration, such Debentures will forthwith mature
and the entire unpaid principal amount of such Debentures, plus all accrued and
unpaid interest thereon shall all be immediately due and payable, in each and
every case without presentment, demand, protest or further notice, all of which
are hereby waived.
14.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Debentures have become or have been declared
immediately due and payable under Section 14.1, the holders of 50% in principal
amount of the Debentures then outstanding may proceed to protect and enforce the
rights of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Debenture, or for an injunction against a violation of any of
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the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
Notwithstanding the foregoing, the holder of any Debenture shall have
the right, which is absolute and unconditional, to receive payment of the
principal of, premium, if any, and interest on such Debenture and to institute
suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such holder.
14.3. RESCISSION.
At any time after any Debentures have been declared due and payable
pursuant to clause (b) of Section 14.1, the holders of not less than 25% in
principal amount of the Debentures then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its conse quences if (a)
the Company has paid all overdue interest on the Debentures, all principal of
and premium, if any, on any Debentures that are due and payable other than by
reason of such declaration and are unpaid, and all interest on such overdue
principal and (to the extent permitted by applicable law) any overdue interest
in respect of the Debentures, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 19, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Debentures. No rescission and annulment
under this Section 14.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
14.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Debenture in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise preju dice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Debenture upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 17,
the Company will pay to the holder of each Debenture on demand such further
amount as shall be sufficient
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to cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 14, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
15. REGISTRATION; EXCHANGE; SUBSTITUTION OF DEBENTURES.
15.1. REGISTRATION OF DEBENTURES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Debentures (the "Debenture
Register"). The name and address of each holder of one or more Debentures, each
transfer thereof and the name and address of each transferee of one or more
Debentures shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Debenture shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary. The Company shall give to any holder of at least 5%
of the original aggregate principal amount ($100,000,000) of Debentures promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Debentures.
15.2. TRANSFER AND EXCHANGE OF DEBENTURES.
The Convertible Debentures (but not the Fixed Rate Debentures) are
subject to restrictions upon transfer contained in the Investors Agreement. Upon
surrender of any Debenture at the principal executive office of the Company for
registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Debenture or his
attorney duly authorized in writing and accompanied by the address for notices
of each transferee of such Debenture or part thereof), the Company shall execute
and deliver, at the Company's expense (except as provided below), one or more
new Debentures (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Debenture. Each such new Debenture shall be payable to such Person
as such holder may request and shall be substantially in the form of Exhibit 1.
Each such new Debenture shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered
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Debenture or dated the date of the surrendered Debenture if no interest shall
have been paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer of Debentures. Debentures shall not be transferred in denomina tions of
less than $1,000,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Debentures, one Debenture may be
in a denomination of less than $1,000,000. Any transferee, by its acceptance of
a Debenture registered in its name (or the name of its nominee), shall be deemed
to have made the representation set forth in Section 6.3.
15.3. REPLACEMENT OF DEBENTURES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any
Debenture, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Debenture, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Debenture or dated the
date of such lost, stolen, destroyed or mutilated Debenture if no interest shall
have been paid thereon.
16. PAYMENTS ON DEBENTURES.
16.1. PLACE OF PAYMENT.
Subject to Section 16.2, payments of principal and interest becoming
due and payable on the Debentures shall be made in Princeton, New Jersey, at the
principal office of the Company. The Company may at any time, by notice to each
holder of a Debenture, change the place of payment of the Debentures so long as
such place of payment shall be either the principal office of the Company in
such jurisdiction or the principal office of a bank or trust company in such
jurisdiction.
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16.2. HOME OFFICE PAYMENT.
So long as Apollo or Apollo's nominee shall be the registered holder of
any Debenture, and notwithstanding anything contained in Section 16.1 or in such
Debenture to the contrary, the Company will pay all sums becoming due on such
Debenture for principal, premium, if any, interest by the method and at the
address as Management shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such
Debenture or the making of any notation thereon, except that, in order to
receive payment or prepayment in full of any Debenture, Apollo shall surrender
such Debenture for cancellation, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 16.1. Prior to any sale or other disposition of any
Debenture held by Apollo or Apollo's nominee Apollo will, at Apollo's election,
either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Debenture to the Company
in exchange for a new Debenture or Debentures pursuant to Section 15.2.
17. EXPENSES, ETC.
17.1. TRANSACTION EXPENSES.
The Company will pay all reasonable out-of-pocket fees and expenses
(including the fees and expenses of a special counsel and other representatives
engaged by Apollo or Management in connection with the transactions contemplated
hereby) incurred by Apollo or Management in connection with such transactions
(up to a maximum amount of $500,000) ("Transaction Fees") and in connection with
any amendments, waivers or consents under or in respect of this Agreement or the
Debentures (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement or the Debentures or in responding to any subpoena or other
legal process or informal investi gative demand issued in connection with this
Agreement or the Debentures, or by reason of being a holder of any Debenture,
(b) the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary or
in connection with any work-out or restructuring of the transactions
contemplated
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hereby and by the Debentures. The Company will pay, and will save Apollo and
Management and each other holder of a Debenture harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by Apollo or Management), its investment advisors, Goldman,
Sachs & Co., and its counsel, Paul, Weiss, Rifkind, Wharton & Garrison and (c)
any filing fees payable by the Company and one-half of any fees payable by
Apollo in connection with any filings or submissions required under the HSR Act
in connection with the conversion of the Convertible Debentures. The Transaction
Fees will only be payable if one of the following occurs: (i) the transactions
contemplated hereby are consummated, (ii) the Company is in material breach of
this Agreement, or (iii) prior to the Closing, Benesse fails to comply with the
terms of the Voting Agreement or Benesse or any executive officer of the Company
fails to vote its shares in favor of approval and adoption of this agreement and
the issuance of the Debentures.
17.2. SURVIVAL.
The obligations of the Company under this Section 17 will survive the
payment or transfer of any Debenture, the enforcement, amendment or waiver of
any provision of this Agreement or the Debentures, and the termination of this
Agreement.
18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Debentures, the purchase or
transfer by Apollo of any Debenture or portion thereof or interest therein and
the payment of any Debenture, and may be relied upon by any subse quent holder
of a Debenture, regardless of any investigation made at any time by or on behalf
of Apollo or any other holder of a Debenture. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Debentures embody the entire agreement and understanding between Apollo
and the Company and supersede all prior agreements and under standings relating
to the subject matter hereof.
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19. AMENDMENT AND WAIVER.
19.1. REQUIREMENTS.
This Agreement and the Debentures may be amended, and the observance of
any term hereof or of the Debentures may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5.14, 6 or 22 hereof, or any defined term (as
it is used therein), will be effective as to Apollo unless consented to by
Apollo in writing, and (b) no such amendment or waiver may, without the written
consent of the holder of each Debenture at the time outstanding affected
thereby, (i) subject to the provisions of Section 14 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest on the Debentures, (ii) change the percentage of the principal amount
of the Debentures the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 9, 13(a), 13(b), 14, 19
or 22.
19.2. SOLICITATION OF HOLDERS OF DEBENTURES.
(a) Solicitation. The Company will provide each holder of the
Debentures (irrespective of the amount of Debentures then owned by it) with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the Debentures. The Company will deliver executed or
true and correct copies of each amendment, waiver or consent effected pursuant
to the provisions of this Section 19 to each holder of outstanding Debentures
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Debentures.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or other wise, or grant any security, to any holder of Debentures
as consideration for or as an inducement to the entering into by any holder of
Debentures of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the
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same terms, ratably to each holder of Debentures then out standing that consent
thereto.
19.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 19
applies equally to all holders of Debentures and is binding upon them and upon
each future holder of any Debenture and upon the Company without regard to
whether such Debenture has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Debenture nor any delay in exercising any rights hereunder or
under any Debenture shall operate as a waiver of any rights of any holder of
such Debenture. As used herein, the term "this Agreement" and references thereto
shall mean this Agreement as it may from time to time be amended or
supplemented.
19.4. DEBENTURES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Debentures then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Debentures, or have directed the taking of any
action provided herein or in the Debentures to be taken upon the direction of
the holders of a specified percentage of the aggregate principal amount of
Debentures then outstanding, Debentures directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.
20. NOTICES.
All notices and communications provided for here under shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
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(i) if to Apollo or Apollo's nominee, to Apollo or it at the
address Apollo or it shall have specified to the Company in writing,
(ii) if to any other holder of any Debenture, to such holder
at such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the atten tion of Robert C. Hendon,
Jr., or at such other address as the Company shall have specified to
the holder of each Debenture in writing.
Notices under this Section 20 will be deemed given only when actually received.
21. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by Management at the Closing (except the
Debentures themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to Management, may be reproduced
by Management or Apollo by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and Management or Apollo may
destroy any original document so reproduced. The Company agrees and stipulates
that, to the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by Management or Apollo in the regular course of business)
and any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence. This Section 21 shall not prohibit the
Company or any other holder of Debentures from contesting any such reproduction
to the same extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
22. APPROVALS, ETC.
The Company shall take all action necessary, in accordance with
applicable law and its Certificate of
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Incorporation and By-laws, to convene a meeting of its shareholders (the
"Company Shareholder Meeting") as promptly as reasonably practicable after the
date on which the definitive Company Proxy Statement has been mailed to the
Company's shareholders for the purpose of considering and approving the issuance
of Common Stock upon conversion of the Debentures pursuant to this Agreement and
the debentures issued pursuant to the Other Purchase Agreement. Subject to the
fiduciary duties of the Company Board, the Company Board will recommend that
holders of Common Stock vote in favor of the approval of this Agreement at the
Company Shareholder Meeting.
In connection with such meeting, the Company (i) will as promptly as
practicable prepare and file with the SEC, will use its best efforts to have
cleared by the SEC and will thereafter mail to its shareholders as promptly as
practicable the Company Proxy Statement and all other proxy materials for such
meeting, (ii) subject to the fiduciary duties of the Company Board, will use its
best efforts to obtain the necessary approvals by its shareholders of this
Agreement and the transactions contemplated hereby and (iii) will otherwise
comply with all legal requirements applicable to such meeting. The Company will
provide Management with a copy of the preliminary proxy statement and all
modifications thereto prior to filing or delivery to the SEC and will consult
with Management in connection therewith. The Company will notify Management
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Company
Proxy Statement or for additional information and will supply Management with
copies of all written correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Company Proxy Statement or this Agreement. If at any time
prior to the Company Shareholder Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Company Proxy Statement, the
Company will promptly prepare and mail to its shareholders such an amendment or
supplement.
23. SUBSTITUTION OF PURCHASER.
Apollo shall have the right to substitute any one of Apollo's
Affiliates as the purchaser of the Debentures that Apollo has agreed to purchase
hereunder, by written notice to
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the Company, which notice shall be signed by both Apollo and such Affiliate,
shall contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "Apollo" is used in this Agreement (other than in this Section
23), such word shall be deemed to refer to such Affiliate in lieu of Apollo,
provided, however, the substitution of Apollo's Affiliate shall not release
Apollo from any liability under this Agreement. In the event that such Affiliate
is so substituted as a purchaser hereunder and such Affiliate thereafter
transfers to Apollo all of the Debentures then held by such Affiliate, upon
receipt by the Company of notice of such transfer, wherever the word "Apollo" is
used in this Agreement (other than in this Section 23), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to Apollo, and
Apollo shall have all the rights of an original holder of the Debentures under
this Agreement.
24. MISCELLANEOUS.
24.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Debenture) whether so expressed or not.
24.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Debentures to the contrary
notwithstanding, any payment of principal of or premium or interest on any
Debenture that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
24.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such juris diction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
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jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
24.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being indepen dent of each other covenant
contained herein, so that com pliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
24.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each coun terpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
24.6. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. All actions and proceedings
arising out of or relating to this Agreement shall be brought by the parties and
heard and determined only in a Federal or State court located in the Borough of
Manhattan in the City and State of New York and the parties hereto consent to
jurisdiction before and waive any objections of venue to such New York and
federal courts. The parties hereto agree to accept service of process in
connection with any such action or proceeding in any manner permitted for a
notice hereunder.
24.7. FURTHER ASSURANCES.
Each party shall cooperate and take such action as may be reasonably
requested by the other party in order to carry out the provisions and purposes
of this Agreement. In that regard, the Company agrees to cooperate with
Management and Apollo with respect to any filing required pursuant to the
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HSR Act in connection with the conversion of the Convertible Debentures.
24.8. CONFIDENTIALITY.
Each Holder, by its acceptance of its Debenture, agrees that it shall
use commercially reasonable efforts to hold in confidence all confidential
Information contained herein or provided hereunder and shall use such
Confidential Information only to the extent required for the performance of this
Agreement and the transactions contemplated herein; provided, however, that
nothing in this Section 24.8 shall prevent any Holder or any of its Affiliates
from delivering copies of such Confidential Information and disclosing such
Confidential Information to (i) its directors, officers, partners, employees,
similar representatives, agents, affiliates and professional consultants who
have been informed of the confidentiality provisions set forth in this Section
24.8, (ii) any actual or prospective transferee of Debentures or Converted
Shares that is subject to confidentiality arrangements substantially similar to
this Section 24.8, (iii) any Governmental Authority having jurisdiction over
such Holder and requesting such Confidential Information, (iv) any Person from
which Apollo offers to purchase any security of the Company, if such Person is
subject to confidentiality arrangements substantially similar to this Section
24.8, or (v) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any applicable law, rule,
regulation or order, (b) in response to any subpoena or other legal process or
(c) in connection with any litigation to which the Holder is a party; provided,
however, that, prior to any such disclosure, pursuant to clause (v)(b), the
Holder shall use reasonable efforts to permit the Company to provide information
to the Person or party requesting the Confidential Information. "Confidential
Information" means information delivered to Apollo or Management by or on behalf
of the Company or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement or the Other Agreements
that is confidential in nature and identified or understood when received by
Apollo or Management as being confidential information of the Company or any
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to Apollo or Management prior to the time of
such disclosure or which Apollo or Management would have received or had access
to from the Company or a Subsidiary absent this Agreement and the
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Other Agreements, (b) subsequently becomes publicly known through no act or
omission by Apollo or Management or any Person acting on their behalf, (c)
otherwise becomes known to Apollo or Management other than through disclosure by
the Company or any Subsidiary, or (d) constitutes financial statements delivered
to Apollo or Management under Section 7.1 that are otherwise publicly available.
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If Apollo is in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between Apollo
and the Company.
Very truly yours,
BERLITZ INTERNATIONAL, INC.
By: /s/ Hiromasa Yokoi
----------------------
Name: Hiromasa Yokoi
Title: Chairman, CEO & President
The foregoing is hereby
agreed to as of the
date thereof.
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
- ---------------------
Name: Laurence Berg
Title: Partner
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
- ---------------------
Name: Laurence Berg
Title: Partner
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SCHEDULE A
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"AGREEMENT" is defined in Section 19.3.
"APOLLO" is defined in the preamble.
"BENESSE" is defined in Section 11.6.
"BENESSE GROUP" is defined in Section 11.6.
"BENESSE SALE EVENT" is defined in Section 11.6.
"BERLITZ JAPAN" is defined in Section 5.4.
"BHI" is defined in Section 2.
"BUSINESS DAY" means for the purposes of any provision of this
Agreement, any day other than a Saturday, a Sunday or a day on which commercial
banks in New York are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CHANGE OF CONTROL" is defined in Section 11.6.
"CHANGE OF CONTROL OFFER" is defined in Section 11.6.
<PAGE>
"CHANGE OF CONTROL OFFER PERIOD" is defined in Section 11.6.
"CHANGE OF CONTROL PURCHASE DATE" is defined in Section 11.6.
"CHANGE OF CONTROL PURCHASE PRICE" is defined in Section 11.6.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"COMMON STOCK" is defined in Section 5.3.
"COMPANY" means Berlitz International, Inc., a New York corporation.
"COMPANY SHAREHOLDER MEETING" is defined in Section 22.
"CONFIDENTIAL INFORMATION" is defined in Section 24.8.
"CONVERSION DATE" is defined in Section 9.2.
"CONVERSION PRICE" is defined in Section 9.1.
"CONVERTIBLE DEBENTURES" is defined in Section 1.
"DEBENTURE REGISTER" is defined in Section 15.1.
"DEBENTURES" is defined in Section 1.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is 2.0% per annum above
the rate of interest stated in clause (a) of the first paragraph of the
Debentures.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordi-
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nances, rules, judgments, orders, decrees, permits, conces sions, grants,
franchises, licenses, agreements or govern mental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single em ployer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 13.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FIXED RATE DEBENTURE" is defined in Section 10.1.
"GAAP" means generally accepted accounting prin ciples as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Significant
Subsidiary conducts all or any part of its business, or which has
jurisdiction over any properties of the Company or any Significant
Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
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"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebt edness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HOLDER" or "HOLDER" means, with respect to any Debenture, the Person
in whose name such Debenture is registered in the register maintained by the
Company pursuant to Section 15.1.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
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(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (f) hereof.
"INTEREST PAYMENT DATE" means each March 31 and September 30.
"INVESTORS AGREEMENT" means the Investors Agreement, to be entered into
and dated as of the date hereof, between the Company and Apollo, as amended,
supplemented, changed or modified from time to time.
"ISSUE DATE" means the date of the Closing.
"JAPAN SHAREHOLDERS AGREEMENT" means the Shareholders' Agreement, dated
as of November 8, 1990 and amended as of January 29, 1993, among Berlitz
Languages, Inc., Fukutake Publishing Co., Ltd. and Berlitz International, Inc.
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"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agree ments, voting trust agreements and all similar
arrangements).
"MANAGEMENT" is defined in Section 1.
"MATERIAL" means material in relation to the busi ness, operations,
affairs, financial condition, assets, or properties of the Company and its
Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsid iaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement, the Other Agreements
and the Debentures, or (c) the validity or enforceability of this Agreement, the
Other Agreements or the Debentures.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" means the Investors Agreement, the Other Purchase
Agreement and the Registration Rights Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corpora tion, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
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"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PREFERRED SHARES" is defined in Section 5.3.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of divi dends or the payment of any amount upon liquidation or
dis solution of such corporation.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"REDEMPTION DATE" is defined in Section 8.2.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and Apollo, as
amended, supplemented, changed or modified from time to time.
"REGULAR RECORD DATE" means the date that is fifteen days prior to the
Interest Payment Date.
"REDEMPTION DATE" is defined in Section 8.2.
"REQUIRED HOLDERS" means, at any time, the holders of at least 50% in
principal amount of the Debentures at the time outstanding (exclusive of
Debentures then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with respon sibility for the administration of the
relevant portion of this Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
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"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary that would at
such time constitute a "significant subsidiary" (as such term is defined in
Regulation S-X of the Securities and Exchange Commission as in effect on the
date of the Closing) of the Company.
"SUBSIDIARY" means, as to any Person, any corpora tion, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount deter mined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so deter mined.
"VOTING AGREEMENT" means the Voting Agreement, dated as of the date
hereof, between the Benesse Corporation and
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Apollo, as amended, supplemented, changed or modified from time to time.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.
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EXHIBIT 1
[FORM OF DEBENTURE]
BERLITZ INTERNATIONAL, INC.
5% CONVERTIBLE EXCHANGEABLE SUBORDINATED
DEBENTURES DUE 2010, SERIES A
THIS DEBENTURE IS SUBJECT TO, AND IS TRANSFERABLE ONLY
UPON COMPLIANCE WITH, THE PROVISIONS OF THE INVESTORS
AGREEMENT DATED AS OF _________, 1998, AMONG THE
COMPANY AND APOLLO MANAGEMENT IV, L.P. A COPY
OF THE ABOVE-REFERENCED AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION
FROM REGISTRATION, UNDER SAID ACT.
No. [_____] [Date]
$[______]
FOR VALUE RECEIVED, the undersigned, BERLITZ INTERNATIONAL, INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of New York, hereby promises to pay to [_________________], or
registered assigns, the principal sum of [__________________] DOLLARS on [insert
twelfth anniversary of Issue Date], with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the
rate of 5% per annum from the date hereof, payable semiannually in cash, on
March 31 and September 30 of each year, commencing with the March 31 or
September 30 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment of principal and any overdue payment of interest, payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate equal to 7% per annum.
Payments of principal of and interest on this Debenture are to be made
in lawful money of the United States of America at the principal office of the
Company in Princeton, New Jersey or at such other place as the Company shall
have designated by written notice to the holder of this Debenture as provided in
the Purchase Agreement referred to below.
<PAGE>
Subject to and upon compliance with the provisions of the Purchase
Agreement (defined below), the holder of this Debenture is entitled, at his
option, at any time on or before the close of business on the twelfth
anniversary of the Issue Date, or in case this Debenture is called for
redemption, then in respect of this Debenture until and including, but (unless
the Company defaults in making the payment due upon redemption) not after, the
close of business on the Redemption Date, to convert this Debenture (or any
portion of the principal amount hereof), at the principal amount hereof, or of
such portion, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock of the Company at a
conversion price equal to $33.05 aggregate principal amount of Debentures for
each share of Common Stock (or at the current adjusted conversion price if an
adjustment has been made as provided in the Purchase Agreement) by surrender of
this Debenture, duly endorsed or assigned to the Company or in blank, to the
Company at its principal office in Princeton, New Jersey, accompanied by written
notice to the Company that the Holder hereof elects to convert this Debenture,
or if less than the entire principal amount hereof is to be converted, the
portion hereof to be converted, and, in case such surrender shall be made during
the period from the close of business on any Regular Record Date next preceding
any Interest Payment Date to the opening of business on such Interest Payment
Date (unless this Debenture of the portion hereof being converted has been
called for redemption on a Redemption Date within such period), also accompanied
by payment in immediately available funds of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this Debenture
then being converted. Subject to the aforesaid requirement for payment and, in
the case of a conversion after the Regular Record Date next preceding any
Interest Payment Date and on or before such Interest Payment Date, to the right
of the Holder of this Debenture (or any Predecessor Debenture) of record at such
Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Purchase Agreement), no payment or adjustment is to
be made on conversion for interest accrued hereon or for dividends on the Common
Stock issued on conversion. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the Purchase
Agreement. The conversion price is subject to adjustment as provided in the
Purchase Agreement. In
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addition, the Purchase Agreement provides that in case of certain consolidations
or mergers to which the Company is a party or the transfer of substantially all
of the assets of the Company, the Purchase Agreement shall be amended, without
the consent of any Holders of Debentures, so that this Debenture, if then
outstanding, will be convertible thereafter, during the period this Debenture
shall be convertible as specified above, only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger or
transfer by a holder of the number of shares (including fractional shares) of
Common Stock into which this Debenture might have been converted immediately
prior to such consolidation, merger or transfer (assuming such holder of Common
Stock failed to exercise any rights of election and received per share the kind
and amount received per share by a plurality of non-electing shares).
This Debenture is one of a series of Convertible Exchangeable
Subordinated Debentures due 2010, Series A (here in called the "Debentures")
issued pursuant to a Purchase Agreement, dated as of October 2, 1998 (as from
time to time amended, the "Purchase Agreement"), between the Company and the
purchaser named therein and is entitled to the benefits of the Purchase
Agreement. Each holder of this Debenture will be deemed, by its acceptance
hereof, to have made the representation set forth in Section 6.3 of the Purchase
Agreement. Capitalized terms used herein without definition have the meaning
assigned to them in the Purchase Agreement.
This Debenture is subordinated to the prior payment of the Senior
Obligations (as defined in the Purchase Agreement) to the extent and in the
manner set forth in the Purchase Agreement and by its acceptance hereof the
holder of this Debenture agrees to such subordination.
This Debenture is a registered Debenture and, as provided in the
Purchase Agreement, upon surrender of this Debenture for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Debenture or Debentures for a like principal amount
will be issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Debenture is registered as the owner hereof for the purpose of
receiving payment and for all other
-3-
<PAGE>
purposes, and the Company will not be affected by any notice to the contrary.
This Debenture is subject to redemption upon the terms set forth in the
Purchase Agreement.
If an Event of Default, as defined in the Purchase Agreement, occurs
and is continuing, the principal of this Debenture may be declared or otherwise
become due and payable in the manner, at the price and with the effect provided
in the Purchase Agreement.
By its acceptance hereof, the holder agrees to maintain the
confidentiality of certain information as and to the extent set forth in the
Purchase Agreement.
-4-
<PAGE>
THIS DEBENTURE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
BERLITZ INTERNATIONAL, INC.
By:_________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT 2
Debenture Purchase Commitments
Apollo Investment Fund IV, L.P. $94.91 million
Apollo Overseas Partners IV, L.P. $5.09 million
-6-
<PAGE>
Exhibit 4.4
FORM OF OPINION OF PAUL, WEISS,
RIFKIND, WHARTON & GARRISON
Exhibit 99.2
================================================================================
BERLITZ INTERNATIONAL, INC.
$55,000,000
5% Convertible Exchangeable Subordinated
Debentures due 2010, Series B
------------------
PURCHASE AGREEMENT
------------------
Dated as of October 2, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. AUTHORIZATION OF DEBENTURES............................................... 1
2. SALE AND PURCHASE OF DEBENTURES........................................... 1
3. CLOSING................................................................... 2
4. CONDITIONS TO CLOSING..................................................... 2
4.1 Representations and Warranties...................................... 2
4.2 Performance; No Default............................................. 2
4.3 Compliance Certificates............................................. 3
4.4 Opinions of Counsel................................................. 3
4.5 Purchase Permitted By Applicable Law, etc........................... 3
4.6 Shareholders Approval............................................... 3
4.7 Other Agreements.................................................... 3
4.8 Proceedings and Documents........................................... 4
4.9 Sale of Other Debentures............................................ 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 4
5.1 Organization; Power and Authority................................... 4
5.2 Authorization, etc.................................................. 4
5.3 Capitalization...................................................... 5
5.4 Organization and Ownership of Shares of Subsidiaries................ 5
5.5 Filed Documents and Financial Statements............................ 6
5.6 Compliance with Laws, Other Instruments, etc........................ 7
5.7 Governmental Authorizations, etc.................................... 8
5.8 Litigation; Observance of Statutes and Orders....................... 8
5.9 Taxes............................................................... 8
5.10 Title to Property; Leases........................................... 8
5.11 Licenses, Permits, etc.............................................. 9
5.12 Compliance with ERISA............................................... 9
5.13 Private Offering by the Company.....................................10
5.14 Use of Proceeds; Margin Regulations.................................10
5.15 Existing Indebtedness...............................................10
5.16 Status under Certain Statutes.......................................11
5.17 Swaps...............................................................11
5.18 Foreign Corrupt Practices Act.......................................11
5.19 No Brokers or Finders...............................................11
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5.20 Agreements Between Apollo and the Company...........................11
5.21 "Berlitz" Trademark.................................................12
6. REPRESENTATIONS OF THE PURCHASER..........................................12
6.1 Organization; Power and Authority...................................12
6.2 Authorization, etc..................................................12
6.3 Purchase for Investment.............................................13
7. INFORMATION AS TO COMPANY.................................................13
7.1 Financial and Business Information..................................13
7.2 Inspection..........................................................15
8. OPTIONAL REDEMPTION OF THE CONVERTIBLE
DEBENTURES................................................................16
8.1 Optional Redemption.................................................16
8.2 Election to Redeem; Notice to Holders...............................17
8.3 Debentures Payable on Redemption Date...............................17
9. CONVERSION OF CONVERTIBLE DEBENTURES......................................17
9.1 Conversion Privilege and Conversion Price...........................17
9.2 Exercise of Conversion Privilege....................................18
9.3 Fractions of Shares.................................................19
9.4 Adjustment of Conversion Price......................................19
9.5 Notice of Adjustments of Conversion Price...........................22
9.6 Notice of Certain Corporate Action..................................22
9.7 Company to Reserve Common Stock.....................................23
9.8 Taxes on Conversions................................................23
9.9 Covenant as to Common Stock.........................................24
9.10 Cancellation of Converted Debentures................................24
9.11 Provisions in Case of Consolidation, Merger or Sale of Assets.......24
10. EXCHANGE OF CONVERTIBLE DEBENTURES FOR FIXED RATE
DEBENTURES................................................................25
10.1 Election for Fixed Rate Debentures..................................25
10.2 Procedure for Exercising Option to Receive Fixed Rate Debentures
....................................................................25
10.3 Redemption of the Fixed Rate Debentures.............................26
10.4 Redemption Pursuant to the Other Purchase Agreement.................26
11. AFFIRMATIVE COVENANTS.....................................................26
11.1 Compliance with Law.................................................26
11.2 Insurance...........................................................27
11.3 Maintenance of Properties...........................................27
11.4 Payment of Taxes. ..................................................27
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11.5 Corporate Existence, etc............................................28
11.6 Repurchase of Debentures at the Option of the Holder Upon a
Change of Control...................................................28
12. NEGATIVE COVENANTS........................................................29
12.1 Merger, Consolidation, etc..........................................30
12.2 Forbearance from Restrictions on Rights of Holders of Convertible
Debentures..........................................................30
13. SUBORDINATION OF CONVERTIBLE DEBENTURES...................................30
14. EVENTS OF DEFAULT.........................................................33
15. REMEDIES ON DEFAULT, ETC..................................................35
15.1 Acceleration........................................................35
15.2 Other Remedies......................................................36
15.3 Rescission..........................................................36
15.4 No Waivers or Election of Remedies, Expenses, etc...................37
16. REGISTRATION; EXCHANGE; SUBSTITUTION OF
DEBENTURES................................................................37
16.1 Registration of Debentures..........................................37
16.2 Transfer and Exchange of Debentures.................................37
16.3 Replacement of Debentures...........................................38
17. PAYMENTS ON DEBENTURES....................................................38
17.1 Place of Payment....................................................38
17.2 Home Office Payment.................................................38
18. EXPENSES, ETC.............................................................39
18.1 Transaction Expenses................................................39
18.2 Survival............................................................39
19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.................................................................40
20. AMENDMENT AND WAIVER......................................................40
20.1 Requirements........................................................40
20.2 Solicitation of Holders of Debentures...............................40
20.3 Binding Effect, etc.................................................41
20.4 Debentures held by Company, etc.....................................41
21. NOTICES...................................................................41
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22. REPRODUCTION OF DOCUMENTS.................................................42
23. APPROVALS, ETC............................................................42
24. SUBSTITUTION OF PURCHASER.................................................43
25. MISCELLANEOUS.............................................................43
25.1 Successors and Assigns..............................................43
25.2 Payments Due on Non-Business Days...................................44
25.3 Severability........................................................44
25.4 Construction........................................................44
25.5 Counterparts........................................................44
25.6 Governing Law.......................................................44
25.7 Further Assurances..................................................45
25.8 Confidentiality.....................................................45
SCHEDULE A -- DEFINED TERMS
SCHEDULE 5.3 -- Capitalization
SCHEDULE 5.4 -- Subsidiaries
SCHEDULE 5.4(a)(i) -- Shares of Subsidiary Capital Stock Owned by
Nominees
SCHEDULE 5.4(a)(ii) -- Shares of Subsidiary Capital Stock Owned by
Third Parties
SCHEDULE 5.4(b) -- Liens on Certain Shares of Subsidiary Capital
Stock
SCHEDULE 5.4(c) -- Certain Items with respect to Berlitz Japan
SCHEDULE 5.4(d) -- Financial Statements of Berlitz Japan
SCHEDULE 5.5(b) -- Unaudited Interim Financial Statements of the
Company
SCHEDULE 5.5(c) -- Financial Projections of the Company
SCHEDULE 5.10 -- Property Liens
SCHEDULE 5.14 -- Use of Proceeds
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<PAGE>
SCHEDULE 5.17 -- Swaps
SCHEDULE 5.20(a) -- Agreements between Apollo and the Company
SCHEDULE 5.21 -- Berlitz Trademark
EXHIBIT 1 -- Form of 5% Convertible Exchangeable
Subordinated Debenture due 2010, Series B
EXHIBIT 4.4 -- Form of Opinion of Paul, Weiss, Rifkind, Wharton
& Garrison, special counsel for the Company
v
<PAGE>
Berlitz International, Inc.
400 Alexander Park
Princeton, New Jersey 08540-6306
5.00% Convertible Exchangeable Subordinated Debentures due 2010, Series B
as of October 2, 1998
Benesse Holdings International, Inc.
65 East 55th Street, 23rd Floor
New York, New York 10022
Ladies and Gentlemen:
Berlitz International, Inc., a New York corporation (the "COMPANY"),
agrees with you as follows:
1. AUTHORIZATION OF DEBENTURES.
The Company has authorized the issue and sale of $55,000,000 aggregate
principal amount of its 5% Convertible Exchangeable Subordinated Debentures due
2010, Series B (the "CONVERTIBLE DEBENTURES", and, together with any Fixed Rate
Debentures (as hereinafter defined) issued in exchange therefor pursuant to
Section 10 of this Agreement, the "DEBENTURES", any such term to include any
debentures issued in substitution therefor pursuant to Section 16 of this
Agreement). The Convertible Debentures shall be substantially in the form set
out in Exhibit 1, with such changes therefrom, if any, as may be approved by you
and the Company. Certain capitalized terms used in this Agreement are defined in
Schedule A; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF DEBENTURES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you, and you will purchase from the Company, at the Closing
provided for in Section 3, $55,000,000 aggregate principal amount of Convertible
Debentures at the purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company is entering
into a separate purchase agreement substantially similar to this Agreement
except for differences which have been notified to and approved by you (the
"OTHER PURCHASE AGREEMENT") with Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners IV, L.P. as represented by Apollo Management IV, L.P.
(collectively, "APOLLO") providing for the sale to and
<PAGE>
purchase by Apollo of $100,000,000 aggregate principal amount of another series
of the Company's debentures at the Closing. Your obligations hereunder and the
obligations of Apollo under the Other Purchase Agreement are several and not
joint agreements and you shall have no obligation under the Other Purchase
Agreement and no liability to any Person for the performance or non-performance
by Apollo thereunder.
3. CLOSING.
The sale and purchase of the Convertible Debentures to be purchased by
you and Apollo shall occur at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, New York 10004-2498, at 9:00 a.m., Eastern Standard Time, at a
closing (the "CLOSING") on the Business Day of or immediately following the
satisfaction of the conditions set forth in Section 4 (the "ISSUE DATE") or on
such other Business Day there after on or prior to March 31, 1999 as may be
agreed upon by the Company and you. At the Closing the Company will deliver to
you the Convertible Debentures to be pur chased by you in the form of a single
Convertible Debenture (or such greater number of Convertible Debentures in
denominations of at least $1,000,000 as you may request) dated the Issue Date
and registered in your name (or in the name of your nominee), against delivery
by you to the Company or its order of immediately available funds in the amount
of the purchase price therefor by wire transfer of immediately available funds
for the account of the Company to such bank account as the Company shall have
notified you in writing. If at the Closing the Company shall fail to tender such
Convertible Debentures to you as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Convertible Debentures to
be sold to you at the Closing is subject to the fulfillment or waiver, prior to
or at the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement and
the Other Agreements shall be correct in all material respects when made and at
the time of the Closing except where such representations and warranties
expressly relate to an earlier date.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it
2
<PAGE>
prior to or at the Closing and after giving effect to the issue and sale of the
Debentures (and the application of the proceeds thereof as contemplated by
Section 5.14) no Default or Event of Default shall have occurred and be
continuing.
4.3 COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you a
certificate of the Secretary of the Company certifying as to the resolutions
attached thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Debentures and this Agreement and the approval of
the issuance of debentures pursuant to the Other Purchase Agreement and of the
Debentures pursuant to this Agreement by shareholders of the Company.
4.4 OPINIONS OF COUNSEL.
You shall have received an opinion, dated the date of the Closing, from
Paul, Weiss, Rifkind, Wharton & Garrison, special counsel for the Company, in
the form set forth in Exhibit 4.4 (and the Company hereby instructs its special
counsel to deliver such opinion to you).
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Debentures shall (i) not
violate any applicable law or regulation (including, without limitation,
Regulation U, T or X of the Board of Governors of the Federal Reserve System)
and (ii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation.
4.6 SHAREHOLDERS APPROVAL.
The shareholders of the Company shall have approved the issuance of
debentures pursuant to the Other Purchase Agreement and of the Debentures
pursuant to this Agreement at the Company Shareholder Meeting.
4.7 OTHER AGREEMENTS.
The Other Agreements shall be in full force and effect and the Company
shall have delivered to you a true and complete copy of each Other Agreement.
3
<PAGE>
4.8 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and the Other Agreements and all documents and
instruments incident to such transactions shall be satisfactory to you and
Coudert Brothers, your special counsel, and you and your special counsel shall
have received all such counterpart originals or certified or other copies as you
or they may reasonably request of such documents.
4.9 SALE OF OTHER DEBENTURES.
Contemporaneously with the sale of Convertible Debentures to you, the
Company shall sell to Apollo under the Other Purchase Agreement $100,000,000
principal amount of the Company's 5% Convertible Exchangeables Subordinated
Debentures due 2010, Series A.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, and is duly qualified as
a foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement, the Other
Agreements and the Debentures and to perform the provisions hereof and thereof.
5.2 AUTHORIZATION, ETC.
This Agreement, the Other Agreements, and the Debentures have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Other
Agreement and Debenture will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The Common Stock issuable upon
4
<PAGE>
conversion of the Convertible Debentures has been duly authorized and reserved
for issuance and upon issuance upon conversion of the Convertible Debentures
will be validly issued, fully paid and nonassessable.
5.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the Company
consists of: (i) 40,000,000 shares of common stock, par value $.10 per share
("COMMON STOCK"), of which 9,529,788 shares are issued and outstanding and (ii)
180,000 shares of preferred stock, par value $1.00 per share ("PREFERRED
SHARES"), of which no shares are issued and outstanding. Of the authorized
Preferred Shares, 180,000 shares have been authorized as a separate series
designated as "7% Non-Cumulative Preferred Shares."
(b) The outstanding shares of Common Stock of the Company have been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, except as disclosed
in the previous paragraph and in Schedule 5.3, there are no other shares of
capital stock of the Company authorized and reserved for issuance and the
Company does not have any commitment to authorize, issue or sell any of its
capital stock or securities convertible into its capital stock. The number of
shares of Common Stock which are issuable and reserved for issuance upon
exercise of stock options of the Company as of the date hereof (and the exercise
price thereof) are disclosed in Schedule 5.3. The Company has no outstanding
securities convertible into capital stock of the Company.
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) The Company has disclosed in Schedule 5.4 a list of all its
Subsidiaries together with the jurisdiction of organization of each such
Subsidiary. All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary of the Company have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Subsidiary
(except for certain shares owned by nominees and third parties as disclosed on
Schedules 5.4(a)(i) and 5.4(a)(ii), respectively) free and clear of any Lien,
except for liens on certain Subsidiaries' shares as indicated on Schedule
5.4(b).
(b) Each Subsidiary of the Company is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Each such
Subsidiary has the corporate or other power and
5
<PAGE>
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(c) With respect to Berlitz Japan, Inc., formerly The Berlitz Schools
of Languages (Japan) Inc. ("BERLITZ JAPAN"), the Company has disclosed in
Schedule 5.4(c): (i) the formula for calculating the minority interest held by
Benesse Corporation, a Japanese corporation ("BENESSE CORPORATION") in Berlitz
Japan and the calculation for such minority interest for the four years ended
December 31, 1997; (ii) the formula for calculating royalty payments payable by
Berlitz Japan to the Company; and (iii) the amount of minority interest relating
to Berlitz Japan as of June 30, 1998, as reflected on the balance sheet of the
Company. The formula set forth in clauses (i) and (ii) may not be amended unless
approved by the disinterested directors of the Company's board of directors.
Benesse Corporation has no contractual or other right to receive a dividend or
other payment with respect to such minority interest without the approval of the
Board of Directors of Berlitz Japan. The only agreement or arrangement relating
to Benesse Corporation's rights as a shareholder of Berlitz Japan with respect
to Berlitz Japan is the Japan Shareholders Agreement.
(d) Berlitz Japan is the same subsidiary referred to in the Japan
Shareholders Agreement as The Berlitz Schools of Languages (Japan) Inc. The
operations of Berlitz Japan include instruction, translation and publishing
activities originating in Japan, and do not include any of the Company's
operations originating in non-Japan Asia. As of the date hereof, no agreements
or understandings exist which would require the Company to merge any future
acquisition made in Japan or in non-Japan Asia into Berlitz Japan, or which
would prohibit the Company from forming any additional subsidiaries with
operations in Japan or non-Japan Asia. The historical financial statements
provided to Benesse with respect to Berlitz Japan, included within the
information listed in Schedule 5.4(d), fairly present the operational results of
all of the operations included within Berlitz Japan and were prepared in all
material respects consistent with past accounting practices.
5.5 FILED DOCUMENTS AND FINANCIAL STATEMENTS.
(a) Each of the documents filed with the SEC since January 1, 1998
complied as to form in all material respects with all of the requirements of the
Securities Act or the Exchange Act, as applicable, and did not contain any
untrue statement of a material fact or omit to state any material fact required
to be contained therein or necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading. Any financial statements contained in such filings (including in
each case the related schedules and notes) fairly present in all material
respects the consolidated financial position of the Company and its Subsidiaries
as of the respective dates and the consolidated results of their operations and
cash flows for the respective periods and have been prepared in accordance with
GAAP consistently applied throughout the periods involved except as set forth in
the
6
<PAGE>
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments). Since December 31, 1997, there has been no change
in the financial condition, operations, business or properties of the Company or
any of its Subsidiaries except as disclosed in the Company's consolidated
financial statements prior to the date hereof or changes that individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect. Since October 2, 1998, the Company has conducted its business in the
usual, regular and ordinary course.
(b) The Company's unaudited interim financial statements, included in
the information listed in Schedule 5.5(b) and delivered to Benesse, were
prepared in all material respects on the same basis as the financial statements
contained in the documents filed with the SEC and fairly present the financial
position of the Company as of the dates referenced therein.
(c) The Company's financial projections, included in the information
listed in Schedule 5.5(c) and delivered to Benesse, were prepared in good faith
based on assumptions believed to have been reasonable at the time made and were
prepared in all material respects consistent with past accounting practices;
however, no representation or warranty is made with respect to actual financial
results which will vary and may vary materially from such projections.
5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Other Agreements and the Debentures will not (i) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any Subsidiary
under, any indenture, material mortgage, deed of trust, loan, credit agreement,
corporate charter or by-laws, or any other Material agreement, lease or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary, which
violation would reasonably be expected to have a Material Adverse Effect. No
representation or warranty is made with respect to the Company's agreement with
NationsBank, National Association, all amounts owing under which will be repaid
on or prior to the date of the Closing.
7
<PAGE>
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement, the Other
Agreements and the Debentures, except (i) the filing of a proxy statement with
the SEC in connection with the Company Shareholder Meeting and (ii) a filing
pursuant to the HSR Act as may be required in connection with the conversion of
the debentures issued under the Other Purchase Agreement.
5.8 LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to the knowl
edge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
5.9 TAXES.
The Company and its Subsidiaries have filed all income tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
payable by them, to the extent such taxes and assessments have become due and
payable and before they have become delinquent, except for any taxes and
assessments (i) the amount of which, or the failure to file with respect to
which, is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Federal income tax liabilities of the Company and its Subsidiaries have been
audited by the Internal Revenue Service and paid for all fiscal years up to and
including the fiscal year ended 1994.
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good title to their respective
properties, including all such properties reflected in the audited balance sheet
as of
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December 31, 1997 or purported to have been acquired by the Company or any
Subsid iary after said date (except as sold or otherwise disposed of), in each
case free and clear of Liens, except for those defects in title and Liens that,
individually or in the aggregate, would not have a Material Adverse Effect or as
otherwise set forth on Schedule 5.10. All Material leases are valid and
subsisting and are in full force and effect in all material respects.
5.11 LICENSES, PERMITS, ETC.
The Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that are Material, without conflict with the
rights of others, except for those conflicts that, individually or in the
aggregate, would not have a Material Adverse Effect.
5.12 COMPLIANCE WITH ERISA.
(a) The Company has operated and administered each Plan in substantial
compliance with all applicable laws. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax pro visions of the Code relating to employee benefit plans (as
defined in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that would reasonably be expected to result in the incurrence
of any such liability by the Company or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets of the Company
or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to
such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the
Code, other than such liabilities or Liens as would not be individually or in
the aggregate Material.
(b) The present value of the benefit liabilities under each of the
Plans subject to Title IV of ERISA (other than Multiemployer Plans), determined
as of the end of each such Plan's most recently ended plan year on the basis of
the actuarial as sumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the current value of the
assets of such Plan allocable to such benefit liabilities. The term "benefit
liabilities" has the meaning specified in section 4001 of ERISA and the terms
"current value" and "present value" have the meaning specified in section 3 of
ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under sec
tion 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually
or in the aggregate are Material.
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(d) The postretirement benefit obligation (determined as of the last
day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not expected to exceed
$1,750,000.
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Debentures or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than you and Apollo, each of which has been offered the
Debentures at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Debentures to the registration requirements of Section 5
of the Securities Act.
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will as promptly as practicable apply substantially all the
proceeds of the sale of the Convertible Debentures to retire existing
indebtedness in accordance with Schedule 5.14. No part of the proceeds from the
sale of the Convertible Debentures hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220).
5.15 EXISTING INDEBTEDNESS.
Neither the Company nor any Subsidiary is in default, and no waiver of
default is currently in effect, in the payment of any principal of or interest
on any Indebtedness of the Company or such Subsidiary in an aggregate principal
amount in excess of $3,000,000 and no event or condition exists with respect to
any such Indebted ness of the Company or any Subsidiary that would (i) permit
(or that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment or (ii) prevent the
Company or any Subsidiary from prepaying any such Indebtedness without
prepayment penalty or premium (except (A) for the Company's agreement with
NationsBank, National Association, all amounts owing under which will be repaid
on or prior to the date of the Closing, and (B) that a prepayment penalty or
premium might become payable in connection with any early termination of the
Company's Swaps).
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5.16 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.17 SWAPS.
The Company has listed on Schedule 5.17 all of the Swaps (and the value
of each such Swap) that either the Company or any of its Subsidiaries is
currently a party to. All of such Swaps have been entered into in connection
with the Company's existing and prior Indebtedness and not for speculative
purposes. Except as set forth on Schedule 5.17, the Company has not entered into
or otherwise effected or permitted to remain outstanding any Swap that is
intended to reduce the Company's exposure to fluctuations in foreign currency
exchange rates and interest rates.
5.18 FOREIGN CORRUPT PRACTICES ACT.
The Company is not in violation of Section 30A of the Exchange Act.
5.19 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker (other
than Goldman, Sachs & Co., as to whose fees and expenses the Company shall have
full responsibility and you shall have no responsibility) or other Person or
firm engaged by or acting on behalf of the Company or any Subsidiary in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
brokerage or finder's or similar fee or other commission as a result of this
Agreement or such transactions. A true and correct copy of the engagement letter
with Goldman, Sachs & Co. has been provided to you.
5.20 AGREEMENTS BETWEEN APOLLO AND THE COMPANY.
Except for the Other Agreements to which Apollo is or will be a party
and the agreements described in Schedule 5.20(a), a true and complete copy of
each of which has been delivered to you, no agreements or understandings exist
between the Company and Apollo or any Affiliate of Apollo or will be entered
into by the Company with Apollo or any Affiliate of Apollo in connection with
the transactions contemplated in this Agreement and the Other Agreements.
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5.21 "BERLITZ" TRADEMARK.
Except as disclosed in Schedule 5.21 hereto or as would not be expected
to have a Material Adverse Effect, the Company has valid title and ownership of,
and has properly registered the "Berlitz" trademark, and use of such trademark
in the Company's business as now conducted or as currently proposed to be
conducted causes no conflict with or infringement of the rights of others.
Except as disclosed in Schedule 5.21, neither the Company nor any Subsidiary has
received any written notice challenging the Company's rights or making any other
claim with respect to the "Berlitz" trademark or is aware of any such threatened
challenge or claim; and such trademark is free and clear of any Liens except as
disclosed in Schedule 5.21.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 ORGANIZATION; POWER AND AUTHORITY.
You represent that you are a corporation duly organized, validly
existing and good standing under the laws of the State of Delaware, and are duly
qualified and in good standing in each jurisdiction in which such qualification
is required by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on your ability to
perform your obligations under the Agreement and the Other Agreements to which
you are or become a party, or the validity or enforceability of this Agreement
or the Other Agreements to which you are or become a party. You represent that
you have the organizational power and authority to transact the business you
transact and propose to transact, to execute and deliver this Agreement and the
Other Agreements to which you are or become a party and to perform the
provisions hereof and thereof.
6.2 AUTHORIZATION, ETC.
You represent that this Agreement and the Other Agreements to which you
are or become a party have been duly authorized by all necessary organizational
action on the part of you, and this Agreement and the Other Agreements to which
you are or become a party constitute and, upon execution and delivery by the
Company of such Agreements, will constitute, legal, valid and binding
obligations of you enforceable against you in accordance with their terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
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6.3 PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Debentures for your own
account and not with a view to the distribution thereof, provided that the
disposition of your property shall at all times be within your control. You
understand that the Debentures have not been registered under the Securities Act
and may be resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from regis tration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Debentures.
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Debentures or, in the case
of clause (a) below, to each holder of a minimum of $10,000,000 in principal
amount of the Convertible Debentures:
(a) Monthly Statements --
(i) within 15 days after the end of each month, duplicate
copies of preliminary flash financial reports prepared monthly in the
normal course of business for Company management and/or the board of
directors with respect to the Company's operations by region and
business segment, and
(ii) within 30 days after the end of each month, duplicate
copies of operational summaries prepared monthly in the normal course
of business for Company management and/or the board of directors with
respect to the Company's regional and geographical results of
operations;
(b) Quarterly Statements -- within 45 days after the end of each quar
terly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter,
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setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the SEC
shall be deemed to satisfy the requirements of this Section 7.1(b);
(c) Annual Statements -- within 90 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accom panied by an opinion thereon of independent certified public accountants
of recog nized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations and cash flows
and have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, provided that
the Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and sent to shareholders with the annual proxy statement and filed with the SEC
shall be deemed to satisfy the requirements of this Section 7.1(c);
(d) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement sent
by the Company or any Subsidiary to public securities holders generally, and
(ii) each regular or periodic report, each registration statement that shall
have become effective (without exhibits except as expressly requested by such
holder), and each final prospectus and all amendments thereto filed by the
Company or any Subsidiary with the SEC;
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(e) Notice of Default or Event of Default -- promptly, and in any event
within five days after a Responsible Officer becoming aware of the existence of
any Default or Event of Default, a written notice specifying the nature and
period of existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within ten days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the institution of proceedings under section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) the incurrence of any liability by the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans,
or in the imposition of any Lien on any of the rights, properties or
assets of the Company or any ERISA Affiliate pursuant to Title I or IV
of ERISA or such penalty or excise tax provisions; and
(g) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its obligations under this
Agreement, the Other Agreements and the Debentures as from time to time may be
reasonably requested by any such holder of Debentures.
7.2 INSPECTION.
The Company shall permit the representatives of each holder of a
minimum of $10,000,000 in principal amount of Convertible Debentures:
(a) No Default -- if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to visit
the principal executive office of the Company, to discuss the affairs, finances
and
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accounts of the Company and its Subsidiaries with the Company's officers, and
with the consent of the Company (which consent will not be unreasonably
withheld) to visit the other offices and properties of the Company and each
Significant Subsidiary, all at such reasonable times and as often as may be
reason ably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or properties of
the Company or any Significant Subsidiary, to examine all their respective books
of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Significant Subsidiaries), all at
such times and as often as may be requested.
8. OPTIONAL REDEMPTION OF THE CONVERTIBLE DEBENTURES.
8.1 OPTIONAL REDEMPTION.
If for the 30 trading days following the third anniversary of the Issue
Date the average of the closing prices of the Company's Common Stock on the New
York Stock Exchange exceeds 120.0% of the Conversion Price, the Company may, at
any time after the 60th trading day after the third anniversary of the Issue
Date, subject to any holder's right to first convert Convertible Debentures into
Common Stock, redeem the Convertible Debentures in whole, but not in part, at a
redemption price equal to 100.0% of the principal amount of such Convertible
Debentures, together with accrued interest to the Redemption Date. In addition,
if for the 30 trading days following the third anniversary of the Issue Date the
average of the closing prices of the Company's Common Stock on the New York
Stock Exchange does not exceed 120.0% of the Conversion Price, the Company may,
at any time after the 60th trading day after the third anniversary of the Issue
Date, subject to any holder's right to first convert Convertible Debentures into
Common Stock, redeem the Convertible Debentures in whole, but not in part, at a
redemption price equal to (i) 104.0% of the principal amount of such Convertible
Debentures, if such redemption occurs during the period from the third
anniversary to and including the fourth anniversary of the Issue Date, (ii)
102.0% of the principal amount of such Convertible Debentures, if such
redemption occurs during the period from the fourth anniversary to and including
the fifth anniversary of the Issue Date, and (iii) 100.0% of the principal
amount of such Convertible Debentures, if such redemption occurs after the fifth
anniversary of the Issue Date, in each case together with accrued interest to
the Redemption Date.
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8.2 ELECTION TO REDEEM; NOTICE TO HOLDERS.
The Company shall give each holder of Convertible Debentures written
notice of an optional redemption pursuant to Section 8.1 or Section 10.3 hereof
not less than 30 days prior to the date fixed for such redemption (the
"REDEMPTION DATE"), specifying the Redemption Date and the redemption price
applicable to such redemption. During such 30 day period, in the case of a
Redemption pursuant to Section 8.1 only, a holder of Convertible Debentures may
inform the Company of the intent to exercise the holder's right to convert
Convertible Debentures into Common Stock. If such notice is given, the
conversion of the Convertible Debentures will be carried out in accordance with
the provisions of Section 9 of this Agreement.
8.3 DEBENTURES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given, the Convertible Debentures
shall, on the date fixed for such redemption, become due and payable at the
applicable price therein specified, and from and after such date (unless the
Company shall default in the payment of such price and accrued interest) such
Convertible Debentures shall cease to bear interest. The amount to be paid in
respect of each such Convertible Debenture shall be paid by the Company at such
price together with accrued interest to such date; provided, however, that
installments of interest due on or prior to such date shall be payable to the
holders of such Convertible Debentures or portions registered at the close of
business on the relevant record dates according to their terms. If the amount
payable in respect of any Convertible Debenture selected for redemption shall
not be so paid or made available for payment, the unpaid amount shall, until
paid, bear interest from the date fixed for such redemption at 7.0% per annum.
The Company will promptly cancel all Debentures redeemed by it and no Debentures
may be issued in substitution or exchange for any such Convertible Debentures.
9. CONVERSION OF CONVERTIBLE DEBENTURES.
9.1 CONVERSION PRIVILEGE AND CONVERSION PRICE.
Subject to and upon compliance with the provisions of this Section, at
the option of the holder thereof, any Convertible Debenture or any portion of
the principal amount thereof may be converted into fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100 of a share) of the
Common Stock of the Company, at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. Such conversion right shall
expire at the close of business on the twelfth anniversary of the Issue Date. In
case the Convertible Debentures are called for redemption, such conversion right
in respect of the Convertible Debentures shall expire at the close of business
on the Redemption Date, unless (i) notice of conversion under Section 9.2 has
been given prior to such time, or (ii) the Company defaults in making the
payment due upon redemption. In the event any Convertible Debentures are
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exchanged for Fixed Rate Debentures, such conversion right shall expire upon
such exchange.
The price at which shares of Common Stock shall be delivered upon
conversion shall be initially $33.05 per share of Common Stock (the "CONVERSION
PRICE"). The Conversion Price shall be adjusted in certain instances as provided
in paragraphs (a) through (g) of Section 9.4.
In the case of any Convertible Debenture which is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment Date
(other than any Debenture whose maturity is prior to such Interest Payment
Date), interest that is due on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Debenture is registered at the close of business on
such Regular Record Date. Except as otherwise expressly provided in the
immediately preceding sentence, in the case of any Convertible Debenture which
is converted, interest which would become payable on an Interest Payment Date
falling after the date of conversion of such Debenture shall not be payable.
9.2 EXERCISE OF CONVERSION PRIVILEGE.
The holder of any Convertible Debenture wishing to exercise the
conversion privilege shall give the Company irrevocable written notice of such
election at least 20 days prior to the Business Day designated in such notice as
the date of conversion (the "CONVERSION DATE"). Such notice shall also specify
the principal amount of Convertible Debentures to be converted. Within seven
days of receipt of any such notice, the Company shall give to all other
registered holders of Convertible Debentures and all registered holders of
convertible debentures issued under the Other Purchase Agreement written notice
of the receipt and contents of such notice of conversion. All such holders of
Convertible Debentures and such other convertible debentures shall have the
right, exercisable by written notice to the Company within 12 days of receipt of
such notice from the Company, to convert on the Conversion Date any or all of
the Convertible Debentures or such other convertible debentures held by them.
The holder of any Convertible Debenture to be converted shall, on or before the
Conversion Date, surrender such Convertible Debenture, duly endorsed or assigned
to the Company or in blank, at the principal executive office of the Company.
Convertible Debentures converted during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date shall (except in the case of
Convertible Debentures or portions thereof which have been called for redemption
on a Redemption Date within such period) be accompanied by payment in
immediately available funds or other funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Convertible Debentures being surrendered for conversion.
Except as provided in the preceding sentence and subject to the third paragraph
of Section 9.1, no payment
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or adjustment shall be made upon any conversion on account of any interest
accrued on the Convertible Debentures surrendered for conversion or on account
of any dividends on the Common Stock issued upon conversion.
Convertible Debentures shall be deemed to have been converted
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holders of such Convertible Debentures as holders shall
cease, and the Person or Persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on or
after the Conversion Date, the Company shall issue and shall deliver at such
office or agency a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in Section 9.3.
In the case of any Convertible Debenture which is converted in part
only, upon such conversion the Company shall execute and deliver to the holder
thereof, at the expense of the Company, a new Convertible Debenture or
Debentures of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Convertible Debenture.
9.3 FRACTIONS OF SHARES.
No fractional shares of Common Stock shall be issued upon conversion of
Convertible Debentures. If more than one Convertible Debenture shall be
surrendered for conversion at one time by the same holder, the number of full
shares which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Convertible Debentures (or
specified portions thereof) so converted. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any
Convertible Debenture or Convertible Debentures (or specified portions thereof),
the Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the market price per share of Common Stock (as
determined by the Board of Directors or in any manner prescribed by the Board of
Directors) at the close of business on the day of conversion.
9.4 ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or
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other distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such determination.
For the purposes of this paragraph, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
(b) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per share
(determined as provided in paragraph (f) of this Section) of the Common Stock on
the date fixed for the determination of stockholders entitled to receive such
rights or warrants, the Conversion Price in effect at the opening of business on
the day following the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights or warrants in respect of shares of Common Stock held
in the treasury of the Company. If any such rights or warrants shall expire
without having been exercised, the Conversion Price shall thereupon be
readjusted to eliminate the amount of its adjustment due to their issuance.
(c) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
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(d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (b) of this Section, any dividend or distribution paid in cash out of
the retained earnings of the Company and any dividend or distribution referred
to in paragraph (a) of this Section), the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph (f) of this Section) of the Common Stock on
the date fixed for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a board resolution delivered to each holder of Convertible
Debentures) of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution.
(e) The reclassification of Common Stock into securities including
other than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 9.11 applies) shall be deemed to involve (i) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within the meaning of
paragraph (d) of this Section), and (ii) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective' within the meaning of paragraph (c) of this Section).
(f) For the purpose of any computation under paragraphs (b) and (d) of
this Section, the current market price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 10
consecutive Business Days selected by the Company commencing not less than 10
nor more than 20 Business Days before the day in question. The closing price for
each day shall be the closing price for such day reported in the Wall Street
Journal or, if not so reported, the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the
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Common Stock is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on the National Association of
Securities Dealers Automated Quotations National Market System or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
or quoted on such National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that purpose.
(g) The Company may make such reductions in the Conversion Price, in
addition to those required by paragraphs (a), (b), (c) and (d) of this Section,
as it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients.
9.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price in
accordance with Section 9.4 and shall prepare a certificate signed by a Senior
Financial Officer of the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed at each office or agency maintained
for the purpose of conversion of Debentures pursuant to Section 16; and
(b) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be required, and as
soon as practicable after it is required, such notice shall be mailed by the
Company together with a copy of the certificate prepared in accordance with
Section 9.5(a) to all holders at their last addresses as they shall appear in
the Debenture Register.
9.6 NOTICE OF CERTAIN CORPORATE ACTION.
In case:
(a) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable otherwise than in cash out of its retained earnings; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company or of
any consolidation or merger to which the Company is a party and for which
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approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purposes of conversion of Debentures pursuant to Section 16, and shall cause
to be mailed to all holders at their last addresses as they shall appear in the
Debenture Register, at least 20 days (or 10 days in any case specified in clause
(a) or (b) above) prior to the applicable record or effective date hereinafter
specified, a notice describing such event in reasonable detail and stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.
9.7 COMPANY TO RESERVE COMMON STOCK.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Convertible Debentures, the full number
of shares of Common Stock then issuable upon the conversion of all outstanding
Convertible Debentures.
9.8 TAXES ON CONVERSIONS.
The Company will pay any and all transfer and stamp taxes that may be
payable in respect of the issue or delivery of shares of Common Stock on
conversion of Convertible Debentures pursuant hereto. The Company shall not,
however, be required to pay any income tax payable with respect to conversion of
Convertible Debentures or any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the holder of the Convertible Debenture or Convertible
Debentures to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such
tax has been paid.
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9.9 COVENANT AS TO COMMON STOCK.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Convertible Debentures will upon issue be fully paid
and nonassessable and, except as provided in Section 9.8, the Company will pay
all taxes, liens and charges with respect to the issue thereof.
9.10 CANCELLATION OF CONVERTED DEBENTURES.
All Convertible Debentures that are converted shall be delivered to and
canceled by the Company.
9.11 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any sale or transfer of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver a
supplement to this Agreement providing that the holder of each Convertible
Debenture then outstanding shall have the right thereafter, during the period
such Convertible Debenture shall be convertible as specified in Section 9.1, to
convert such Debenture only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares (including fractional shares) of Common Stock of
the Company into which such Debenture might have been converted immediately
prior to such consolidation, merger, sale or transfer, assuming such holder of
Common Stock of the Company (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be ("CONSTITUENT
PERSON"), or an Affiliate of a constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same for
each share of Common Stock of the Company held immediately prior to such
consolidation, merger, sale or transfer by others than a constituent Person or
an Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("NON-ELECTING SHARE"), then for the purpose of this Section
the kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such supplement to this Agreement shall provide for
adjustments which, for events subsequent to the effective date of the event
which triggers the requirement of such supplemental indenture, shall be as
nearly equivalent as
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may be practicable to the adjustments provided for in this Section 9. The above
provisions of this Section 9.11 shall similarly apply to successive
consolidations, mergers, sales or transfers.
10. EXCHANGE OF CONVERTIBLE DEBENTURES FOR FIXED RATE DEBENTURES.
10.1 ELECTION FOR FIXED RATE DEBENTURES.
If (i) for the 30 trading days immediately preceding the third
anniversary of the Issue Date, the average of the closing prices of the
Company's Common Stock on the New York Stock Exchange does not exceed the
Conversion Price and (ii) Apollo has elected to exchange its convertible
debentures issued under the Other Purchase Agreement for fixed rate debentures
under the similar provisions of the Other Purchase Agreement, Benesse may elect
to exchange its Convertible Debentures (when completed, the "EXCHANGE"), in
whole, into fixed-rate non-convertible debentures (the "FIXED RATE DEBENTURES")
with a principal amount equal to the principal amount of the Convertible
Debentures and with a maturity date on the seventh anniversary of the date of
the Exchange.
10.2 PROCEDURE FOR EXERCISING OPTION TO RECEIVE FIXED RATE DEBENTURES.
(a) Benesse may exercise its option to receive Fixed Rate Debentures by
delivering a preliminary written notice of exercise to the Company no later than
10 trading days following receipt by Benesse from the Company of notice of
Apollo's preliminary election to exchange its convertible debentures under the
Other Purchase Agreement.
(b) The interest rate for the Fixed Rate Debentures and the other terms
thereof (except for the principal amount) will be determined in accordance with
the applicable provisions of the Other Purchase Agreement and will be the same
as such terms in the fixed rate debentures issued under the Other Purchase
Agreement.
(c) The Company will advise Benesse of the interest rate applicable to
the Fixed Rate Debentures and the other terms thereof promptly after they are
determined in accordance with the Other Purchase Agreement, and will advise
Benesse whether Apollo has decided to complete the exchange after being informed
of such terms. Benesse may elect to proceed only if Apollo has elected to
proceed, and only if Benesse notifies the Company of its election within 10 days
of receipt of notice of Apollo's election to proceed. If both Apollo and Benesse
elect to proceed, such election becomes irrevocable and the Company, no later
than 150 days from the third anniversary of the Issue Date, shall at its option
either (i) redeem all the Convertible Debentures and the convertible debentures
issued under the Other Purchase Agreement at 100% of the principal amount
thereof plus accrued interest to the Redemption Date or (ii) deliver to
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Benesse and Apollo its duly executed Fixed Rate Debentures and a payment for
accrued interest on the Convertible Debentures and such other debentures to the
date of the Exchange.
(d) If the Exchange should occur, the Debentures will forfeit all
Common Stock conversion rights.
10.3 REDEMPTION OF THE FIXED RATE DEBENTURES.
Following the third anniversary of the Exchange, the Company may, in
whole, but not in part, redeem the Fixed Rate Debentures for a redemption price
equal to (i) the sum of 100% of the principal amount of such Fixed Rate
Debentures plus an additional percentage of the principal amount, such
percentage being 50% of the interest rate on such Fixed Rate Debentures, if such
redemption occurs during the period from the third anniversary of the Exchange
to and including the fourth anniversary of the Exchange, (ii) the sum of 100% of
the principal amount of such Fixed Rate Debentures plus an additional percentage
of the principal amount, such percentage being 25% of the interest rate on such
Fixed Rate Debentures, if such redemption occurs during the period from the
fourth anniversary to and including the fifth anniversary of the Exchange, and
(iii) 100% of the principal amount of such Fixed Rate Debentures, if such
redemption occurs after the fifth anniversary of the Exchange, in each case
together with accrued interest to the Redemption Date.
10.4 REDEMPTION PURSUANT TO THE OTHER PURCHASE AGREEMENT.
The Company shall not redeem the Fixed Rate Debentures or Convertible
Debentures pursuant to this Agreement unless the Company redeems the fixed rate
debentures or convertible debentures pursuant to the Other Purchase Agreement
and shall not redeem any fixed rate debentures or convertible debentures
pursuant to the Other Purchase Agreement unless the Company redeems the Fixed
Rate Debentures or Convertible Debentures pursuant to this Agreement.
11. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Convertible Debentures
are outstanding:
11.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is sub ject, including, without limitation, Environmental Laws, and will obtain
and maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their
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respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
11.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
11.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance would not, individually
or in the aggregate, have a Material Adverse Effect.
11.4 PAYMENT OF TAXES.
The Company will and will cause each of its Subsidiaries to file all
income tax or similar tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on such returns and
all other taxes, assessments, governmental charges, or levies payable by any of
them, to the extent such taxes and assessments have become due and payable and
before they have become delinquent, provided that neither the Company nor any
Subsidiary need pay any such tax or assessment if (i) the amount, applicability
or validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or such Subsidiary or (ii) the nonpayment of all such
taxes and assessments in the aggregate would not reasonably be expected to have
a Material Adverse Effect.
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11.5 CORPORATE EXISTENCE, ETC.
Except as provided in Section 12.1, the Company will at all times
preserve and keep in full force and effect its corporate existence. Subject to
Section 12.1, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries (unless merged or
consolidated into the Company or a Subsidiary) and all rights and franchises of
the Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and
effect such corporate existence, right or franchise would not, individually or
in the aggregate, have a Material Adverse Effect.
11.6 REPURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL.
(a) Upon the occurrence of a Change of Control or a Benesse Sale Event,
each holder of Debentures shall have the right, at such holder's option,
pursuant to an offer (subject only to conditions required by applicable law, if
any) by the Company (the "CHANGE OF CONTROL OFFER"), to require the Company to
repurchase for cash all or any part of such holder's Debentures (provided, that
the principal amount of such Debentures must be $1,000,000 or an integral
multiple thereof) on a date (the "CHANGE OF CONTROL PURCHASE DATE") that is no
later than 150 days after the occurrence of such Change of Control or Benesse
Sale Event, whichever it may be, at the Change of Control Purchase Price
specified below, plus accrued and unpaid interest to the Change of Control
Purchase Date. The Change of Control Offer shall be made within 15 business days
following a Change of Control or Benesse Sale Event, whichever it may be, and
shall remain open for 20 Business Days following its commencement (the "CHANGE
OF CONTROL OFFER PERIOD"). Upon expiration of the Change of Control Offer
Period, the Company promptly, but, in any event, no later than 150 days from the
Change of Control, shall purchase all Debentures properly tendered in response
to the Change of Control Offer.
(b) As used herein, a "CHANGE OF CONTROL" means:
(i) any merger or consolidation of the Company with or into
any Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Section 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than Benesse, Benesse Corporation or any of their
Affiliates (collectively, the "BENESSE GROUP"), is or becomes the
beneficial owner (as such term is used in Rule 13d-3 of the Exchange
Act or any successor provision thereto), directly or indirectly, of
more than 50% of the total voting power in the
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aggregate normally entitled to vote in the election of directors,
managers or trustees, as applicable, of the transferee(s) or surviving
entity or entities,
(ii) any "person" or "group" other than the Benesse Group,
becomes the beneficial owner, directly or indirectly, of more than 50%
of the total voting power in the aggregate of all classes of capital
stock of the Company then outstanding normally entitled to vote in
elections of directors, or
(iii) during any period of 12 consecutive months after the
Issue Date, individuals, together with successors selected by such
individuals, who at the beginning of any such 12-month period
constituted the Board of Directors of the Company cease for any reason
(other than a planned retirement) to constitute a majority of the Board
of Directors of the Company then in office, as applicable.
A "BENESSE SALE EVENT" means the sale by the Benesse Group of 80% or
more of the aggregate number of shares of Common Stock directly or indirectly
owned by the Benesse Group on the date of this Agreement.
The "CHANGE OF CONTROL PURCHASE PRICE" means 101% of the principal
amount of the Debentures.
(c) On or before the Change of Control Purchase Date, the Company will
(i) accept for payment Debentures or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) promptly pay the holders of Debentures so
accepted an amount equal to the Change of Control Purchase Price (together with
accrued and unpaid interest, if any), and (iii) authenticate and deliver to such
holders a new Debenture equal in principal amount to any unpurchased portion of
the Debenture surrendered. Any Debentures not so accepted will be delivered
promptly by the Company to the holder thereof.
(d) If the Change of Control Purchase Date hereunder is on or after a
Regular Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest due on such Interest Payment Date will be paid to
the Person in whose name a Debenture is registered at the close of business on
such Regular Record Date, and such interest will not be payable to holders who
tender the Debentures pursuant to such Change of Control Offer.
12. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Convertible Debentures
are outstanding:
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12.1 MERGER, CONSOLIDATION, ETC.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the case may
be, shall be a solvent corporation organized and existing under the laws of the
United States or any State thereof (including the District of Columbia), and, if
the Company is not such corporation, such corporation shall have executed and
delivered to each holder of any Convertible Debentures its assumption of the due
and punctual performance and observance of each covenant and condition of this
Agreement, the Other Agreements and the Convertible Debentures; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the
assets of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 12.1 from its liability under this Agreement, the
Other Agreements or the Convertible Debentures.
12.2 FORBEARANCE FROM RESTRICTIONS ON RIGHTS OF HOLDERS OF CONVERTIBLE
DEBENTURES.
The Company will not enter into any agreement or instrument or
otherwise agree to any covenant that would in any way limit the right of the
holders of the Convertible Debentures to convert the Convertible Debentures into
Common Stock or exchange the Convertible Debentures for Fixed Rate Debentures.
13. SUBORDINATION OF CONVERTIBLE DEBENTURES.
The Company covenants and agrees, and each holder of a Convertible
Debenture, by acceptance thereof, likewise covenants and agrees, (i) that, to
the extent and in the manner set forth in this Section 13, the Company's Senior
Obligations, if any, will be senior in right of payment to the Convertible
Debentures, and (ii) that the subordination provisions set forth in this Section
13 are, and are intended to be, an inducement and a consideration to each holder
of any Senior Obligation, whether such Senior Obligation was created or acquired
before or after the date of this Agreement, to acquire and continue to hold, or
to continue to hold, such Senior Obligation and such holder of Senior
Obligations shall be deemed conclusively to have relied on such subordination
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provisions in acquiring and continuing to hold, or continuing to hold, such
Senior Obligations.
(a) As used herein, "SENIOR IN RIGHT OF PAYMENT TO THE CONVERTIBLE
DEBENTURES" means that:
(i) no part of the Debt shall have any claim to the assets of
the Company on a parity with or prior to the claim of the Senior
Obligations; and
(ii) unless and until the Senior Obligations have been paid in
full, without the express prior written consent of all holders of such
Senior Obligations, no Holder will take, demand (including by means of
any legal action) or receive from the Company, and the Company will not
make, give or permit, directly or indirectly, by set-off, redemption,
purchase or in any other manner, any payment of or security for the
whole or any part of the Debt; provided, however, that (x) at any time,
the Company may make, and the Holders may receive, scheduled payments
on account of the Debt in accordance with the terms hereof, except if a
default in the performance or observance of any term or condition
relating to any Senior Obligations (other than a default in the payment
of any principal of, premium if any, or interest on the Senior
Obligations) has occurred and is continuing that permits the holders of
the Senior Obligations to declare such Senior Obligations to be due and
payable, the holders of Senior Obligations may give notice (a "Senior
Blockage Notice") to the Company (provided, however, no more than one
Senior Blockage Notice may be given during any 365 consecutive day
period) that until all Senior Obligations are paid in full, no
scheduled payments may be made by the Company on account of the Debt
during the period ("Senior Blockage Period") commencing on the date of
such Senior Blockage Notice and ending on the earliest of: (A) 189 days
after the date of such Senior Blockage Notice; (B) the date of such
default is cured or waived; and (C) the date that the holders of the
Senior Obligations shall have given notice to the Company of
termination of the Senior Blockage Period, and except when a default in
the payment of any principal of, premium if any, or interest on the
Senior Obligations has occurred and is continuing or would result
therefrom, (y) at any time permitted under Sections 10.1 and 10.2 the
Convertible Debentures may be exchanged for Fixed Rate Debentures or at
any time converted in accordance with the terms hereof, and (z) upon
the acceleration of the maturity of any Senior Obligations, the Holders
may accelerate the scheduled maturities of the Debt if and to the
extent permitted hereby at such time but such acceleration shall not
give any Holder any right to take, demand (including by means of any
legal action) or receive from the
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Company, or the Company the right to make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any other manner,
any payment of or security for the whole or any part of the Debt unless
and until the Senior Obligations have been paid in full.
(b) Any payment or distribution of assets of the Company, whether in
cash, property or securities, to which any Holder would be entitled except for
the provisions hereof, shall be paid or delivered by the Holder, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other
Person making such payment or distribution, to the holders of the Senior
Obligations or their representative, ratably in accordance with the amounts
thereof, to the extent necessary to pay in full all Senior Obligations, before
any payment or distribution shall be made to any Holder.
(c) The expressions "prior payment in full," "payment in full," "paid
in full" and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full in cash, in immediately
available funds, of all of the Senior Obligations and the expression "any
payment of or security for the whole or any part of the Debt" and any other
similar terms of phrases when used herein shall not be deemed to include a
payment or distribution of stock or securities of the Company provided for by a
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law or of any other corporation provided for by such plan
of reorganization or readjustment, which stock or securities are subordinated in
right of payment to all then outstanding Senior Obligations to substantially the
same extent as the Convertible Debentures are so subordinated as provided in
this Section 13. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of all or substantially all of its
properties and assets as an entirety to another Person upon the terms and
conditions set forth in Section 12.1 shall not be deemed a "proceeding" for the
purposes of this Section 13 if the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Section 12.1.
(d) If any payment or distribution, whether consisting of money,
property or securities, is collected or received by any Holder in respect of the
Debt, except payments permitted hereunder, such Holder forthwith shall deliver
the same to the holders of the Senior Obligations or their representative,
ratably in accordance with the amounts thereof, in the form received, duly
endorsed to such holders or representative, if required, to be applied to the
payment or prepayment of the Senior Obligations until the Senior Obligations are
paid in full. Until so delivered, such payment or distribution shall be held in
trust by such Holder as the property of such holders of Senior Obligations,
segregated from other funds and property held by the Holder.
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(e) As used herein, "SENIOR OBLIGATIONS" shall mean collectively the
unpaid principal of, premium, if any, and interest on (including, without
limitation, interest accruing after the maturity date of any Senior Obligation
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Company, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) all Indebtedness of the Company having an initial
principal amount in excess of $5,000,000, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter incurred, in each
case whether on account of principal, premium, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise which by its
express terms states it is a "Senior Obligation."
(f) As used herein, "DEBT" shall mean collectively the unpaid principal
of, premium, if any, and interest on (including, without limitation, interest
accruing after the maturity date of any Convertible Debenture and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Company,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Convertible Debentures, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, in each case whether on account of principal, premium, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise.
(g) Notwithstanding anything herein to the contrary, the 5% Convertible
Exchangeable Subordinated Debentures due 2010, Series A, of the Company, issued
to Apollo under the Other Purchase Agreement shall not be Senior Obligations and
such debentures shall rank in all respects PARI PASSU with the Convertible
Debentures.
14. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal of or premium
on any Debenture when the same becomes due and payable; or
(b) the Company defaults in the payment of any interest on any
Debenture for more than ten Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 12.1; or
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(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 14) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
default and (ii) the Company receiving written notice of such default from any
holder of a Debenture (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of Section 14); or
(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which made if
a date is specified, or as of Closing; or
(f) (i) the Company or any Significant Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is out
standing in an aggregate principal amount of at least $25,000,000 beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Significant Subsidiary is in default in the performance of or compliance with
any term of any evidence of any Indebtedness in an aggregate outstanding
principal amount of at least $25,000,000 or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and as a consequence
of such default or condition such Indebtedness has become, or has been declared
due and payable before its stated maturity or before its regularly scheduled
dates of payment; or
(g) the Company or any Significant Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any of its Significant
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization
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or any other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its Significant
Subsidiaries, or any such petition shall be filed against the Company or any of
its Significant Subsidiaries and such petition shall not be dismissed within 60
days; or
(i) a final judgment or judgments for the payment of money aggregating
in excess of $10,000,000 are rendered against one or more of the Company and its
Significant Subsidiaries and which judgments are not, within 60 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within 60 days after the expiration of such stay; or
(j) (i) with respect to any Plan, a prohibited transaction within the
meaning of Section 4975 of the Code or Section 406 of ERISA shall occur which
has a reasonable likelihood of resulting in direct or indirect liability to the
Company, (ii) with respect to any Plan subject to Title IV of ERISA, the filing
of a notice by the Company or an ERISA Affiliate to voluntarily terminate any
such Plan in a distress termination, (iii) with respect to any Multiemployer
Plan, the Company or any ERISA Affiliate shall incur any withdrawal liability in
excess of $50,000 or (iv) with respect to any Plan subject to Title IV of ERISA,
the Company or any ERISA Affiliate shall incur an accumulated funding deficiency
or request a funding waiver from the Internal Revenue Service, provided that an
event listed in clauses (i) through (iv) hereof shall constitute an Event of
Default only if it has a Material Adverse Effect.
15. REMEDIES ON DEFAULT, ETC.
15.1 ACCELERATION.
Subject to Section 13:
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 14 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Debentures then outstanding shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 50% in principal amount of the Debentures at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Debentures then outstanding to be immediately due
and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 14 has occurred and is continuing, any holder or holders of Debentures
at the time out-
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standing affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Debentures held by
it or them to be immediately due and payable.
Upon any Debentures becoming due and payable under this Section 15.1,
whether automatically or by declaration, such Debentures will forthwith mature
and the entire unpaid principal amount of such Debentures, plus all accrued and
unpaid interest thereon shall all be immediately due and payable, in each and
every case without present ment, demand, protest or further notice, all of which
are hereby waived.
15.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Debentures have become or have been declared
immediately due and payable under Section 15.1, the holders of 50% in principal
amount of the Debentures then outstanding may proceed to protect and enforce the
rights of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Debenture, or for an injunction against a violation of any of
the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
Notwithstanding the foregoing, the holder of any Debenture shall have
the right, which is absolute and unconditional, to receive payment of the
principal of, premium, if any, and interest on such Debenture and to institute
suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such holder.
15.3 RESCISSION.
At any time after any Debentures have been declared due and payable
pursuant to clause (b) of Section 15.1, the holders of not less than 25% in
principal amount of the Debentures then outstanding, by written notice to the
Company, may re scind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Debentures, all principal of
and premium, if any, on any Debentures that are due and payable other than by
reason of such declaration and are unpaid, and all interest on such overdue
principal and (to the extent permitted by applic able law) any overdue interest
in respect of the Debentures, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 20, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Debentures. No rescission and annulment
under this Section 15.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
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15.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Debenture in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Debenture upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 18,
the Company will pay to the holder of each Debenture on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 15, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
16. REGISTRATION; EXCHANGE; SUBSTITUTION OF DEBENTURES.
16.1 REGISTRATION OF DEBENTURES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Debentures (the "DEBENTURE
REGISTER"). The name and address of each holder of one or more Debentures, each
transfer thereof and the name and address of each transferee of one or more
Debentures shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Debenture shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary. The Company shall give to any holder of at least 5%
of the original aggregate principal amount ($55,000,000) of the Debentures,
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Debentures.
16.2 TRANSFER AND EXCHANGE OF DEBENTURES.
Upon surrender of any Debenture at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Debenture or its attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Debenture or part thereof), the
Company shall execute and deliver, at the Company's expense (except as provided
below), one or more new Debentures (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Debenture. Each such new Debenture shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit 1. Each such new Debenture shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered
Debenture or dated the date of the surrendered Debenture if no interest shall
have been paid thereon. The
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Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Debentures.
Debentures shall not be transferred in denominations of less than $1,000,000,
provided that if necessary to enable the registration of transfer by a holder of
its entire holding of Debentures, one Debenture may be in a denomination of less
than $1,000,000. Any transferee, by its acceptance of a Debenture registered in
its name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.3.
16.3 REPLACEMENT OF DEBENTURES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any
Debenture, and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it, or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Debenture, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Debenture or dated the
date of such lost, stolen, destroyed or mutilated Debenture if no interest shall
have been paid thereon.
17. PAYMENTS ON DEBENTURES.
17.1 PLACE OF PAYMENT.
Subject to Section 17.2, payments of principal and interest becoming
due and payable on the Debentures shall be made in Princeton, New Jersey, at the
principal office of the Company. The Company may at any time, by notice to each
holder of a Debenture, change the place of payment of the Debentures so long as
such place of payment shall be either the principal office of the Company in
such jurisdiction or the principal office of a bank or trust company in such
jurisdiction.
17.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the registered holder of any
Debenture, and notwithstanding anything contained in Section 17.1 or in such
Debenture to the contrary, the Company will pay all sums becoming due on such
Debenture for principal, premium, if any, and interest by the method and at the
address as you shall have from time to time specified to the Company in writing
for such purpose, without the presentation or surrender of such Debenture or the
making of any notation thereon, except that, in order to receive payment or
prepayment in full of any Debenture, you shall surrender such Debenture for
cancellation to the Company at its principal executive
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office or at the place of payment most recently designated by the Company
pursuant to Section 17.1. Prior to any sale or other disposition of any
Debenture held by you or your nominee you will, at your election, either endorse
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender such Debenture to the Company in exchange for
a new Debenture or Debentures pursuant to Section 16.2.
18. EXPENSES, ETC.
18.1 TRANSACTION EXPENSES.
The Company will pay all reasonable out-of-pocket fees and expenses
(including the fees and expenses of a special counsel and other representatives
engaged by you in connection with the transactions contemplated hereby) incurred
by you in connection with such transactions (up to a maximum amount of $100,000)
("TRANSACTION FEES") and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the Debentures (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement or the
Debentures or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Debentures,
or by reason of being a holder of any Debenture, (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or re structuring of the transactions contemplated hereby and by the
Debentures. The Company will pay, and will save you and each other holder of a
Debenture harmless from, all claims in respect of any fees, costs or expenses if
any, of brokers and finders (other than those retained by you), its investment
advisors, Goldman, Sachs & Co. and its counsel, Paul, Weiss, Rifkind, Wharton &
Garrison, and (c) any filing fees payable by the Company in connection with any
filings or submissions required under the HSR Act in connection with the
conversion of the Convertible Debentures. The Transaction Fees will be payable
only if one of the following occurs: (i) the transactions contemplated hereby
are consummated, or (ii) the Company is in material breach of this Agreement.
18.2 SURVIVAL.
The obligations of the Company under this Section 18 will survive the
payment or transfer of any Debenture, the enforcement, amendment or waiver of
any provision of this Agreement or the Debentures, and the termination of this
Agreement.
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19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Debentures, the purchase or
transfer by you of any Debenture or portion thereof or interest therein and the
payment of any Debenture, and may be relied upon by any subsequent holder of a
Debenture, regardless of any investigation made at any time by or on behalf of
you or any other holder of a Debenture. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Debentures embody the entire agreement and understanding between you and
the Company and supersede all prior agreements and understandings relating to
the subject matter hereof.
20. AMENDMENT AND WAIVER.
20.1 REQUIREMENTS.
This Agreement and the Debentures may be amended, and the observance of
any term hereof or of the Debentures may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Re quired Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5.14, 6 or 23 hereof, or any defined term (as
it is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Debenture at the time outstanding affected thereby, (i)
subject to the provisions of Section 15 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest on the Debentures, (ii) change the percentage of the principal amount
of the Debentures the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 9, 14(a), 14(b), 15, 20
or 23.
20.2 SOLICITATION OF HOLDERS OF DEBENTURES.
(a) Solicitation. The Company will provide each holder of the
Debentures (irrespective of the amount of Debentures then owned by it) with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the Debentures. The Company will deliver executed or
true and correct copies of each amendment, waiver or consent effected pursuant
to the provisions of this Section 20 to each holder of outstanding Debentures
promptly following the date on which it is
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executed and delivered by, or receives the consent or approval of, the requisite
holders of Debentures.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Debentures
as consideration for or as an inducement to the entering into by any holder of
Debentures of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Debentures then
outstanding that consent thereto.
20.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 20
applies equally to all holders of Debentures and is binding upon them and upon
each future holder of any Debenture and upon the Company without regard to
whether such Debenture has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Debenture nor any delay in exercising any rights hereunder or
under any Debenture shall operate as a waiver of any rights of any holder of
such Debenture. As used herein, the term "THIS AGREEMENT" and references thereto
shall mean this Agreement as it may from time to time be amended or
supplemented.
20.4 DEBENTURES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Debentures then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Debentures, or have directed the taking of any
action provided herein or in the Debentures to be taken upon the direction of
the holders of a specified percentage of the aggregate principal amount of
Debentures then outstanding, Debentures directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.
21. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
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(i) if to you or your nominee, to you or it at the address you
or it shall have specified to the Company in writing,
(ii) if to any other holder of any Debenture, to such holder
at such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Robert C. Hendon,
Jr., or at such other address as the Company shall have specified to
the holder of each Debenture in writing.
Notices under this Section 21 will be deemed given only when actually received.
22. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Debentures
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, micro film, microcard, miniature photographic or
other similar process and you may destroy any original document so reproduced.
The Company agrees and stipulates that, to the extent permitted by applicable
law, any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by you in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 22 shall not prohibit the Company or any other holder of Debentures from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
23. APPROVALS, ETC.
The Company shall take all action necessary, in accordance with
applicable law and its Certificate of Incorporation and By-laws, to convene a
meeting of its shareholders (the "COMPANY SHAREHOLDER MEETING") as promptly as
reasonably practicable after the date on which the definitive Company Proxy
Statement has been mailed to the Company's shareholders for the purpose of
considering and approving the issuance of Common Stock upon conversion of the
Debentures pursuant to this Agreement and the debentures issued pursuant to the
Other Purchase Agreement. Subject to the fiduciary duties of the Board of
Directors of the Company, the Board of Directors of the Company will recommend
that holders of Common Stock vote in favor of the approval of this Agreement at
the Company Shareholder Meeting.
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In connection with such meeting, the Company (i) will as promptly as
practicable prepare and file with the SEC, will use its best efforts to have
cleared by the SEC and will thereafter mail to its shareholders as promptly as
practicable the Company Proxy Statement and all other proxy materials for such
meeting, (ii) subject to the fiduciary duties of the Board of Directors of the
Company, will use its best efforts to obtain the necessary approvals by its
shareholders of this Agreement and the transactions contemplated hereby and
(iii) will otherwise comply with all legal requirements applicable to such
meeting. The Company will provide you with a copy of the preliminary proxy
statement and all modifications thereto prior to filing or delivery to the SEC
and will consult with you in connection therewith. The Company will notify you
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Company
Proxy Statement or for additional information and will supply you with copies of
all written correspondence between the Company or any of its representatives, on
the one hand, and the SEC or its staff, on the other hand, with respect to the
Company Proxy Statement or this Agreement. If at any time prior to the Company
Shareholder Meeting there shall occur any event that should be set forth in an
amendment or supplement to the Company Proxy Statement, the Company will
promptly prepare and mail to its shareholders such an amendment or supplement.
24. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the pur chaser of the Debentures that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 24), such word shall be deemed to refer to such Affiliate in lieu
of you, provided, however, that substitution of your Affiliate shall not release
you from any liability under this Agreement. In the event that such Affiliate is
so substituted as a purchaser hereunder and such Affiliate thereafter transfers
to you all of the Debentures then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "you" is used in this
Agreement (other than in this Sec tion 24), such word shall no longer be deemed
to refer to such Affiliate, but shall refer to you, and you shall have all the
rights of an original holder of the Debentures under this Agreement.
25. MISCELLANEOUS.
25.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective
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successors and assigns (including, without limitation, any subsequent holder of
a Debenture) whether so expressed or not.
25.2 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Debentures to the contrary
notwithstanding, any payment of principal of or premium or interest on any
Debenture that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
25.3 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
25.4 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
25.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
25.6 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. All actions and proceedings
arising out of or relating to this Agreement shall be brought by the parties and
heard and determined only in a Federal or State court located in the Borough of
Manhattan in the City and State of New York and the parties hereto consent to
jurisdiction before and waive any objections to the venue of such New
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York and Federal courts. The parties hereto agree to accept service of process
in connection with any such action or proceeding in any manner permitted for a
notice hereunder.
25.7 FURTHER ASSURANCES.
Each party shall cooperate and take such action as may be reasonably
requested by the other party in order to carry out the provisions and purposes
of this Agreement. In that regard, the Company agrees to cooperate with you with
respect to any filing required pursuant to the HSR Act in connection with the
conversion of the Convertible Debentures.
25.8 CONFIDENTIALITY.
Each Holder, by its acceptance of its Debenture, agrees that it shall
use commercially reasonable efforts to hold in confidence all Confidential
Information contained herein or provided hereunder and shall use such
Confidential Information only to the extent required for the performance of this
Agreement and the transactions contemplated herein; provided, however, that
nothing in this Section 25.8 shall prevent any Holder or any of its affiliates
from delivering copies of Confidential Information and disclosing Confidential
Information to (i) its directors, officers, employees, similar representatives,
agents, affiliates and professional advisors who have been informed of the
confidentiality provisions set forth in this Section 25.8, (ii) any actual or
prospective transferee of Debentures or Converted Shares that is subject to
confidentiality arrangements substantially similar to this Section 25.8, (iii)
any Person from which you offer to purchase any security of the Company, if such
Person is subject to confidentiality arrangements substantially similar to this
Section 25.8, (iv) any Governmental Authority having jurisdiction over such
Holder and requesting such Confidential Information, (v) any other Person to
which such delivery or disclosure may be necessary or appropriate (a) in
compliance with any applicable law, rule, regulation or order, (b) in response
to any subpoena or other legal process, or (c) in connection with any litigation
to which the Holder is a party; provided, however, that, prior to any such
disclosure pursuant to clause (v)(b), the Holder shall use reasonable efforts to
permit the Company to provide information to the Person or party requesting the
Confidential Information. "CONFIDENTIAL INFORMATION" means information delivered
to you by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by or otherwise pursuant to this Agreement or the
Other Agreements that is confidential in nature and identified or understood
when received by you as being confidential information of the Company or any
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such disclosure or
which you would have received or had access to from the Company or a Subsidiary
absent this Agreement and the Other Agreements, (b) subsequently becomes
publicly known through no act or omission by you or any Person acting on your
behalf, (c) otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary, or (d) constitutes financial statements delivered to
you under Section 7.1 that are otherwise publicly available.
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Com pany, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
BERLITZ INTERNATIONAL, INC.
By: /s/ Hiromasa Yokoi
----------------------
Name: Hiromasa Yokoi
Title: Chairman, CEO & President
The foregoing is hereby
agreed to as of the
date thereof.
BENESSE HOLDINGS INTERNATIONAL, INC.
By: /s/ Mako Obara
- ------------------
Name: Mako Obara
Title: President & CEO
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SCHEDULE A
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"AGREEMENT" is defined in Section 20.3.
"APOLLO" is defined in Section 2.
"APOLLO PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
the date hereof between Apollo and the Company, pursuant to which Apollo has
agreed to purchase $100 million principal amount of Debentures.
"BENESSE" mean Benesse Holdings International, Inc., a Delaware
corporation.
"BENESSE CORPORATION" is defined in Section 5.4(c).
"BENESSE GROUP" is defined in Section 11.6.
"BENESSE SALE EVENT" is defined in Section 11.6.
"BERLITZ JAPAN" is defined in Section 5.4(c).
"BUSINESS DAY" means for the purposes of any provision of this
Agreement, any day other than a Saturday, a Sunday or a day on which commercial
banks in New York are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
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"CHANGE OF CONTROL" is defined in Section 11.6.
"CHANGE OF CONTROL OFFER" is defined in Section 11.6.
"CHANGE OF CONTROL OFFER PERIOD" is defined in Section 11.6.
"CHANGE OF CONTROL PURCHASE DATE" is defined in Section 11.6.
"CHANGE OF CONTROL PURCHASE PRICE" is defined in Section 11.6.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"COMMON STOCK" is defined in Section 5.3.
"COMPANY" means Berlitz International, Inc., a New York corporation.
"COMPANY SHAREHOLDER MEETING" is defined in Section 23.
"CONFIDENTIAL INFORMATION" is defined in Section 25.8.
"CONVERSION DATE" is defined in Section 9.2.
"CONVERSION PRICE" is defined in Section 9.1.
"CONVERTIBLE DEBENTURES" is defined in Section 1.
"DEBENTURE REGISTER" is defined in Section 16.1.
"DEBENTURES" is defined in Section 1.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is 2.0% per annum above
the rate of interest stated in clause (a) of the first paragraph of the
Debentures.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, per mits, concessions, grants, franchises, licenses, agreements or
governmental restrictions
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relating to pollution and the protection of the environment or the release of
any materials into the environment, including but not limited to those related
to hazardous substances or wastes, air emissions and discharges to waste or
public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not incor
porated) that is treated as a single employer together with the Company under
section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 14.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FIXED RATE DEBENTURE" is defined in Section 10.1.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Significant
Subsidiary conducts all or any part of its business, or which has
jurisdiction over any properties of the Company or any Significant
Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
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(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
indebtedness or obligation;
(c) to lease properties or to purchase properties or services primarily
for the purpose of assuring the owner of such indebtedness or obligation of the
ability of any other Person to make payment of the indebtedness or obligation;
or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HOLDER" or "HOLDER" means, with respect to any Debenture, the Person
in whose name such Debenture is registered in the register maintained by the
Company pursuant to Section 16.1.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any such
property);
(c) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with respect
to any property owned by such Person (whether or not it has assumed or otherwise
become liable for such liabilities);
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(e) all its liabilities in respect of letters of credit or instruments
serving a similar function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for borrowed
money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
"INTEREST PAYMENT DATE" means each March 31 and September 30.
"INVESTORS AGREEMENT" means the Investors Agreement, to be entered into
and dated as of the date hereof, between the Company and Apollo, as amended,
supplemented, changed or modified from time to time.
"ISSUE DATE" means the date of the Closing.
"JAPAN SHAREHOLDERS AGREEMENT" means the Shareholders' Agreement, dated
as of November 8, 1990 and amended as of January 29, 1993, among Berlitz
Languages, Inc., Benesse Corporation (then known as Fukutake Publishing Co.,
Ltd.) and the Company.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, or properties of the Company and its
Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
to perform its obliga tions under this Agreement, the Other Agreements and the
Debentures, or (c) the validity or enforceability of this Agreement, the Other
Agreements or the Debentures.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
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"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" means the Other Purchase Agreement, the Investors
Agreement, the Promissory Note, the Registration Rights Agreement and a
registration rights agreement between the Company and Apollo in substantially
the same form as the Registration Rights Agreement.
"OTHER PURCHASE AGREEMENT" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PREFERRED SHARES" is defined in Section 5.3.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corpo ration.
"PROMISSORY NOTE" means the Company's Subordinated Promissory Note in
the principal amount of $50,000,000 issued in favor of Benesse on the Closing
Date.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"REDEMPTION DATE" is defined in Section 8.2.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and Benesse, as
amended, supplemented, changed or modified from time to time.
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"REGULAR RECORD DATE" means the date that is fifteen days prior to an
Interest Payment Date.
"REDEMPTION DATE" is defined in Section 8.2.
"REQUIRED HOLDERS" means, at any time, the holders of at least 50% in
principal amount of the Debentures at the time outstanding (exclusive of
Debentures then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary that would at
such time constitute a "significant subsidiary" (as such term is defined in
Regulation S-X of the Securities and Exchange Commission as in effect on the
date of the Closing) of the Company.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Sub sidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at
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the end of such fiscal quarter, and in making such determination, if any
agreement relating to such Swap provides for the netting of amounts payable by
and to such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so determined.
"VOTING AGREEMENT" means the Voting Agreement, dated as of the date
hereof, between Apollo and Benesse Corporation, as amended, supplemented,
changed or modified from time to time.
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EXHIBIT 1
[FORM OF DEBENTURE]
BERLITZ INTERNATIONAL, INC.
5% CONVERTIBLE EXCHANGEABLE SUBORDINATED DEBENTURE
DUE 2010, SERIES B
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION
FROM REGISTRATION, UNDER SAID ACT.
No. [_____] [Date]
$[_______]
FOR VALUE RECEIVED, the undersigned, BERLITZ INTERNATIONAL, INC.
(herein called the "COMPANY"), a corporation organized and existing under the
laws of the State of New York, hereby promises to pay to [_________________], or
registered assigns, the principal sum of [____________] DOLLARS on [insert
twelfth anniversary of Issue Date], with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the
rate of 5% per annum from the date hereof, payable semiannually in cash, on
March 31 and September 30 of each year, commencing with the March 31 or
September 30 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) to the extent permitted by law on any
overdue payment of principal and any overdue payment of interest payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate equal to 7% per annum.
Payments of principal of and interest on this Debenture are to be made
in lawful money of the United States of America at the principal office of the
Company in Princeton, New Jersey or at such other place as the Company shall
have designated by written notice to the holder of this Debenture as provided in
the Purchase Agreement referred to below.
Subject to and upon compliance with the provisions of the Purchase
Agreement (defined below), the holder of this Debenture is entitled, at its
option, at any time on or before the close of business on the twelfth
anniversary of the Issue Date, or in case this Debenture is called for
redemption, then in respect of this Debenture until and including, but (unless
the Company defaults in making the payment due upon redemption) not after, the
close of business on the Redemption Date, to convert this
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Debenture (or any portion of the principal amount hereof), at the principal
amount hereof, or of such portion, into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock of the Company at a conversion price equal to $33.05 aggregate principal
amount of Debentures for each share of Common Stock (or at the current adjusted
conversion price if an adjustment has been made as provided in the Purchase
Agreement) by surrender of this Debenture, duly endorsed or assigned to the
Company or in blank, to the Company at its principal office in Princeton, New
Jersey, accompanied by written notice to the Company that the Holder hereof
elects to convert this Debenture, or if less than the entire principal amount
hereof is to be converted, the portion hereof to be converted, and, in case such
surrender shall be made during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date (unless this Debenture of the portion
hereof being converted has been called for redemption on a Redemption Date
within such period), also accompanied by payment in immediately available funds
of an amount equal to the interest payable on such Interest Payment Date on the
principal amount of this Debenture then being converted. Subject to the
aforesaid requirement for payment and, in the case of a conversion after the
Regular Record Date next preceding any Interest Payment Date and on or before
such Interest Payment Date, to the right of the Holder of this Debenture (or any
Predecessor Debenture) of record at such Regular Record Date to receive an
installment of interest (with certain exceptions provided in the Purchase
Agreement), no payment or adjustment is to be made on conversion for interest
accrued hereon or for dividends on the Common Stock issued on conversion. No
fractions of shares or scrip representing fractions of shares will be issued on
conversion, but instead of any fractional interest the Company shall pay a cash
adjustment as provided in the Purchase Agreement. The conversion price is
subject to adjustment as provided in the Purchase Agreement. In addition, the
Purchase Agreement provides that in case of certain consolidations or mergers to
which the Company is a party or the transfer of substantially all of the assets
of the Company, the Purchase Agreement shall be amended, without the consent of
any Holders of Debentures, so that this Debenture, if then outstanding, will be
convertible thereafter, during the period this Debenture shall be convertible as
specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares (including fractional shares) of Common Stock into which
this Debenture might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares).
This Debenture is one of a series of Convertible Exchangeable
Subordinated Debentures due 2010, Series B (herein called the "DEBENTURES")
issued pursuant to a Purchase Agreement dated as of October 2, 1998 (as from
time to time amended, the "PURCHASE AGREEMENT"), between the Company and the
purchaser named therein, and is entitled to the benefits of the Purchase
Agreement. Each holder of this Debenture will be deemed, by its acceptance
hereof, to have made the representation set
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forth in Section 6.3 of the Purchase Agreement. Capitalized terms used herein
without definition have the meaning assigned to them in the Purchase Agreement.
This Debenture is subordinated to the prior payment of the Senior
Obligations (as defined in the Purchase Agreement) to the extent and in the
manner set forth in the Purchase Agreement and by its acceptance hereof the
holder of this Debenture agrees to such subordination.
This Debenture is a registered Debenture and, as provided in the
Purchase Agreement, upon surrender of this Debenture for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Debenture or Debentures for a like principal amount
will be issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Debenture is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
This Debenture is subject to redemption upon the terms set forth in the
Purchase Agreement.
If an Event of Default, as defined in the Purchase Agreement, occurs
and is continuing, the principal of this Debenture may be declared or otherwise
become due and payable in the manner, at the price and with the effect provided
in the Purchase Agreement.
By its acceptance hereof, the holder agrees to maintain the
confidentiality of certain information as and to the extent provided in the
Purchase Agreement.
THIS DEBENTURE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
BERLITZ INTERNATIONAL, INC.
By: _________________________
Name:
Title:
3
Exhibit 99.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 2, 1998 (this
"Agreement"), between Berlitz International, Inc., a New York corporation
("Company"), and Apollo Management IV, L.P., a Delaware limited partnership on
behalf of Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
(collectively, "Investor").
WHEREAS, Investor and the Company have entered into a Purchase
Agreement, dated as of October 2, 1998 (the "Purchase Agreement"), pursuant to
which Investor will purchase $100,000,000 aggregate principal amount of
convertible exchangeable debentures due 2010, Series A (the "Debentures") of the
Company; and
WHEREAS, pursuant to the terms and conditions of the Debentures, such
Debentures may be convertible at any time at the option of the holder, in part
or in whole, into shares (the "Common Shares") of common stock of the Company,
par value $.10 per share (the "Common Stock").
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein and for other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
I. Securities Subject to this Agreement
(i) Definitions. The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any successor or assignee
thereof.
The term "Issue Date" means the date of original issuance of the
Debentures.
The terms "Registrable Securities" and "Restricted Securities" shall
each refer to the Common Shares and any shares of Common Stock issued in respect
of the Common Shares, whether by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization.
(ii) Restricted Securities. For the purposes of this Agreement,
Restricted Securities will cease to be Restricted Securities when (i) a
registration statement filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), covering such Restricted Securities
<PAGE>
2
has been declared effective and they have been disposed of pursuant to such
effective registration statement, or (ii) such Restricted Securities have been
sold pursuant to Rule 144 under the Securities Act.
(iii) Registrable Securities. Registrable Securities will cease to be
Registrable Securities when they cease to be Restricted Securities.
II. Demand Registration. Commencing on the second anniversary of the
Issue Date, in addition to any other rights of the Holders, upon written request
by the Holders of at least 50% of the Registrable Securities then outstanding
(the "Demanding Holders") to the Company that the Company effect a registration
of any or all of the Registrable Securities and specifying the intended method
of disposition thereof, the amount of the Registrable Securities proposed to be
sold and the jurisdiction (if known) in which registration is desired (a "Demand
Registration"), such demands to be given on not more than two (2) separate
occasions (but in no event shall the Company be required to effect more than one
Demand Registration in any nine-month period), then the Company will (i)
promptly notify all other Holders of Registrable Securities and (ii) use its
reasonable best efforts to effect the registration under the Securities Act of
the Registrable Securities which the Company has been so requested to register
by such Holders for disposition, in accordance with the intended method of
disposition stated in such request, within ninety (90) days of the request
therefor. All Holders who are not Demanding Holders shall be entitled to
participate in such offering in accordance with the terms hereof if they so
notify the Company of their desire to do so, specifying the amount of
Registrable Securities they wish to include, within 15 days of receipt of notice
from the Company. If any registration statement relating to any such
registration is not declared effective, such registration shall not count
towards the limit set forth in this paragraph. The Demanding Holders shall have
the right to designate the managing underwriters for any underwritten offering
pursuant to a Demand Registration, which underwriters shall be reasonably
acceptable to the Company.
The Company shall be entitled to include in any Demand Registration
authorized but unissued shares of Common Stock, shares of Common Stock held by
the Company as treasury stock and shares of Common Stock held by other
shareholders. Notwithstanding the foregoing, if the
<PAGE>
3
managing underwriter or underwriters of such offering determine in good faith
that the total amount of Registrable Securities and shares of Common Stock
requested to be included in such offering would adversely affect the success of
such offering, then the number of shares of Common Stock to be offered for the
account of the Demanding Holders and any other selling shareholder and the
number of shares of Common Stock to be offered by the Company to the public
shall each be reduced, to the extent necessary to reduce the total amount of
shares to be included in such offering to the amount recommended by such
managing underwriter or underwriters, in the following order of priority: first,
the shares of Common Stock proposed to be registered by any other selling
shareholders or Holders; second, the shares of Common Stock proposed to be
registered by the Company; and third, the shares of Registrable Securities
proposed to be registered by the Demanding Holders. If any of such categories is
to be reduced and consists of more than one shareholder, the part of the total
reduction to that category of shares imposed on each shareholder in that
category shall be in the same proportion that the total number of shares of
Common Stock held (including shares issuable upon conversion of convertible
debentures) by such shareholder bears to the total number of shares of Common
Stock held (including shares issuable upon conversion of convertible debentures)
by all shareholders in that category who sought to have shares registered. If
more than 50% of the shares requested to be registered by Demanding Holders in
such Demand Registration are not included in such Demand Registration as a
result of any reduction set forth in this paragraph, such Demand Registration
shall not count towards the limit set forth in the preceding paragraph.
Notwithstanding the foregoing, the Company shall have the right to
delay any registration of Registrable Securities requested pursuant to this
Section 2 for up to one hundred twenty (120) days if such registration would, in
the reasonable good faith judgment of the Company's Board of Directors,
substantially interfere with any material transaction being considered at the
time of receipt of the request.
III. Piggy-Back Registration
If at any time the Company proposes to file a registration statement
under the Securities Act with respect to an offering of Common Stock (other than
a registration statement on Form S-4 or S-8, or any form substituted therefor,
or filed in connection with an exchange offer or
<PAGE>
4
an offering of securities solely to the Company's existing stockholders) (the
"Piggy-Back Registration"), then the Company shall in each case give written
notice of such proposed filing to Investor as soon as practicable but in no
event less than 20 business days before the anticipated filing date, and such
notice shall offer Investor the opportunity to register such number of shares of
Registrable Securities as Investor may request. The Company shall permit
Investor, in the event Investor has given the Company notice (which may be given
by telephone, to be confirmed promptly in writing, or by facsimile) within 10
business days after receipt of such notice of its desire, to include any or all
of the Registrable Securities held by it in such offering on the same terms and
conditions as included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering determine in good faith that the
total amount of Registrable Securities and shares of Common Stock requested to
be included in such offering would adversely affect the success of such
offering, then the number of shares of Common Stock to be offered by the Company
to the public and the number of shares of Registrable Securities to be offered
for the account of Investor or any other Holder and the number of shares of
Common Stock to be offered for the account of any other selling shareholders
shall each be reduced to the extent necessary to reduce the total amount of
shares to be included in such offering to the amount recommended by such
managing underwriters, in the following order of priority: (i) if the offering
is a "Demand Registration" under the Registration Rights Agreement, dated the
date hereof, between the Company and Benesse Holdings International, Inc., then
in such order as in accordance with the provisions thereunder and (ii) in all
other instances, first, the shares of Registrable Securities proposed to be
registered by the Investor or Holders and the shares of Common Stock proposed to
be registered by any other selling stockholders, on a pro rata basis; and
second, the shares of Common Stock proposed to be registered by the Company. If
any of such categories is to be reduced and consists of more than one
shareholder, the part of the total reduction to that category of shares imposed
on each shareholder in that category shall be in the same proportion that the
total number of shares of Common Stock held (including shares issuable upon
conversion of convertible debentures) by such shareholder bears to the total
number of shares of Common Stock held (including shares issuable upon conversion
of convertible debentures) by all shareholders in that category who sought to
have shares registered. In the event that the contemplated distribution does not
involve an underwritten
<PAGE>
5
public offering, such determination that the inclusion of such Registrable
Securities shall adversely affect the success of the offering shall be made in
reasonable good faith by the Board of Directors of the Company.
No registration effected under this Section 3, and no failure to effect
a registration under this Section 3, shall relieve the Company of its obligation
to effect a registration upon the request of Demanding Holders pursuant to
Section 2. No failure to effect a registration under this Section 3 or under
Section 2 and to complete the sale of Registrable Securities in connection
therewith shall relieve the Company of any other obligation under this
Agreement, including without limitation, the Company's obligations under
Sections 6 and 7.
IV. Holdback Agreement
If reasonably requested by the managing underwriter or underwriters for
any public offering of Registrable Securities being made pursuant to a
registration statement relating to a Demand Registration or a Piggy-Back
Registration (the "Registration Statement"), the Company will (i) not publicly
sell or distribute any securities similar to those being registered, or any
securities convertible into or exchangeable or exercisable for such securities
(other than any such sale or distribution of such securities in connection with
any merger or consolidation by the Company or any subsidiary thereof, or the
acquisition by the Company or a subsidiary thereof of the capital stock or
substantially all of the assets of any other person, or by reason of the
existence of previously issued and outstanding convertible securities, options
or warrants), during the time reasonably requested by the underwriter, not to
exceed 14 business days prior to, and during the 90-day period beginning on, the
effective date of any Registration Statement in which Investor is participating
or the commencement of a public distribution of the Registrable Securities
pursuant to such Registration Statement; provided, however, that in no event
shall this clause prevent the Company from selling or distributing any
securities registered under the Securities Act on Form S-4 or Form S-8 or any
successor form; and (ii) use reasonable efforts to cause each other holder of
privately placed securities similar to those being registered to agree not to
effect any public sale or distribution of any such securities during the periods
described in clause (i) above, in each case including a sale pursuant to Rule
144 under the
<PAGE>
6
Securities Act (except as part of any such registration, if permitted).
If requested by the managing underwriter or Underwriters for any public
offering of Registrable Securities being made pursuant to a Registration
Statement, the Investor will not publicly sell or distribute any Registrable
Securities or any securities convertible into or exchangeable or exercisable for
such securities, including a sale pursuant to Rule 144 under the Act, during the
time reasonably requested by the underwriter, not to exceed 14 business days
prior to, and during the 90-day period beginning on, the effective date of any
Registration Statement in which Investor is participating or the commencement of
a public distribution of the Registrable Securities pursuant to such
Registration Statement or other underwritten offering.
V. Registration Procedures
In connection with any sale of Registrable Securities pursuant to a
Registration Statement, the Company will as promptly as practicable:
(i) prepare and file with the Commission a Registration
Statement on the appropriate form under the Securities Act, which form
shall comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required by
the Commission to be filed therewith, and use its reasonable best
efforts to have such Registration Statement declared effective and
remain effective in accordance with the provisions of this Agreement;
provided, however, that, prior to filing a Registration Statement or
prospectus relating to Registrable Securities or any amendments or
supplements thereto, the Company shall (A) furnish to Investor,
Investor's counsel and the underwriters, if any, copies of all such
documents proposed to be filed and (B) provide Investor and Investor's
counsel with an adequate and appropriate opportunity to participate in
the preparation of such Registration Statement or prospectus relating
to Registrable Securities or any amendments or supplement thereto to be
filed with the Commission;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep such
<PAGE>
7
Registration Statement effective for as long as such registration is
required to remain effective pursuant to the terms hereof; shall cause
the prospectus contained in the Registration Statement to be
supplemented by any required prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities
Act; and shall comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition set forth
in such Registration Statement or supplement to the prospectus;
(iii) promptly notify Investor, counsel to Investor and any
underwriter and (if requested by any such person) confirm such notice
in writing, (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed and, with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective, (ii) of any request by the Commission or any
state securities authority for amendments and supplements to a
Registration Statement and prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the issuance
by any state securities commission or other regulatory authority of any
order suspending the qualification or exemption from qualification of
any of the Registrable Securities under state securities or "blue sky"
laws or the initiation of any proceedings for that purpose, and (v) if,
between the effective date of a Registration Statement and the closing
of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and
correct in all material respects;
(iv) use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement, and if one is
issued use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the
earliest possible moment;
<PAGE>
8
(v) if requested by the managing underwriter or underwriters,
if any, or by Investor or its counsel, incorporate in a prospectus
supplement or post-effective amendment such information as such
managing underwriter or underwriters request, or Investor's counsel
reasonably requests, to be included therein, including, without
limitation, with respect to the Registrable Securities being sold by
Investor to such underwriter or underwriters, the purchase price being
paid therefor by such underwriter or underwriters and with respect to
any other terms of an underwritten offering of the Registrable
Securities to be sold in such offering, and make all required filings
of such prospectus supplement or post-effective amendment;
(vi) cooperate with Investor and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery
of certificates (which shall not bear any restrictive legends unless
required under applicable law) representing securities sold under a
Registration Statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter
or underwriters, if any, or Investor may request and keep available and
make available to the Company's transfer agent or depositary prior to
the effectiveness of such Registration Statement a supply of such
certificates;
(vii) provide a CUSIP number for all Registrable Securities
covered by a Registration Statement not later than the effective date
of such Registration Statement;
(viii) cooperate with Investor and each underwriter
participating in the disposition of Registrable Securities and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. ("NASD");
(ix) during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents
required to be filed with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act");
(x) in connection with an underwritten offering, participate,
to the extent reasonably requested by the
<PAGE>
9
managing underwriter for the offering or Investor, in customary efforts
to sell the securities under the offering, including without
limitation, participating in "road shows";
(xi) use its reasonable best efforts to register or qualify
such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as Investor shall reasonably request, use
its reasonable best efforts to keep each such registration or
qualification (or exemption therefrom) effective during the period in
which the Registration Statement is required to be kept effective, and
do any and all other acts and things that may be reasonably necessary
or advisable to enable such sellers to consummate the disposition in
such jurisdictions of the Registrable Securities owned by Investor;
provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (k), (ii)
subject itself to general taxation in any such jurisdiction where it is
not then so subject, or (iii) consent to general service of process in
any such jurisdiction;
(xii) notify Investor at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
the Registration Statement contains an untrue statement of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly prepare and file with the
Commission a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(xiii) enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities (Investor may, at its
option, require that any or all of the representations, warranties and
covenants of the Company to or for the
<PAGE>
10
benefit of any underwriters also be made to and for the
benefit of Investor);
(xiv) make available for inspection by Investor, any
underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent
retained by the managing underwriter (collectively, the "Inspectors"),
all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspector in connection with the Registration Statement. Records
and other information that the Company determines, in good faith, to be
confidential shall be identified as confidential prior to delivery of
such records or information to the Inspectors, and if the Company so
notifies the Inspectors that such records and information are
confidential, such records and information shall not be disclosed by
the Inspectors unless (i) the disclosure of such Records in the opinion
of counsel reasonably acceptable to the Company is necessary to avoid
or correct a misstatement or omission in the Registration Statement or
(ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction; Investor agrees
that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential;
(xv) if the offering is an underwritten public offering, use
its best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as
Investor or the managing underwriter reasonably request;
(xvi) use its best efforts to obtain an opinion or opinions
from counsel for the Company in customary form and covering such
matters of the type customarily covered by opinions as Investor or the
managing underwriter reasonably request; and
<PAGE>
11
(xvii) otherwise comply with all applicable rules and
regulations of the Commission and any other governmental,
quasi-governmental or private body to which the Company or the
transactions contemplated by this Agreement is subject, and make
available to its security holders, as soon as reasonably practicable,
an earning statement, which earning statement shall satisfy the
provisions of section 11(a) of the Securities Act.
The Company may require Investor to furnish to the Company, and the
registration rights of Investor hereunder shall be subject to Investor
furnishing, such information regarding the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
and the Investor shall represent and warrant to the Company and the underwriter
that such information is true and correct in all material respects.
Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(l) hereof,
Investor will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement until Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 5(l) hereof and,
if so directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
All underwriting discounts, selling commissions and expenses of
underwriters will be borne by Investor.
VI. Registration and Other Expenses
The Company will pay all expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all costs
and expenses of registration hereunder, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), fees and expenses of the counsel
and accountants for the Company (including the reasonable expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), opinions of counsel and all other costs and expenses of the
Company
<PAGE>
12
incident to Rule 144 sales or the preparation, printing and filing under the
Securities Act of the Registration Statement (and all amendments and supplements
thereto) and furnishing copies thereof and of the prospectus included therein.
In addition, the Company will reimburse Investor for the reasonable fees and
expenses of not more than one counsel chosen by Investor.
VII. Indemnification and Contribution.
(i) Indemnification by the Company. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, Investor, its officers,
directors, partners, employees and agents, and each person who controls Investor
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, Investor
(collectively, the "Investor Indemnified Persons"), from and against all losses,
claims, damages, liabilities and expenses (including without limitation any
reasonable legal or other fees and expenses incurred by any such Investor
Indemnified Person in connection with defending or investigating any action or
claim in respect thereof) (collectively, the "Investor Damages") to which any
such Investor Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such Investor Damages (or proceedings in respect thereof)
arise out of or are caused by any untrue statement or alleged untrue statement
of material fact or any omission or alleged omission of a material fact required
to be stated in the Registration Statement or prospectus or any amendment
thereof or supplement thereto or necessary to make the statements therein (in
the case of a prospectus, in the light of the circumstances under which they
were made) not misleading, except insofar as such Investor Damages arise out of
or are caused by any untrue statement or alleged untrue statement or omission or
alleged omission contained in any information with respect to Investor so
furnished in writing by Investor expressly for use therein (or any amendment or
supplement thereto). In connection with an underwritten offering, the Company
shall agree to indemnify the underwriters thereof, their officers and directors
and each person who controls such underwriters (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) on similar
terms as provided above with respect to the indemnification of Investor;
provided, however, if pursuant to an underwritten public offering of Registrable
Securities, the Company and any underwriters enter into an underwriting
agreement or
<PAGE>
13
purchase agreement relating to such offering that contains provisions relating
to indemnification between the Company and such underwriters such provision
shall be deemed to govern indemnification as between the Company and the
underwriters.
(ii) Indemnification by Investor. Investor agrees to indemnify and hold
harmless, to the full extent permitted by law, the Company, its officers,
directors, stockholders, employees and agents, and each person who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, or is under common control with, or is controlled by,
the Company (collectively, the "Company Indemnified Persons"), from and against
all losses, claims, damages, liabilities and expenses (including without
limitation any reasonable legal or other fees and expenses incurred by any such
Company Indemnified Person in connection with defending or investigating any
action or claim in respect thereof) (collectively, the "Company Damages") to
which any such Company Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such Company Damages (or proceedings in
respect thereof) arise out of or are caused by any untrue statement or alleged
untrue statement of material fact or any omission or alleged omission of a
material fact required to be stated in the Registration Statement or prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such Company Damages arise out of or are caused by any
untrue statement or alleged untrue statement or omission or alleged omission
contained in any information with respect to Investor so furnished in writing
by, or on behalf of, Investor expressly for use therein (or any amendment or
supplement thereto). In no event shall the liability of Investor hereunder be
greater in amount than the dollar amount of the proceeds (net of underwriting
commissions and fees) received by Investor upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(iii) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such person will claim indemnification or contribution
<PAGE>
14
pursuant to this Agreement and, upon request of the indemnified party, permit
the indemnifying party to assume the defense thereof and retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and shall pay the fees and disbursements of such counsel relating to such
proceeding; provided, however, that failure by such person entitled to
indemnification to give prompt written notice shall not materially prejudice
such person's right of indemnification granted hereunder, except to the extent
the indemnifying party is materially prejudiced thereby. In any such proceeding,
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, or (ii) the indemnifying party
fails promptly to assume the defense of such proceeding or fails to employ
counsel reasonably satisfactory to such indemnified party, or (iii) the named
parties to any such proceeding (including any impleaded parties) include both
such indemnified party and the indemnifying parties or an affiliate of the
indemnifying party or such indemnified party, and there may be one or more
defenses available to such indemnified party that are different from or
additional to the defenses available to the indemnifying party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel of its choice at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense thereof and such counsel shall be at the expense of the indemnifying
party, it being understood, however, that unless there exists a conflict among
indemnified parties, the indemnifying party shall not, in connection with any
one such proceeding or separate but substantially similar or related proceedings
in the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for the
indemnified parties. The indemnifying party will not be subject to any liability
for any settlement made without its consent, which shall not be unreasonably
withheld but, if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in
<PAGE>
15
respect of which any indemnified party is a party, and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(iv) Contribution. If the indemnification provided for in this Section
7 from an indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and Investor on the other hand from the offering of
such Registrable Securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 7(c), any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
Notwithstanding the provisions of this Section 7(d), Investor shall not
be required to contribute any amount in excess of the amount by which the dollar
amounts of the proceeds (net of underwriting commissions and fees) received by
Investor upon sale of the Registrable Securities giving rise to such
contribution obligation exceeds the amount of any damages which Investor has
<PAGE>
16
otherwise been required to pay by reason of such untrue statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the second preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 7(d).
The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
VIII. Rule 144
The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of Investor, make
publicly available other information so long as necessary to permit sales under
Rule 144 under the Securities Act), and it will take such further action as
Investor may reasonably request, all to the extent required from time to time to
enable Investor to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act, as such Rule may be amended from time to time, and any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of Investor, the Company will deliver to Investor a written statement as to
filings made by the Company with the Commission.
<PAGE>
17
IX. Miscellaneous
(i) No Inconsistent Agreements. The Company has not and will not
hereafter enter into any agreement with respect to its securities that is
inconsistent with the rights granted to Investor in this Agreement or otherwise
conflicts with the provisions hereof.
(ii) Remedies. The Company and Investor, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of their rights under this Agreement. The
Company and Investor agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by any of them of the
provisions of this Agreement and hereby agree not to oppose the granting of such
relief on the basis that the other party has an adequate remedy at law. Each
party hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
(iii) Amendments and Waivers. This Agreement may not be amended except
by an instrument in writing signed by the Company and Investor.
(iv) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (and shall be deemed to have been
duly given upon receipt) by delivery in person, facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9(d)):
(1) if to the Company, to:
Berlitz International, Inc.
400 Alexander Park
Princeton, New Jersey 08540-6306
Attention: Robert C. Hendon, Jr.
Facsimile: (609) 514-9670
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
<PAGE>
18
New York, New York 10019-6064
Attention: Matthew Nimetz
Facsimile: (212) 373-2377
(2) if to Investor, to:
Apollo Management IV, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attention: Larry Berg
Facsimile: (310) 201-4198
with a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067-1725
Attention: Alison S. Ressler
Facsimile: (310) 712-8800
(v) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto
including, without limitation and without the need for an express assignment,
subsequent holders of Registrable Securities. If any transferee of any holder of
Registrable Securities shall acquire Registrable Securities in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities, such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof.
(vi) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
(vii) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(viii) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
All actions and proceedings arising out of or relating to this agreement shall
be brought by the parties and heard and determined
<PAGE>
19
only in a Federal or State court located in the Borough of Manhattan in the City
and State of New York and the parties hereto consent to jurisdiction before and
waive any objections of venue to the New York courts. The parties hereto agree
to accept service of process in connection with any such action or proceeding in
any manner permitted for a notice hereunder.
(ix) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstances, 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 contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
(x) Entire Agreement. This Agreement is intended by the parties to be a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(xi) Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by the other party in order to carry out
the provisions and purposes of this Agreement.
<PAGE>
20
IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement as of the date first written above.
BERLITZ INTERNATIONAL, INC.
By: /s/ Hiromasa Yokoi
----------------------
Name: Hiromasa Yokoi
Title: Chairman, CEO & President
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
---------------------
Name: Laurence Berg
Title: Partner
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
---------------------
Name: Laurence Berg
Title: Partner
Exhibit 99.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 2, 1998 (this
"AGREEMENT"), between Berlitz International, Inc., a New York corporation (the
"COMPANY"), and Benesse Holdings International, Inc., a Delaware corporation
("INVESTOR").
WHEREAS, Investor and the Company have entered into a Purchase
Agreement, dated as of October 2, 1998 (the "PURCHASE AGREEMENT"), pursuant to
which Investor will purchase $55,000,000 aggregate principal amount of the
Company's Convertible Exchangeable Subordinated Debentures due 2010, Series B
(the "BENESSE DEBENTURES"); and
WHEREAS, pursuant to the terms and conditions of the Benesse
Debentures, the Benesse Debentures may be converted at any time at the option of
the holder, in part or in whole, into shares (the shares issued upon such
conversion being herein referred to as the "COMMON SHARES") of common stock of
the Company, par value $.10 per share (the "COMMON STOCK").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein and for other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Securities Subject to this Agreement
(a) Definitions. The term "HOLDER" means any person owning or having
the right to acquire Registrable Securities or any successor or assignee
thereof.
The term "ISSUE DATE" means the date of original issuance of the
Benesse Debentures.
The terms "REGISTRABLE SECURITIES" and "RESTRICTED SECURITIES" shall
each refer to the Common Shares and any shares of Common Stock issued in respect
of the Common Shares, whether by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization.
(b) Restricted Securities. For the purposes of this Agreement,
Restricted Securities will cease to be Restricted Securities when (i) a
registration statement filed with the Securities and Exchange Commission (the
"COMMISSION") under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), covering such Restricted Securities has been declared effective and they
have been disposed of pursuant to such effective registration statement, or (ii)
such Restricted Securities have been sold pursuant to Rule 144 under the
Securities Act.
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(c) Registrable Securities. Registrable Securities will cease to be
Registrable Securities when they cease to be Restricted Securities.
2. Demand Registration.
Commencing on the second anniversary of the Issue Date, in addition to
any other rights of the Holders, upon written request by the Holders of at least
50% of the Registrable Securities then outstanding (the "DEMANDING HOLDERS") to
the Company that the Company effect a registration of any or all of the
Registrable Securities and specifying the intended method of disposition
thereof, the amount of the Registrable Securities proposed to be sold and the
jurisdiction (if known) in which registration is desired (a "DEMAND
REGISTRATION"), such demand to be given on not more than one (1) occasion, then
the Company will (i) promptly notify all other Holders of Registrable Securities
of each request and (ii) use its reasonable best efforts to effect the
registration under the Securities Act of the Registrable Securities which the
Company has been so requested to register by such Holders for disposition, in
accordance with the intended method of disposition stated in such request,
within ninety (90) days of the request therefor. All Holders who are not
Demanding Holders shall be entitled to participate in such offering in
accordance with the terms hereof if they so notify the Company of their desire
to do so, specifying the amount of Registrable Securities they wish to include,
within 15 days of receipt of notice from the Company. If any registration
statement relating to any such registration is not declared effective, such
registration shall not count towards the limit set forth in this paragraph. The
Demanding Holders shall have the right to designate the managing underwriters
for any underwritten offering pursuant to a Demand Registration, which
underwriters shall be reasonably acceptable to the Company.
The Company shall be entitled to include in any Demand Registration
authorized but unissued shares of Common Stock, shares of Common Stock held by
the Company as treasury stock and shares of Common Stock held by other
shareholders. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering determine in good faith that the total amount of
Registrable Securities and shares of Common Stock requested to be included in
such offering would adversely affect the success of such offering, then the
number of shares of Common Stock to be offered for the account of the Demanding
Holders and any other selling shareholder and the number of shares of Common
Stock to be offered by the Company to the public shall each be reduced, to the
extent necessary to reduce the total amount of shares to be included in such
offering to the amount recommended by such managing underwriter or underwriters,
in the following order of priority: first, the shares of Common Stock proposed
to be registered by any other selling shareholders or Holders; second, the
shares of Common Stock proposed to be registered by the Company; and third, the
shares of Registrable Securities proposed to be registered by the Demanding
Holders. If any of such categories is to be reduced and consists of more than
one shareholder, the part of the total reduction to that category of shares
imposed on each shareholder in that category shall be in the same proportion
that the total number of shares of Common Stock held (including shares issuable
upon conversion of convertible debentures) by such shareholder bears to the
total number of shares of Common Stock held (including shares issuable upon
conversion of convertible debentures) by all
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shareholders in that category who sought to have shares registered. If less than
50% of the shares requested to be registered by Demanding Holders in such Demand
Registration are included in such Demand Registration as a result of any
reduction set forth in this paragraph, such Demand Registration shall not count
towards the limit set forth in the preceding paragraph.
Notwithstanding the foregoing, the Company shall have the right to
delay any registration of Registrable Securities requested pursuant to this
Section 2 for up to one hundred twenty (120) days if such registration would, in
the reasonable good faith judgment of the Company's Board of Directors,
substantially interfere with any material transaction being considered at the
time of receipt of the request.
3. Piggy-Back Registration
If at any time the Company proposes to file a registration statement
under the Securities Act with respect to an offering of Common Stock (other than
a registration statement on Form S-4 or S-8, or any form substituted therefor,
or filed in connection with an exchange offer or an offering of securities
solely to the Company's existing stockholders) (the "PIGGY-BACK REGISTRATION"),
then the Company shall in each case give written notice of such proposed filing
to each Holder as soon as practicable but in no event less than 20 business days
before the anticipated filing date, and such notice shall offer each Holder the
opportunity to register such number of shares of Registrable Securities as such
Holder may request. The Company shall permit each Holder, in the event such
Holder has given the Company notice (which may be given by telephone, to be
confirmed promptly in writing, or by facsimile) within 10 business days after
receipt of such notice of its desire, to include any or all of the Registrable
Securities held by it in such offering on the same terms and conditions as
included therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering determine in good faith that the total amount of
Registrable Securities and shares of Common Stock requested to be included in
such offering would adversely affect the success of such offering, then the
number of shares of Common Stock to be offered by the Company to the public and
the number of shares of Registrable Securities to be offered for the account of
Investor or any other Holder and the number of shares of Common Stock to be
offered for the account of any other selling shareholders shall each be reduced
to the extent necessary to reduce the total amount of shares to be included in
such offering to the amount recommended by such managing underwriters, in the
following order of priority: (i) if the offering is a "Demand Registration"
under the Registration Rights Agreement, dated the date hereof, among the
Company, Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.,
then in such order as in accordance with the provisions thereunder and (ii) in
all other instances, first, the shares of Registrable Securities proposed to be
registered by the Investor or Holders and the shares of Common Stock proposed to
be registered by any other selling stockholders, on a pro rata basis; and
second, the shares of Common Stock proposed to be registered by the Company. If
any of such categories is to be reduced and consists of more than one
shareholder, the part of the total reduction to that category of shares imposed
on each shareholder in that category shall be in the same proportion that the
total number of shares of Common Stock held (including shares issuable upon
conversion of convertible debentures) by such shareholder bears to the total
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number of shares of Common Stock held (including shares issuable upon conversion
of convertible debentures) by all shareholders in that category who sought to
have shares registered. In the event that the contemplated distribution does not
involve an underwritten public offering, such determination that the inclusion
of such Registrable Securities shall adversely affect the success of the
offering shall be made in reasonable good faith by the Board of Directors of the
Company.
No registration effected under this Section 3, and no failure to effect
a registration under this Section 3, shall relieve the Company of its obligation
to effect a registration upon the request of Demanding Holders pursuant to
Section 2. No failure to effect a registration under this Section 3 or under
Section 2 and to complete the sale of Registrable Securities in connection
therewith shall relieve the Company of any other obligation under this
Agreement, including without limitation, the Company's obligations under
Sections 6 and 7.
4. Holdback Agreement
If reasonably requested by the managing underwriter or underwriters for
any public offering of Registrable Securities being made pursuant to a
registration statement relating to a Demand Registration or a Piggy-Back
Registration (a "REGISTRATION STATEMENT"), the Company will not publicly sell or
distribute any securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities (other than
any such sale or distribution of such securities in connection with any merger
or consolidation by the Company or any subsidiary thereof, or the acquisition by
the Company or a subsidiary thereof of the capital stock or substantially all of
the assets of any other person, or by reason of the existence of previously
issued and outstanding convertible securities, options or warrants), during the
time reasonably requested by the underwriter, not to exceed 14 business days
prior to, and during the 90-day period beginning on, the effective date of any
Registration Statement in which Investor is participating or the commencement of
a public distribution of the Registrable Securities pursuant to such
Registration Statement; provided, however, that in no event shall this clause
prevent the Company from selling or distributing any securities registered under
the Securities Act on Form S-4 or Form S-8 or any successor form; and (ii) use
reasonable efforts to cause each other holder of privately placed securities
similar to those being registered to agree not to effect any public sale or
distribution of any such securities during the periods described in clause (i)
above, in each case including a sale pursuant to Rule 144 under the Securities
Act (except as part of any such registration, if permitted).
If requested by the managing underwriter or underwriters for any public
offering of Registrable Securities being made pursuant to a Registration
Statement, the Investor will not publicly sell or distribute any Registrable
Securities or any securities convertible into or exchangeable or exercisable for
such securities, including a sale pursuant to Rule 144 under the Act, during the
time reasonably requested by the underwriter, not to exceed 14 business days
prior to, and during the 90-day period beginning on, the effective date of any
Registration Statement in which Investor is participating or the commencement of
a public distribution of the Registrable Securities pursuant to such
Registration Statement or other underwritten offering.
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5. Registration Procedures
In connection with any sale of Registrable Securities pursuant to a
Registration Statement, the Company will as promptly as practicable:
(a) prepare and file with the Commission a Registration Statement on
the appropriate form under the Securities Act, which form shall comply as to
form in all material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith, and use its reasonable best efforts to have such Registration
Statement declared effective and remain effective in accordance with the
provisions of this Agreement; provided, however, that, prior to filing a
Registration Statement or prospectus relating to Registrable Securities or any
amendments or supplements thereto, the Company shall (A) furnish to Investor,
Investor's counsel and the underwriters, if any, copies of all such documents
proposed to be filed and (B) provide Investor and Investor's counsel with an
adequate and appropriate opportunity to participate in the preparation of such
Registration Statement or prospectus relating to Registrable Securities or any
amendments or supplement thereto to be filed with the Commission;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement effective for as long as such registration is
required to remain effective pursuant to the terms hereof; shall cause the
prospectus contained in the Registration Statement to be supplemented by any
required prospectus supplement, and, as so supplemented, to be filed pursuant to
Rule 424 under the Securities Act; and shall comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement during the
applicable period in accordance with the intended methods of disposition set
forth in such Registration Statement or supplement to the prospectus;
(c) promptly notify Investor, counsel to Investor and any underwriter
and (if requested by any such person) confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission or any state securities authority for amendments and supplements to a
Registration Statement and prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) of the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities or
"blue sky" laws or the initiation of any proceedings for that purpose, and (v)
if, between the effective date of a Registration Statement and the closing of
any sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects;
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(d) use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement, and if one is issued
use its best efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement at the earliest possible moment;
(e) if requested by the managing underwriter or underwriters, if any,
or by Investor or its counsel, incorporate in a prospectus supplement or
post-effective amendment such information as such managing underwriter or
underwriters request, or Investor's counsel reasonably requests, to be included
therein, including, without limitation, with respect to the Registrable
Securities being sold by Investor to such underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters and with
respect to any other terms of an underwritten offering of the Registrable
Securities to be sold in such offering, and make all required filings of such
prospectus supplement or post-effective amendment;
(f) cooperate with Investor and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (which shall not bear any restrictive legends unless required under
applicable law) representing securities sold under a Registration Statement, and
enable such securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Investor may request and
keep available and make available to the Company's transfer agent or depositary
prior to the effectiveness of such Registration Statement a supply of such
certificates;
(g) provide a CUSIP number for all Registrable Securities covered by a
Registration Statement not later than the effective date of such Registration
Statement;
(h) cooperate with Investor and each underwriter participating in the
disposition of Registrable Securities and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. ("NASD");
(i) during the period when the prospectus is required to be delivered
under the Securities Act, promptly file all documents required to be filed with
the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (the "EXCHANGE ACT");
(j) in connection with an underwritten offering, participate, to the
extent reasonably requested by the managing underwriter for the offering or
Investor, in customary efforts to sell the securities under the offering,
including without limitation, participating in "road shows";
(k) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as Investor shall reasonably request, use its reasonable best
efforts to keep each such registration or qualification (or exemption therefrom)
effective during the period in which the Registration Statement is required to
be kept effective, and do any and all other acts and things that may be
reasonably necessary or advisable to enable such sellers to consummate the
disposition in such jurisdictions of the
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Registrable Securities owned by Investor; provided, however, that the Company
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph (k),
(ii) subject itself to general taxation in any such jurisdiction where it is not
then so subject, or (iii) consent to general service of process in any such
jurisdiction;
(l) notify Investor at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in the Registration Statement
contains an untrue statement of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and promptly prepare
and file with the Commission a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading;
(m) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities (Investor may, at its option, require that any or all of the
representations, warranties and covenants of the Company to or for the benefit
of any underwriters also be made to and for the benefit of Investor);
(n) make available for inspection by Investor, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by the managing underwriter
(collectively, the "INSPECTORS"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"RECORDS"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Inspector
in connection with the Registration Statement. Records and other information
that the Company determines, in good faith, to be confidential shall be
identified as confidential prior to delivery of such Records or information to
the Inspectors, and if the Company so notifies the Inspectors that such Records
and information are confidential, such Records and information shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records in the
opinion of counsel reasonably acceptable to the Company is necessary to avoid or
correct a misstatement or omission in the Registration Statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction; Investor agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential;
(o) if the offering is an underwritten public offering, use its best
efforts to obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as Investor or the managing underwriter
reasonably request;
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(p) use its best efforts to obtain an opinion or opinions from counsel
for the Company in customary form and covering such matters of the type
customarily covered by opinions as Investor or the managing underwriter
reasonably request; and
(q) otherwise comply with all applicable rules and regulations of the
Commission and any other governmental, quasi-governmental or private body to
which the Company or the transactions contemplated by this Agreement is subject,
and make available to its security holders, as soon as reasonably practicable,
an earning statement, which earning statement shall satisfy the provisions of
section 11(a) of the Securities Act.
The Company may require Investor to furnish to the Company, and the
registration rights of Investor hereunder shall be subject to Investor
furnishing, such information regarding the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
and the Investor shall represent and warrant to the Company and the underwriter
that such information is true and correct in all material respects.
Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(l) hereof,
Investor will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement until Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 5(l) hereof and,
if so directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
All underwriting discounts, selling commissions and expenses of
underwriters will be borne by Investor.
6. Registration and Other Expenses
The Company will pay all expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all costs
and expenses of registration hereunder, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), fees and expenses of the counsel
and accountants for the Company (including the reasonable expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), opinions of counsel and all other costs and expenses of the
Company incident to Rule 144 sales or the preparation, printing and filing under
the Securities Act of the Registration Statement (and all amendments and
supplements thereto) and furnishing copies thereof and of the prospectus
included therein. In addition, the Company will reimburse Investor for the
reasonable fees and expenses of not more than one counsel chosen by Investor.
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7. Indemnification and Contribution
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, Investor, its officers,
directors, partners, employees and agents, and each person who controls Investor
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, Investor
(collectively, the "INVESTOR INDEMNIFIED PERSONS"), from and against all losses,
claims, damages, liabilities and expenses (including without limitation any
reasonable legal or other fees and expenses incurred by any such Investor
Indemnified Person in connection with defending or investigating any action or
claim in respect thereof) (collectively, the "INVESTOR DAMAGES") to which any
such Investor Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such Investor Damages (or proceedings in respect thereof)
arise out of or are caused by any untrue statement or alleged untrue statement
of material fact or any omission or alleged omission of a material fact required
to be stated in the Registration Statement or prospectus or any amendment
thereof or supplement thereto or necessary to make the statements therein (in
the case of a prospectus, in the light of the circumstances under which they
were made) not misleading, except insofar as such Investor Damages arise out of
or are caused by any untrue statement or alleged untrue statement or omission or
alleged omission contained in any information with respect to Investor so
furnished in writing by Investor expressly for use therein (or any amendment or
supplement thereto). In connection with an underwritten offering, the Company
shall agree to indemnify the underwriters thereof, their officers and directors
and each person who controls such underwriters (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) on similar
terms as provided above with respect to the indemnification of Investor;
provided, however, if pursuant to an underwritten public offering of Registrable
Securities, the Company and any underwriters enter into an underwriting
agreement or purchase agreement relating to such offering that contains
provisions relating to indemnification between the Company and such underwriters
such provision shall be deemed to govern indemnification as between the Company
and the underwriters.
(b) Indemnification by Investor. Investor agrees to indemnify and hold
harmless, to the full extent permitted by law, the Company, its officers,
directors, stockholders, employees and agents, and each person who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, or is under common control with, or is controlled by,
the Company (collectively, the "COMPANY INDEMNIFIED PERSONS"), from and against
all losses, claims, damages, liabilities and expenses (including without
limitation any reasonable legal or other fees and expenses incurred by any such
Company Indemnified Person in connection with defending or investigating any
action or claim in respect thereof) (collectively, the "COMPANY DAMAGES") to
which any such Company Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such Company Damages (or proceedings in
respect thereof) arise out of or are caused by any untrue statement or alleged
untrue statement of material fact or any omission or alleged omission of a
material fact required to be stated in the Registration Statement or prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus, in the light of
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the circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such Company Damages arise out of or are caused by any
untrue statement or alleged untrue statement or omission or alleged omission
contained in any information with respect to Investor so furnished in writing
by, or on behalf of, Investor expressly for use therein (or any amendment or
supplement thereto). In no event shall the liability of Investor hereunder be
greater in amount than the dollar amount of the proceeds (net of underwriting
commissions and fees) received by Investor upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such person will claim indemnification or contribution
pursuant to this Agreement and, upon request of the indemnified party, permit
the indemnifying party to assume the defense thereof and retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and shall pay the fees and disbursements of such counsel relating to such
proceeding; provided, however, that failure by such person entitled to
indemnification to give prompt written notice shall not materially prejudice
such person's right of indemnification granted hereunder, except to the extent
the indemnifying party is materially prejudiced thereby. In any such proceeding,
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, or (ii) the indemnifying party
fails promptly to assume the defense of such proceeding or fails to employ
counsel reasonably satisfactory to such indemnified party, or (iii) the named
parties to any such proceeding (including any impleaded parties) include both
such indemnified party and the indemnifying parties or an affiliate of the
indemnifying party or such indemnified party, and there may be one or more
defenses available to such indemnified party that are different from or
additional to the defenses available to the indemnifying party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel of its choice at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense thereof and such counsel shall be at the expense of the indemnifying
party, it being understood, however, that unless there exists a conflict among
indemnified parties, the indemnifying party shall not, in connection with any
one such proceeding or separate but substantially similar or related proceedings
in the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
indemnified parties. The indemnifying party will not be subject to any liability
for any settlement made without its consent, which shall not be unreasonably
withheld but, if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is a party, and indemnity could have
been sought hereunder by such
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indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 7
from an indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and Investor on the other hand from the offering of
such Registrable Securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 7(c), any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
Notwithstanding the provisions of this Section 7(d), Investor shall not
be required to contribute any amount in excess of the amount by which the dollar
amounts of the proceeds (net of underwriting commissions and fees) received by
Investor upon sale of the Registrable Securities giving rise to such
contribution obligation exceeds the amount of any damages which Investor has
otherwise been required to pay by reason of such untrue statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the second preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 7(d).
11
<PAGE>
The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. Rule 144
The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of Investor, make
publicly available other information so long as necessary to permit sales under
Rule 144 under the Securities Act), and it will take such further action as
Investor may reasonably request, all to the extent required from time to time to
enable Investor to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act, as such Rule may be amended from time to time, and any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of Investor, the Company will deliver to Investor a written statement as to
filings made by the Company with the Commission.
9. Miscellaneous
(a) No Inconsistent Agreements. The Company has not and will not
hereafter enter into any agreement with respect to its securities that is
inconsistent with the rights granted to Investor in this Agreement or otherwise
conflicts with the provisions hereof.
(b) Remedies. The Company and Investor, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
and Investor agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by either of them of the provisions of
this Agreement and hereby agree not to oppose the granting of such relief on the
basis that the other party has an adequate remedy at law. Each party hereto
severally agrees that it will not seek, and agrees to waive any requirement for,
the securing or posting of a bond in connection with any other party's seeking
or obtaining such equitable relief.
(c) Amendments and Waivers. This Agreement may not be amended except by
an instrument in writing signed by the Company and Investor.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (and shall be deemed to have been
duly given upon receipt) by delivery in person, facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9(d));
(i) if to the Company, to:
12
<PAGE>
Berlitz International, Inc.
400 Alexander Park
Princeton, New Jersey 08540-6306
Attention: Robert C. Hendon, Jr.
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
Facsimile: (212) 373-2377
(ii) if to Investor, to:
Benesse Holdings International, Inc.
65 East 55th Street, 23rd Floor
New York, NY 10022
Attention:
Facsimile: 212-813-0656
with a copy to:
Benesse Corporation
Tokyo Legal Administration Office
1-34 Ochiai, Tama-shi
Tokyo 206, Japan
Attention: Mr. Yusaku Mori
Facsimile: 81-42-356-7301
and:
Coudert Brothers
Daini Okamotova Building, 10F
1-22-16 Toranemon Minato-ku
Tokyo, Japan 105
Attention: Scott T. Jones
Facsimile: 813-3580-2301
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto
including, without limitation and without the need for an express assignment,
subsequent holders of Registrable Securities. If any transferee of any holder of
Registrable Securities shall acquire Registrable
13
<PAGE>
Securities in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. All actions
and proceedings arising out of or relating to this agreement shall be brought by
the parties and heard and determined only in a Federal or State court located in
the Borough of Manhattan in the City and State of New York and the parties
hereto consent to jurisdiction before and waive any objections to the venue of
such Federal and New York courts. The parties hereto agree to accept service of
process in connection with any such action or proceeding in any manner permitted
for a notice hereunder.
(i) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstances, 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 contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties' hereto
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties to be a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(k) Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by the other party in order to carry out the
provisions and purposes of this Agreement.
14
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement as of the date first written above.
BERLITZ INTERNATIONAL, INC.
By: /s/ Robert C. Hendon, Jr.
-----------------------------
Name: Robert C. Hendon, Jr.
Title: Vice President, General
Counsel & Secretary
BENESSE HOLDINGS INTERNATIONAL, INC.
By: /s/ Mako Obara
------------------
Name: Mako Obara
Title: President & CEO
15
Exhibit 99.5
================================================================================
INVESTORS AGREEMENT
among
BERLITZ INTERNATIONAL, INC.
AND
APOLLO MANAGEMENT IV, L.P.
---------------------------
Dated as of October 2, 1998
---------------------------
================================================================================
<PAGE>
INVESTORS AGREEMENT
INVESTORS AGREEMENT, dated as of October 2, 1998 (this "Agreement"),
among Berlitz International, Inc., a New York corporation (the "Company"), and
Apollo Management IV, L.P., a Delaware limited partnership ("Apollo"), on behalf
of Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
WHEREAS, the Company and Apollo have entered into the Purchase
Agreement, dated as of October 2, 1998 (the "Purchase Agreement"), pursuant to
which the Company is issuing and selling $100 million aggregate principal amount
of convertible exchangeable subordinated debentures due 2010, Series A of the
Company (the "Debentures") to Apollo;
WHEREAS, the Debentures are convertible at any time at the option of
Apollo, in part or in whole, into shares of Common Stock as provided for in the
Purchase Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" has the meaning assigned such term in the Purchase
Agreement.
"Board" means the Board of Directors of the Company.
"Closing" and "Closing Date" have the meaning assigned such terms in
the Purchase Agreement.
"Common Stock" means common stock, par value $.10 per share, of the
Company or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Conversion Price" has the meaning assigned such term in the Purchase
Agreement.
"Converted Shares" means the actual shares of Common Stock received by
Apollo upon conversion of, some or all of, the Debentures.
<PAGE>
2
"Fixed Rate Debentures" has the meaning assigned such term in the
Purchase Agreement.
"Initial Interest" means the aggregate number of shares of Common Stock
into which the Debentures held by Apollo may be converted as of the Closing
Date.
"Investor Directors" means any person nominated by Apollo who is
elected to the Board pursuant to this Agreement.
"Issue Date" means the date of the Closing.
"Liquidation" means the liquidation under applicable bankruptcy or
reorganization legislation, or the dissolution or winding up, of the Company.
"Person" has the meaning assigned such term in the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Shares" means the aggregate amount of the Converted Shares held by
Apollo and the Converted Shares Apollo has the right to receive.
"Share Price" means, as of any date, the closing price of the Common
Stock as reported in the Wall Street Journal on the last day of trading
immediately preceding such date.
"Stockholders" mean all the holders of Common Stock and "Stockholder"
shall mean any such Person.
"Subsidiary" has the meaning assigned such term in the Purchase
Agreement.
"Transfer" has the meaning assigned such term in Section 4.2.
2. Corporate Governance.
2.1 Initial Composition. Effective at the Closing, the Company
shall cause the Board to be increased from ten directorships to twelve
directorships (one of which new directorships shall be elected for an initial
term expiring at the Company's annual meeting of Stockholders in 1999 and the
other shall be elected for an initial term expiring at the Company's annual
meeting of Stockholders in 2000). Effective at the Closing, the Board shall
elect the Investor Directors to fill the vacancies created in accordance with
this Section 2.1.
<PAGE>
3
2.2 Election of Directors.
2.2.1 So long as Apollo continues to own Shares that
represent at least 50% of the Initial Interest, Apollo shall have the right to
nominate two persons for election to the Board.
2.2.2 So long as Apollo owns Shares that represent at
least 25% but less than 50% of the Initial Interest, Apollo shall have the right
to nominate one person for election to the Board. At such time as Apollo owns
Shares that represent less than 50% of the Initial Interest, the Board shall be
reduced from twelve directorships to eleven directorships and if two Investor
Directors are serving at such time, one Investor Director nominated by Apollo
shall resign from the Board.
2.2.3 If, at any time, Apollo owns Shares that
represent less than 25% of the Initial Interest, Apollo shall no longer be
entitled to nominate persons for election to the Board and if an Investor
Director is serving at such time, such Investor Director shall resign from the
Board. At such time as Apollo owns Shares that represent less than 25% of the
Initial Interest, the Board may be reduced or increased at the option of the
Company.
2.3 Removal and Replacement of Directors.
2.3.1 Removal of Investor Directors. If at any time
Apollo notifies the Board of its wish to remove any Investor Director, the Board
shall vote so as to remove such Investor Director in accordance with the
Company's Bylaws.
2.3.2 Replacement of Directors. If at any time, a
vacancy is created on the Board by reason of the incapacity, death, removal or
resignation of any Investor Director, then Apollo shall designate an individual
to fill such vacancy until the next meeting of Stockholders.
2.4 Investor Directors.
2.4.1 The Investor Directors shall receive notice of
each meeting of the Board at the same time and in the same manner as other
members of the Board..
2.4.2 The Investor Directors shall be entitled to
compensation and indemnification rights similar to those of other non-employee
directors of the Company. The Company shall at all times maintain a directors'
and officers' insurance policy covering the Investor Directors that provides in
the aggregate substantially no less coverage than the policy covering the
current directors of the Company as of the date of this Agreement.
<PAGE>
4
3. Certain Actions of the Company.
3.1 Actions of the Company. Subject to Section 3.2, the
Company shall not take, approve or otherwise ratify any of the following actions
(whether occurring in one or a series of related transactions) without the
approval of at least one of the Investor Directors present at a meeting of the
Board duly called:
(i) any Transfer (as defined in Section 4.2) to
another Person of any of the assets of the Company which will result in
aggregate gross proceeds to the Company in excess of $50 million;
(ii) any acquisition by the Company of assets if the
aggregate value of the consideration paid by the Company is in excess
of $50 million;
(iii) (x) any transaction, merger or consolidation of
the Company or any of its subsidiaries into or with one or more Persons
or (y) any transaction, merger or consolidation of one or more Persons
into or with the Company or any of its subsidiaries if, in either such
case, the aggregate value of the consideration received or paid by the
Company is in excess of $50 million;
(iv) any transaction entered into after the date
hereof between the Company, on the one hand, and any Affiliate of the
Company (other than a Subsidiary of the Company), on the other hand, if
the aggregate value of the consideration received or paid by the
Company is in excess of $5 million, other than (x) transactions
substantially similar to those transactions set forth on Annex A and
(y) the Company's repurchase of Benesse's interest in Berlitz Japan, in
whole or in part, provided, that, the purchase price and the terms of
the repurchase are approved by the Disinterested Directors of the
Board, the Board and Apollo; provided further, that, if Apollo
disagrees with the Company's valuation of the consideration received or
paid by the Company in any such transaction, such disagreement shall be
submitted to an independent investment banker agreed to by Apollo and
the Company for resolution as soon as practicable.
(v) the creation, incurrence, guarantee, assumption
or refinancing of any additional indebtedness for borrowed money which
(i) has an aggregate principal amount in excess of $50 million and (ii)
ranks senior in right of payment to the Debentures; provided, however,
that the approval of an Investor Director shall not be required for the
creation, incurrence, guarantee, assumption or refinancing of
indebtedness for borrowed money incurred to finance one or more related
acquisitions in which the aggregate value of the consideration paid by
the Company in all such related acquisitions does not exceed $50
million in any twelve month period or $100 million in the
<PAGE>
5
aggregate. If one of the Investor Directors agrees to vote in favor of
a proposed transaction pursuant to Section 3.1(ii), 3.1(iii) or
3.1(iv), the approval of an Investor Director shall not be required for
the creation, incurrence, guarantee, assumption or refinancing of any
indebtedness in connection with such transaction;
(vi) any declaration or payment of any dividend or
other payment to holders of securities junior in right of payment to
the Debentures (other than scheduled interest and principal payments
with respect to any indebtedness of the Company) which, individually or
in the aggregate, exceeds (i) 50% of net income of the Company for the
12 months preceding the date of such payment or (ii) $5 million in any
12 month period. For purposes of this clause (vi), "net income" of the
Company for any period will be determined on a consolidated basis by
reference to the item in the Company's financial statements showing net
income for such period.
(vii) the issuance of any equity securities of the
Company, in a public offering or otherwise; provided, however, the
approval of an Investor Director shall not be required (x) for the
issuance of Common Stock upon conversion of the Company's Convertible
Exchangeable Subordinated Debentures due 2010, Series B (the "Benesse
Debentures"), or (y) if at the time of such issuance the Share Price
reflects an increase of 10%, compounded annually from the Issue Date,
from the Conversion Price; and
(viii) the voluntary filing for Liquidation by the
Company.
3.2 The rights contained in Section 3.1 shall terminate upon
the earlier to occur of (i) the fifth anniversary of the Issue Date, and (ii)
the date on which Apollo owns Shares that represent, on a fully diluted basis
(excluding any additional Common Stock acquired by Benesse Holdings
International, Inc., a Delaware corporation ("BHI"), or Benesse Corporation, a
Japanese corporation ("Benesse"), or any of their Affiliates after the date
hereof other than Common Stock issued upon conversion of any Benesse
Debentures), less than 10% of the issued and outstanding Common Stock. The
provisions of Section 3.1 shall not apply to any action taken by the Company in
accordance with the provisions of the Purchase Agreement, dated as of October 2,
1998 between the Company and BHI, the Benesse Debentures issued thereunder or
the Subordinated Promissory Note in aggregate principal amount of $50 million to
be issued by the Company to BHI on the Closing Date.
<PAGE>
6
4. Transfer of Interest.
4.1 Apollo may Transfer any or all of its interest in the
Debentures or Converted Shares to any Person provided, that, in each case, such
Transfer is made in accordance with this Section 4. Any such Transfer not
permitted by the terms of this Section 4 shall be null and void, and the Company
is authorized to refuse to transfer ownership on the books of the Company or the
transfer agent of any Debentures or Converted Shares Transferred in violation of
this Agreement.
4.2 Apollo shall have the right to (i) sell, assign, transfer
(voluntarily or involuntarily), exchange (by merger or otherwise) or otherwise
dispose of or (ii) grant a lien, encumbrance, pledge or other form of security
interest (each a "Transfer") in any or all of its interest in the Debentures or
Converted Shares, pursuant to the following terms and conditions:
(i) Subject to the terms of paragraph (iv) below,
Apollo may transfer any or all of its interest in the Debentures or the
Converted Shares to an Affiliate of Apollo at any time;
(ii) from the date hereof until the first anniversary
of the Issue Date, Apollo shall not Transfer any or all of its interest
in the Debentures or the Converted Shares (other than to an Affiliate
of Apollo) without the consent of the Company, which consent may be
unreasonably withheld;
(iii) from the first anniversary until the third
anniversary of the Issue Date, Apollo shall not Transfer any or all of
its interest in the Debentures or the Converted Shares (other than to
an Affiliate of Apollo) without the consent of the Company, which
consent shall not be unreasonably withheld; and
(iv) Apollo shall not Transfer any or all of its
interest in the Debentures or the Converted Shares (i) to those
entities set forth on Annex B or (ii) if the Board determines that such
Transfer is to a Person (including an Affiliate) engaging in a business
that is competitive with the business of the Company or a business the
Board has taken action to enter or the Company disclosed publicly that
it plans to enter and such transfer involves more than 1.0% of the
outstanding shares of Common Stock of the Company.
4.3 Notwithstanding the provisions of Section 4.2, the
obligations of Apollo hereunder (including the transfer restrictions contained
in this Section 4) shall be binding upon each transferee to whom Debentures or
Converted Shares are transferred, whether or not such Transfer is permitted
under the terms of this Agreement, except for Transfers pursuant to a public
offering. Prior to consummation of any Transfer, except for Transfers pursuant
to a public offering, the
<PAGE>
7
transferee shall agree in writing to be bound by the terms and conditions of
this Agreement. Prompt notice shall be given to the Company by the transferor of
any Transfer of Debentures or Converted Shares.
4.4 The Company shall cause each certificate representing a
Converted Share or a Debenture to contain a legend stating that the Transfer of
such Converted Share or Debenture is restricted and subject to the terms and
conditions of this Agreement.
4.5 In addition to the other restrictions provided for in this
Agreement, each holder of Debentures or Converted Shares agrees that it will
not, directly or indirectly, Transfer any Debentures or Converted Shares, except
as permitted under the Securities Act and other applicable federal or state
securities laws.
4.6 The transferee of Debentures or Converted Shares (other
than an Affiliate of Apollo) shall not be entitled to (i) nominate any person to
the Board under Section 2; (ii) any approval rights pursuant to Section 3; or
(iii) participate in a sale of the Company pursuant to Section 5.
5. Sale of the Company. If the Company intends to pursue a sale of the
Company, 80% or more of the shares held by BHI and its Affiliates in the Company
or all or substantially all of the assets of the Company, the Company shall (i)
retain a nationally recognized investment bank, reasonably acceptable to Apollo,
to advise the Company with respect to the sale process; (ii) provide Apollo
written notice of the Company's intention to sell the Company or all or
substantially all of the assets of the Company prior to retaining potential
investment banks or contacting buyers; and (iii) provide Apollo, from time to
time as reasonably requested, with reports of the progress of any such sale.
Apollo is aware of its obligations under the federal securities laws with
respect to any non-public information it obtains pursuant to this Section 5.
6. Miscellaneous.
6.1 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by facsimile, certified, registered or express mail, postage prepaid. Any
such notice shall be deemed given when so delivered personally, or sent by
facsimile, certified,
<PAGE>
8
registered or express mail or, if mailed, five days after the date of deposit in
the United States mail, as follows:
(a) if to the Company:
Berlitz International, Inc.
400 Alexander Park
Princeton, NJ 08540
Attn: Robert C. Hendon, Jr.
Facsimile: (609) 514-9670
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attn: Matthew Nimetz
Facsimile: (212) 373-2377
(b) if to the Investor:
Apollo Management IV, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Attn: Larry Berg
Facsimile: (310) 201-4198
with a copy to:
Sullivan & Cromwell
1888 Century Park East, Suite 2100
Los Angeles, CA 90067
Attn: Alison S. Ressler
Facsimile: (310) 712-8800
Any party may, by notice given in accordance with this Section 6.1, designate
another address or person for receipt of notices hereunder.
6.2 Amendment and Waiver.
6.2.1 No failure or delay on the part of any party
hereto 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,
<PAGE>
9
power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the parties hereto at law, in
equity or otherwise.
6.2.2 Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by the Company and Apollo and (ii) only in the specific
instance and for the specific purpose for which made or given.
6.3 Specific Performance. The parties hereto intend that each
of the parties has the right to seek damages or specific performance in the
event that any other party hereto wilfully fails to perform such party's
obligations hereunder. Therefore, if any party shall institute any action or
proceeding to enforce the provisions hereof, any party against whom such action
or proceeding is brought hereby waives any claim or defense therein that the
plaintiff party has an adequate remedy at law.
6.4 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.5 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.
6.6 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
6.8 Further Assurances. Each of the parties shall, and shall
cause their respective Affiliates to, execute such instruments and take such
action as
<PAGE>
10
may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby.
6.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective permitted
successors and assigns. This Agreement is not assignable by the Company and is
not assignable by Apollo except to an Affiliate of Apollo.
6.10 No Third Party Beneficiaries. This Agreement is not
intended to, and does not, create any rights or benefits of any Person other
than the parties hereto.
6.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
6.12 Effectiveness. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement shall not become effective, and
Apollo shall have no rights hereunder, unless and until the purchase and sale of
the Debentures pursuant to the Purchase Agreement is consummated.
<PAGE>
11
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
BERLITZ INTERNATIONAL, INC.
By: /s/ Hiromasa Yokoi
----------------------
Name: Hiromasa Yokoi
Title: Chairman, CEO & President
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
---------------------
Name: Laurence Berg
Title: Partner
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
---------------------
Name: Laurence Berg
Title: Partner
Exhibit 99.6
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 2, 1998 (this "Agreement"),
between Benesse Corporation, a shareholder ("Principal Shareholder") of Berlitz
International, Inc., a New York corporation (the "Company"), and Apollo
Management IV, L.P., a Delaware limited partnership on behalf of Apollo
Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. ("Investor").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Investor and the Company are entering into (i) a Purchase Agreement,
dated as of the date hereof (the "Purchase Agreement"), pursuant to which
Investor has agreed to purchase $100,000,000 aggregate principal amount of
convertible exchangeable subordinated debentures due 2010, Series A (the
"Debentures") of the Company and (ii) an Investors Agreement, dated as of the
date hereof (the "Investors Agreement"), which contains, among other things,
provisions relating to the appointment of directors to the Board of Directors of
the Company by Investor;
WHEREAS, pursuant to a Purchase Agreement, dated as of the date hereof
(the "Benesse Purchase Agreement"), between the Company and Benesse Holdings
International, Inc., a Delaware corporation ("BHI"), BHI, an Affiliate (as
defined in the Purchase Agreement) of Principal Shareholder, has agreed to
purchase $55,000,000 aggregate principal amount of convertible exchangeable
subordinated debentures due 2010, Series B (the "Benesse Debentures") of the
Company simultaneous with the purchase by Investor of the Debentures;
WHEREAS, Principal Shareholder is the direct or indirect record holder
and beneficial holder of 6,985,338 shares, which is approximately 73.3% of the
outstanding common stock of the Company, par value $.10 per share ("Common
Stock");
WHEREAS, approval of the shareholders of the Company is necessary to
approve the issuance of the Debentures pursuant to the Purchase Agreement and
the issuance of the Benesse Debentures; and
<PAGE>
WHEREAS, in order to induce Investor to enter into the Purchase
Agreement and the Investors Agreement, Principal Shareholder is willing to agree
to vote its Shares (as defined below) so as to (i) approve the issuance of the
Debentures and the Benesse Debentures (the "Issuance") and (ii) elect the
directors appointed by Investor pursuant to the Investors Agreement to the Board
of Directors of the Company.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein and for other good and valuable
considera tion, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Representations of Principal Shareholder. Principal Shareholder
represents that it (a) directly or through BHI is the record holder and
beneficial holder of 6,985,338 shares of Common Stock and (b) has full power and
authority to make, enter into and carry out the terms of this Agreement.
Principal Shareholder represents that this Agreement has been duly and validly
executed and delivered by Principal Shareholder and constitutes a valid and
binding obligation of Principal Shareholder, enforceable against Principal
Shareholder in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The term "Shares" includes the shares Principal Shareholder and BHI
hold on the date of this Agreement, shares that Principal Shareholder and BHI
acquire after the execution of this Agreement and shares that Principal
Shareholder or BHI transfers to its Affiliates (other than the Company or any
Subsidiary as defined in the Purchase Agreement) after the date of this
Agreement, in each case only so long as Principal Shareholder or any of its
Affiliates (including BHI but excluding the Company and its Subsidiaries) shall
continue to own such shares. Principal Shareholder agrees that neither it nor
BHI will transfer any shares of Common Stock unless the transferee has agreed in
writing with or expressly for the benefit of Investor to vote the transferred
shares as provided in Section 2 hereof and to be bound by the provisions of
Section 3 and this sentence.
2. Agreement to Vote Shares.
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<PAGE>
(a) Principal Shareholder hereby agrees to vote, and to cause its
Affiliates to vote, the Shares, at every meeting of the shareholders of the
Company at which such matters are considered and at every adjournment thereof,
including the meeting contemplated by the Purchase Agreement, or any consent in
lieu thereof, (i) in favor of adoption and approval of the Issuance pursuant to
the Purchase Agreement and the Benesse Purchase Agreement and (ii) against any
action or agreement that would compete with, impede, or interfere with the
adoption and approval of the Purchase Agreement, the Benesse Purchase Agreement
and the Issuance or inhibit the timely consummation of the Issuance.
(b) Principal Shareholder hereby agrees to vote, and to cause its
Affiliates to vote, the Shares at every meeting of the shareholders of the
Company at which such matters are considered and at every adjournment thereof,
or any consent in lieu thereof, in favor of the directors appointed by Investor
pursuant to the Investors Agreement to the Board of Directors of the Company.
Principal Shareholder also hereby agrees not to vote, and to cause its
Affiliates not to vote, the Shares for any director competing against the
directors appointed by Investor pursuant to the Investors Agreement for
appointment to the Board of Directors of the Company.
3. No Proxy Solicitations. Principal Shareholder agrees that it will
not, nor will it permit any entity under its control to, (a) solicit proxies or
become a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the 1934 Act) in opposition to or in competition with the
consummation of the Issuance or otherwise encourage or assist any party in
taking or planning any action which would compete with or otherwise serve to
interfere with or inhibit the timely consummation of the Issuance in accordance
with the terms of the Purchase Agreement and the Benesse Purchase Agreement, (b)
directly or indirectly encourage, initiate or cooperate in a shareholders' vote
or action by consent of the Company's shareholders in opposition to or in
competition with the consummation of the Issuance or (c) become a member of a
"group" (as such term is used in Section 13(d) of the 1934 Act) with respect to
any voting securities of the Company for the purpose of opposing or competing
with the consummation of the Issuance.
-3-
<PAGE>
4. Tag-Along Right. (a) If at any time Principal Shareholder proposes
to sell, transfer or otherwise dispose ("Transfer") of (i) 80% or more of the
shares of Common Stock held by it and BHI in the Company on the date of this
agreement (a "Common Stock Tag-Along Transfer") or (ii) 50% or more of the
Benesse Debentures (a "Debenture Tag-Along Transfer" and, together with a Common
Stock Tag-Along Transfer, a "Tag-Along Transfer"), Principal Shareholder shall
afford Investor the opportunity to participate therein in accordance with this
Section 4.
(b) With respect to each Tag-Along Transfer, Investor shall have the
right to Transfer, at the same price and upon identical terms as such proposed
Tag-Along Transfer, any or all of its shares of Common Stock issuable or issued
upon conversion of the Debentures (in the case of a Common Stock Tag-Along
Transfer) or Debentures (in the case of a Debenture Tag-Along Transfer), not to
exceed the Investor's Portion.
(c) At the time a Tag-Along Transfer is proposed, the Principal
Shareholder shall give written notice to the Investor (the "Transfer Notice"),
which notice shall identify the proposed purchaser and state the number of
shares of Common Stock or principal amount of Benesse Debentures proposed to be
Transferred, the proposed offering price (including the form and terms of any
non-cash consideration to be received in connection therewith), the proposed
date of any such Transfer (the "Transfer Date") and any other material terms and
conditions of the proposed Transfer. The Transfer Notice shall also contain a
complete and correct copy of any offer to, or agreement with, the Principal
Shareholder by the proposed purchaser in connection therewith. The Principal
Shareholder shall use its best efforts to deliver the Transfer Notice at least
30 days prior to the Transfer Date and in no event shall the Principal
Shareholder provide such Transfer Notice later than 21 days prior to the
Transfer Date.
(d) If the Investor wishes to participate in the Tag-Along Transfer, it
shall provide written notice (the "Tag-Along Notice") to the Principal
Shareholder no less than seven days prior to the Transfer Date. The Tag-Along
Notice shall set forth the number of shares of Common Stock or principal amount
of Debentures that Investor elects to include in the Transfer, which shall not
exceed the Investor's Portion.
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<PAGE>
If a Tag-Along Notice is not received by the Principal Shareholder
prior to the seven day period specified above, the Principal Shareholder shall
have the right to sell or otherwise Transfer the number of shares of Common
Stock or principal amount of Debentures specified in the Transfer Notice without
any participation by the Investor, but only on terms and conditions with respect
to the consideration paid by the proposed purchaser no more favorable (and other
material terms and conditions which a reasonable investor would consider
significant to the decision to include Common Stock or Debentures in the
Transfer no more favorable in any material respect) to the Principal Shareholder
than as stated in the Transfer Notice to the Investor, and only if such Transfer
occurs on a date within 90 days of the Transfer Date.
(e) The Investor shall not be required to make any representations and
warranties to any person in connection with any Tag-Along Transfer except as to
(i) good title and the absence of liens with respect to the Investor's
securities to be sold, (ii) the partnership or other existence of the Investor
and (iii) the authority for and the validity, binding effect and enforceability
of any agreements entered into by the Investor in connection with such Transfer.
(f) The provisions of this Section 4 shall not apply to any Transfer by
the Principal Shareholder or any of its Affiliates to another Affiliate of the
Principal Shareholder (provided that such transferee Affiliate has agreed to be
bound by this Agreement). The Principal Shareholder represents to the Investor
that it has not entered into any agreement providing for any rights inconsistent
with the rights provided to the Investors in this Section 4 and that it has not
otherwise directly or indirectly granted any such rights. The Principal
Shareholder shall not enter into any agreement providing for, or otherwise
directly or indirectly grant, any tag- along or other contractual rights to
participate, directly or indirectly, in any Tag-Along Transfer without the prior
written consent of the Investor.
(g) "Investor's Portion" shall mean (i) in the case of a Common Stock
Tag-Along Transfer, that number of Shares of Common Stock determined by
multiplying (A) the number of shares of Common Stock issued or issuable upon
conversion of the Debentures and held by the Investor
-5-
<PAGE>
immediately prior to the Transfer (the "Investor's Shares") by (B) a fraction,
the numerator of which is the number of shares of Common Stock to be Transferred
by Principal Shareholder and its Affiliates (including shares issuable upon
conversion of any Benesse Debentures to be transferred) and the denominator of
which is the total number of shares of Common Stock held by Principal
Shareholder and its Affiliates immediately prior to the Transfer (including
shares issuable upon conversion of the Benesse Debentures), and (ii) in the case
of a Debenture Tag-Along Transfer, that principal amount of Debentures
determined by multiplying (A) the principal amount of Debentures held by the
Investor immediately prior to the Transfer by (B) a fraction, the numerator of
which is the principal amount of Benesse Debentures to be transferred by
Principal Shareholder and its Affiliates and the denominator of which is the
total principal amount of Benesse Debentures held by Principal Shareholder and
its Affiliates immediately prior to the Transfer. If the Shares of Common Stock
or Debentures so calculated exceeds the amount that the purchaser is willing to
acquire, the number of shares of Common Stock or principal amount of Debentures
to be Transferred by Investor and Principal Shareholder shall be reduced on a
pro rata basis to the number or amount that the purchaser is willing to acquire.
If a Common Stock Tag-Along Transfer and a Debenture Tag-Along Transfer are to
occur together, Investor may choose to have the Debentures held by it counted in
determining the Investor's Portion of either Common Stock or Debentures but not
both. In such case, the Benesse Debentures shall be counted in the same manner
chosen by Investor.
5. Termination. The obligations of Principal Shareholder pursuant to
Sections 2(a) and 3 shall terminate upon the earliest to occur of (i) the
consummation of the Issuance or (ii) termination of the Purchase Agreement. The
obligations of Principal Shareholder pursuant to Section 2(b) shall terminate at
such time as Investor is no longer entitled to nominate persons for election to
the Board pursuant to the Investors Agreement. The obligations of Principal
Shareholder pursuant to Section 4 shall terminate when Investor and its
Affiliates no longer own any Debentures or Common Stock issued upon conversion
of the Debentures or the Debentures have been exchanged for Fixed Rate
Debentures (as defined in the Purchase Ageeement).
6. Investor's Representations and Agreements.
-6-
<PAGE>
(a) Investor represents that it has full power and authority to make,
enter into and carry out the terms of this Agreement and that this Agreement has
been duly and validly executed and delivered by Investor and constitutes a valid
and binding obligation of Investor, enforceable against Investor in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratoriums and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(b) Investor represents that it has delivered to Principal Shareholder
a true and complete copy of the Investors Agreement and the Purchase Agreement,
and agrees that no amendment or modification of either such agreement shall
increase any obligation of Principal Shareholder hereunder unless Principal
Shareholder has consented thereto in writing.
(c) Investor agrees that, notwithstanding any provision of this
Agreement to the contrary and notwithstanding that the Company is an Affiliate
of the Principal Shareholder, the Principal Shareholder shall not be responsible
for any action or inaction by the Company or any Subsidiary (as defined in the
Purchase Agreement) of the Company which is contrary to any provision of this
Agreement.
7. Miscellaneous.
(a) No Inconsistent Agreements. Principal Shareholder has not and will
not hereafter enter into any agreement with respect to the Shares that is
inconsistent with the rights granted to Investor in this Agreement or otherwise
conflicts with the provisions hereof.
(b) Specific Performance. Each party hereto severally acknowledges that
it will be impossible to measure in money the damage to the other party if a
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other party will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis
-7-
<PAGE>
that the other party has an adequate remedy at law. Each party hereto severally
agrees that it will not seek, and agrees to waive any requirement for, the
securing or posting of a bond in connection with any other party's seeking or
obtaining such equitable relief.
(c) Amendments and Waivers. This Agreement may not be amended except by
an instrument in writing signed by Principal Shareholder and Investor.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing (and shall be deemed to have been
duly given upon receipt) by delivery in person, facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
7(d)):
(i) if to Principal Shareholder, to:
Benesse Corporation
Tokyo Legal Administration Office
1-34 Ochiai, Tama-Shi
Tokyo 206, Japan
Attention: Mr. Yusaku Mori
Facsimile: 81-42-356-7301
with a copy to:
Coudert Brothers
Daini Okamotoya Building, 10F
1-22-16 Toranomon Minato-ku
Tokyo, Japan 105
Attention: Scott T. Jones
Facsimile: (813) 3580-2301
(ii) if to Investor, to:
Apollo Management IV, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, California 90067
Attention: Larry Berg
Facsimile: (310) 201-4198
-8-
<PAGE>
with a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067-1725
Attention: Alison S. Ressler
Facsimile: (310) 712-8800
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto
and shall not be assignable by Principal Shareholder without the written consent
of the Investor, or by the Investor (other than to an Affiliate) without the
written consent of the Principal Shareholder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. All actions
and proceedings arising out of or relating to this agreement shall be brought by
the parties and heard and determined only in a Federal or State court located in
the Borough of Manhattan in the City and State of New York and the parties
hereto consent to jurisdiction before and waive any objections to the venue of
such Federal and New York courts. The parties hereto agree to accept service of
process in connection with any such action or proceeding in any manner permitted
for a notice hereunder.
(i) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstances, 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 contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
-9-
<PAGE>
(j) Entire Agreement. This Agreement is intended by the parties to be a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings with respect to such subject matter, other than those
set forth or referred to herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
(k) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement or where any provision hereof is validly asserted as
a defense, the successful party shall, to the extent permitted by applicable
law, be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(l) Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by the other party in order to carry out the
provisions and purposes of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
---------------------
Name: Laurence Berg
Title: Partner
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Laurence Berg
---------------------
Name: Laurence Berg
Title: Partner
BENESSE CORPORATION
By: /s/ Soichiro Fukutake
-------------------------
Name: Soichiro Fukutake
Title: President
-11-
Exhibit 99.7
BENESSE HOLDINGS INTERNATIONAL, INC.
65 East 55th Street, 23rd Floor
New York, New York 10022
October 2, 1998
Berlitz International, Inc.
400 Alexander Park
Princeton, New Jersey 08540-6306
Ladies and Gentlemen:
Reference is made to the Purchase Agreement, dated as of the date
hereof (the "PURCHASE AGREEMENT"), between Berlitz International, Inc., a New
York corporation (the "COMPANY"), and Benesse Holdings International, Inc., a
Delaware corporation ("BENESSE"), which is being entered into simultaneously
with this letter agreement. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Purchase Agreement.
In connection with the Purchase Agreement, the parties hereby agree as
follows:
1. At the request of the Company and in order to permit the Company to
proceed with the Company Shareholder Meeting and to furnish its proxy statement
to shareholders in connection therewith, Benesse hereby irrevocably commits,
subject to satisfaction of the conditions set forth in the Purchase Agreement
and the Other Purchase Agreement to, and to the Closing of, the issuance and
sale of an aggregate of $155 million of the Company's Convertible Exchangeable
Subordinated Debentures Due 2010, Series A and B, and the application of the
proceeds thereof as contemplated therein, to lend to the Company the principal
sum of Fifty Million U.S. Dollars (US $50,000,000) on the Closing Date upon the
terms and subject to the conditions of the subordinated promissory note attached
hereto as Exhibit A.
2. This letter agreement shall not be assignable by either party hereto
without the prior written consent of both parties hereto and any purported
assignment without such consent shall be null and void.
3. This letter agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
4. This letter agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which when taken together shall be
deemed one and the same instrument.
If the foregoing correctly sets forth the agreement between the parties
hereto with respect to the subject matter hereof, kindly execute a copy of this
agreement in the space
<PAGE>
2
indicated below at which time this letter agreement shall serve as a valid and
binding agreement between the parties hereto with respect to the subject matter
hereof.
Very truly yours,
BENESSE HOLDINGS INTERNATIONAL, INC.
By: /s/ Mako Obara
------------------
Name: Mako Obara
Title: President & CEO
ACCEPTED AND AGREED TO:
BERLITZ INTERNATIONAL, INC.
By: /s/ Hiromasa Yokoi
- ----------------------
Name: Hiromasa Yokoi
Title: Chairman, CEO & President
<PAGE>
EXHIBIT A
BERLITZ INTERNATIONAL, INC.
SUBORDINATED PROMISSORY NOTE
THE SECURITY REPRESENTED BY THIS PROMISSORY NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
US $50,000,000 New York, New York
________ __, 1998
SECTION 1. PAYMENT OF PRINCIPAL AND INTEREST
BERLITZ INTERNATIONAL, INC. (the "BORROWER"), a New York corporation,
hereby promises to pay to the order of BENESSE HOLDINGS INTERNATIONAL, INC., a
Delaware corporation, or its successors or permitted assigns (the "LENDER") the
principal sum of Fifty Million U.S. Dollars (US$50,000,000). The principal
amount of this Promissory Note (herein, this "NOTE") remaining unpaid from time
to time shall bear interest from the date hereof, until paid in full, payable in
accordance with Section 2 hereof. The Borrower agrees to repay the entire
principal amount of this Note, and all accrued and unpaid interest thereon, in a
single payment on the Maturity Date. As used herein, "MATURITY DATE" means
[____________, 2010], the date which is the twelfth anniversary of the date
hereof.
SECTION 2. INTEREST.
(a) Interest on all amounts outstanding hereunder shall be payable
semi-annually in arrears on each Interest Payment Date. As used herein,
"INTEREST PAYMENT DATE" means June 30 and December 30 of each year during the
term hereof commencing December 30, 1998. If an Interest Payment Date does not
fall on a Business Day, then the Interest Payment Date shall be the next
preceding Business Day.
(b) Interest shall be paid on the unpaid principal amount of this Note
(i) until the fifth anniversary of this Note, at the Initial Interest Rate and
(ii) thereafter, at the Reset Interest Rate. As used herein, the "INITIAL
INTEREST RATE" shall be 5.90% per annum. All interest on this Note shall be
calculated on the basis of a 365 day year and the actual number of days elapsed.
(c) The Reset Interest Rate shall be determined and agreed upon by the
Borrower and the Lender by no later than the fifth Business Day prior to the
fifth anniversary of the date of this Note (the "DETERMINATION DATE"), provided,
however, that in no event shall the Reset Interest Rate exceed the Applicable
Rate. If the Borrower and the Lender are unable to agree
<PAGE>
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upon the Reset Interest Rate by the Determination Date, the Reset Interest Rate
shall be the Applicable Rate. As used herein, "RESET INTEREST RATE" shall mean
the rate fixed on the Determination Date at which interest on the outstanding
principal of this Note shall be calculated from and after the fifth anniversary
of this Note until this Note is fully repaid.
(d) Notwithstanding anything herein to the contrary, if on any Interest
Payment Date the payment of interest on this Note is prohibited under Section 9,
in lieu of a cash payment of such amount of interest, the then principal amount
payable under this Note shall be increased with effect from such Interest
Payment Date by an amount equal to the amount of such prohibited cash payment.
Any such amount of interest added to the principal of this Note shall continue
to be considered a "scheduled payment on account of the Debt" for purposes of
Section 9 and shall be payable as soon thereafter as is permitted under Section
9.
(e) Notwithstanding anything herein to the contrary, the interest
payable by the Borrower with respect to this Note shall not exceed the maximum
amount permitted by applicable law and, to the extent that any payments in
excess of such permitted amount are received by the Lender, such excess shall be
considered payments in respect of the principal amount of this Note.
SECTION 3. PAYMENT.
Principal and interest hereunder shall be payable to the Lender without
set-off or counterclaim in U.S. Dollars in immediately available funds to the
bank account of the Lender as notified in writing to the Borrower.
SECTION 4. OPTIONAL REDEMPTION.
At its option, the Borrower may prepay this Note at any time from and
after the tenth anniversary of the date of this Note if, as of such time, all of
the Convertible Debentures have been repaid or converted into Common Stock (the
"OPTIONAL REDEMPTION"). If the Borrower exercises such Optional Redemption,
there shall be no prepayment penalty or premium.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender that:
(A) ORGANIZATION; POWER AND AUTHORITY. The Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Borrower has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to
<PAGE>
-3-
transact the business it transacts and proposes to transact, to execute and
deliver this Note and the Convertible Debentures and to perform the provisions
hereof and thereof.
(B) AUTHORIZATION, ETC. This Note and the Convertible Debentures have
been duly authorized by all necessary corporate action on the part of the
Borrower, and each of this Note and the Convertible Debentures constitutes a
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(C) CAPITALIZATION; SUBSIDIARIES. (i) As of the date hereof, the
authorized capital stock of the Borrower consists of: (x) 40,000,000 shares of
common stock, par value $.10 per share ("COMMON STOCK"), of which 9,529,788
shares are issued and outstanding and (y) 180,000 shares of preferred stock, par
value $1.00 per share, of which no shares are issued and outstanding.
(ii) The outstanding shares of Common Stock of the Borrower
have been duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(iii) The Borrower has disclosed in Schedule 5.4 to the
Debenture Purchase Agreement a list of all its Subsidiaries together with the
jurisdiction of organization of each such Subsidiary. All of the outstanding
shares of capital stock or similar equity interests of each Subsidiary of the
Borrower have been validly issued, are fully paid and nonassessable and are
owned by the Borrower or another Subsidiary (except for certain shares owned by
nominees and third parties as disclosed on Schedules 5.4(a)(i) and 5.4(a)(ii),
respectively, to the Debenture Purchase Agreement) free and clear of any lien,
except for liens on certain Subsidiaries' shares as indicated on Schedule 5.4(b)
to the Debenture Purchase Agreement.
(iv) Each Subsidiary of the Borrower is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
<PAGE>
-4-
(D) FILED DOCUMENTS AND FINANCIAL STATEMENTS. (i) Each of the documents
filed with the Securities and Exchange Commission since January 1, 1998 complied
as to form in all material respects with all of the requirements of the
Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as
amended, as applicable, and did not contain any untrue statement of a material
fact or omit to state any material fact required to be contained therein or
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. Any financial
statements contained in such filings (including in each case the related
schedules and notes) fairly represent in all material respects the consolidated
financial position of the Borrower and its Subsidiaries as of the respective
dates and the consolidated results of their operations and cash flows for the
respective periods and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments). Since December 31, 1997, there has been no change in the financial
condition, operations, business or properties of the Borrower or any of its
Subsidiaries except as disclosed in the Borrower's consolidated financial
statements or changes that individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
(ii) The Borrower's unaudited interim financial statements,
included in the information listed in Schedule 5.5(b) to the Debenture Purchase
Agreement and delivered to the Lender, were prepared in all material respects on
the same basis as the financial statements contained in the documents filed with
the Securities and Exchange Commission and fairly present the financial position
of the Borrower as of the dates referenced therein.
(iii) The Borrower's financial projections, included in the
information listed in Schedule 5.5(c) and delivered to the Lender, were prepared
in good faith based on assumptions believed to have been reasonable at the time
made and were prepared in all material respects consistent with past accounting
practices; however, no representation or warranty is made with respect to actual
financial results which will vary and may vary materially from such projections.
(E) COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Borrower of this Note and the Convertible
Debentures will not (i) contra vene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Borrower or any Subsidiary under, any indenture, mortgage, deed of trust,
loan, credit agreement, corporate charter or by-laws, or any other material
agreement, lease or instrument to which the Borrower or any Subsidiary is bound
or by which the Borrower or any Subsidiary or any of their respective properties
may be bound or affected, (ii) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or governmental authority applicable to the Borrower or any
Subsidiary or (iii) violate any provision of any statute or other rule or
regulation of any governmental authority applicable to the Borrower or any
Subsidiary, which violation would reasonably be expected to have a Material
Adverse Effect. No representation
<PAGE>
-5-
or warranty is made with respect to the Borrower's agreement with NationsBank,
National Association, all amounts owing under which have been repaid on or prior
to the date of this Note.
(F) GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery or performance
by the Borrower of this Note.
(G) LITIGATION; OBSERVANCE OF STATUTES AND ORDERS. (i) There are no
actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Subsidiary or any property
of the Borrower or any Subsidiary in any court or before any arbitrator of any
kind or before or by any governmental authority that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(ii) Neither the Borrower nor any Subsidiary is in default
under any order, judgment, decree or ruling of any court, arbitrator or
governmental authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation environmental laws) of any
governmental authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(H) TAXES. The Borrower and its Subsidiaries have filed all income tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (i) the amount of which, or the failure to file with
respect to which, is not individually or in the aggregate material or (ii) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Borrower or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Federal income tax liabilities of the Borrower and its
Subsidiaries have been audited by the Internal Revenue Service and paid for all
fiscal years up to and including the fiscal year ended 1994.
(I) TITLE TO PROPERTY; LEASES. The Borrower and its Subsidiaries have
good title to their respective properties, including all such properties
reflected in the audited balance sheet as of December 31, 1997 or purported to
have been acquired by the Borrower or any Subsidiary after said date (except as
sold or otherwise disposed of), in each case free and clear of liens, except for
those defects in title and liens that, individually or in the aggregate, would
not have a Material Adverse Effect or as otherwise set forth on Schedule 5.10 to
the Debenture Purchase Agreement. All material leases are valid and subsisting
and are in full force and effect in all material respects.
<PAGE>
-6-
(J) LICENSES, PERMITS, ETC. The Borrower and its Subsidiaries own or
possess all licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that are material,
without conflict with the rights of others, except for those conflicts that,
individually or in the aggregate, would not have a Material Adverse Effect.
(K) PRIVATE OFFERING BY THE BORROWER. Neither the Borrower nor anyone
acting on its behalf has offered this Note or any similar securities for sale
to, or solicited any offer to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any person other than the Lender, which
has been offered this Note at a private sale for investment. Neither the
Borrower nor anyone acting on its behalf has taken, or will take, any action
that would subject the issuance or sale of this Note to the registration
requirements of Section 5 of the Securities Act of 1933, as amended.
(L) USE OF PROCEEDS. The Borrower will as promptly as practicable apply
substantially all the proceeds of the sale of this Note and the Convertible
Debentures to retire existing indebtedness in accordance with Schedule 5.14 to
the Debenture Purchase Agreement.
(M) EXISTING INDEBTEDNESS. Neither the Borrower nor any Subsidiary is
in default, and no waiver of default is currently in effect, in the payment of
any principal of or interest on any Indebtedness of the Borrower or such
Subsidiary in an aggregate principal amount in excess of $3,000,000 and no event
or condition exists with respect to any such Indebtedness of the Borrower or any
Subsidiary that would (i) permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become due
and payable before its stated maturity or before its regularly scheduled dates
of payment or (ii) prevent the Borrower or any Subsidiary from prepaying any
such Indebtedness without prepayment penalty or premium (except (A) for the
Borrower's agreement with NationsBank, National Association, all amounts owing
under which have been repaid on or prior to the date of this Note, and (B) that
a prepayment penalty or premium might become payable in connection with any
early termination of the Borrower's interest rate, currency or similar swaps).
(N) FOREIGN CORRUPT PRACTICES ACT. The Borrower is not in violation of
Section 30A of the Securities Exchange Act of 1934, as amended.
(O) NO BROKERS OR FINDERS. No agent, broker, finder, or investment or
commercial banker (other than Goldman, Sachs & Co., as to whose fees and
expenses the Borrower shall have full responsibility and the Lender shall have
no responsibility) or other Person or firm engaged by or acting on behalf of the
Borrower or any Subsidiary in connection with the negotiation, execution or
performance of this Note, is or will be entitled to any brokerage or finder's or
similar fee or other commission as a result of this Note.
<PAGE>
-7-
(P) "BERLITZ" TRADEMARK. Except as disclosed in Schedule 5.21 to the
Debenture Purchase Agreement, the Borrower has valid title and ownership of, and
has properly registered the "Berlitz" trademark, and use of such trademark in
the Borrower's business as now conducted or as currently proposed to be
conducted causes no known conflict with or infringement of the rights of others
except for any such failure or conflict which would not be expected to have a
Material Adverse Effect. Except as disclosed in Schedule 5.21 to the Debenture
Purchase Agreement, neither the Borrower nor any Subsidiary has received any
written notice challenging the Borrower's rights or making any other claim with
respect to the "Berlitz" trademark or is aware of any such threatened challenge
or claim; and such trademark is free and clear of any liens except as disclosed
in Schedule 5.21 to the Debenture Purchase Agreement.
SECTION 6. COVENANTS.
In addition to the other undertakings herein contained, the Borrower
hereby covenants to the Lender that so long as any amount payable hereunder is
outstanding the Borrower shall perform the following obligations:
(A) USE OF PROCEEDS. The Borrower shall use the proceeds of this Note
only for prepayment of amounts outstanding under the Benesse Facilities,
prepayment of amounts outstanding under the Bank Credit Facilities, repayments
of other Indebtedness or for any other purpose if approved by the Lender in
writing.
(B) OTHER AGREEMENTS. The Borrower shall perform all of its obligations
as and when required pursuant and with respect to the Convertible Debentures as
in effect on the date hereof.
(C) INFORMATION. The Borrower shall furnish to the Lender:
(i) promptly, such financial and other information as the
Lender may from time to time reasonably request; and
(ii) promptly, any financial and other information provided to
the holders of the Convertible Debentures pursuant to subsection (b).
(D) COMPLIANCE WITH LAW. The Borrower will and will cause each of its
Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
environmental laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such
<PAGE>
-8-
licenses, certificates, permits, franchises and other governmental
authorizations would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(E) INSURANCE. The Borrower will and will cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective proper ties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
(F) MAINTENANCE OF PROPERTIES. The Borrower will and will cause each of
its Sub sidiaries to maintain and keep, or cause to be maintained and kept,
their respective properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided that this Section
shall not prevent the Borrower or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Borrower has concluded that
such discontinuance would not, individually or in the aggregate, have a Material
Adverse Effect.
(G) PAYMENT OF TAXES. The Borrower will and will cause each of its
Subsidiaries to file all income tax or similar tax returns required to be filed
in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies payable by any of them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, provided that
neither the Borrower nor any Subsidiary need pay any such tax or assessment if
(i) the amount, applicability or validity thereof is contested by the Borrower
or such Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Borrower or a Subsidiary has established adequate reserves
therefor in accordance with GAAP on the books of the Borrower or such Subsidiary
or (ii) the nonpayment of all such taxes and assessments in the aggregate would
not reasonably be expected to have a Material Adverse Effect.
(H) CORPORATE EXISTENCE, ETC. Except as provided in Section 6(j), the
Borrower will at all times preserve and keep in full force and effect its
corporate existence. Subject to Section 6(j), the Borrower will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged or consolidated into the Borrower or a Sub
sidiary) and all rights and franchises of the Borrower and its Subsidiaries
unless, in the good faith judgment of the Borrower, the termination of or
failure to preserve and keep in full force and effect such corporate existence,
right or franchise would not, individually or in the aggregate, have a Material
Adverse Effect.
(I) REPURCHASE OF NOTE AT THE OPTION OF THE LENDER UPON A CHANGE OF
CONTROL.
<PAGE>
-9-
(i) Upon the occurrence of a Change of Control or a Benesse
Sale Event, the Lender shall have the right, at the Lender's option,
pursuant to an offer (subject only to conditions required by applicable
law, if any) by the Borrower (the "CHANGE OF CONTROL OFFER"), to
require the Borrower to repurchase for cash all or any part of this
Note (provided, that the principal amount of this Note to be
repurchased must be $1,000,000 or an integral multiple thereof) on a
date (the "CHANGE OF CONTROL PURCHASE DATE") that is no later than 150
days after the occurrence of such Change of Control or Benesse Sale
Event, whichever it may be, at the Change of Control Purchase Price
specified below, plus accrued and unpaid interest to the Change of
Control Purchase Date. The Change of Control Offer shall be made within
15 business days following a Change of Control or Benesse Sale Event,
whichever it may be, and shall remain open for 20 Business Days
following its commencement (the "CHANGE OF CONTROL OFFER PERIOD"). Upon
expiration of the Change of Control Offer Period, the Borrower
promptly, but, in any event, no later than 150 days from the Change of
Control, shall purchase this Note (or part thereof) properly tendered
in response to the Change of Control Offer.
(ii) As used herein, a "CHANGE OF CONTROL" means:
(A) any merger or consolidation of the Borrower with
or into any Person or any sale, transfer or other conveyance, whether
direct or indirect, of all or substantially all of the assets of the
Borrower on a consolidated basis, in one transaction or a series of
related transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Section 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than Benesse, Corporation or any of its Affiliates
(collectively, the "BENESSE GROUP"), is or becomes the beneficial owner
(as such term is used in Rule 13d-3 of the Exchange Act or any
successor provision thereto), directly or indirectly, of more than 50%
of the total voting power in the aggregate normally entitled to vote in
the election of directors, managers or trustees, as applicable, of the
transferee(s) or surviving entity or entities,
(B) any "person" or "group" other than the Benesse
Group, becomes the beneficial owner, directly or indirectly, of more
than 50% of the total voting power in the aggregate of the all classes
of capital stock of the Borrower then outstanding normally entitled to
vote in election of directors, or
(C) during any period of 12 consecutive months after
the date of this Note, individuals, together with successors selected
by such individuals, who at the beginning of any such 12-month period
constituted the Board of Directors of the Borrower cease for any reason
(other than a planned retirement) to constitute a majority of the Board
of Directors of the Borrower then in office, as applicable.
<PAGE>
-10-
A "BENESSE SALE EVENT" means the sale by the Benesse Group of 80% or
more of the aggregate number of shares of Common Stock directly or indirectly
owned by the Benesse Group on the date of this Note.
The "CHANGE OF CONTROL PURCHASE PRICE" means 101% of the principal
amount of the Note.
(iii) On or before the Change of Control Purchase Date, the
Borrower will (A) accept for payment this Note or portion thereof
properly tendered pursuant to the Change of Control Offer, (B) promptly
pay the Lender an amount equal to the Change of Control Purchase Price
(together with accrued and unpaid interest, if any), and (C)
authenticate and deliver to the Lender a new Note equal in principal
amount to any unpurchased portion of the Note surrendered.
(J) MERGER, CONSOLIDATION, ETC. The Borrower shall not consolidate with
or merge with any other corporation or convey, transfer or lease substantially
all of its assets in a single transaction or series of transactions to any
Person unless:
(i) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Borrower as an entirety,
as the case may be, shall be a solvent corporation organized and
existing under the laws of the United States or any State thereof
(including the District of Columbia), and, if the Borrower is not such
corporation, such corporation shall have executed and delivered to the
Lender its assumption of the due and punctual performance and
observance of each covenant and condition of this Note; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Borrower shall have the effect of releasing the Borrower or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 6(j) from its liability under this Note.
(K) INSPECTION. The Borrower shall permit the representatives of the
Lender:
(i) No Default -- if no Default or Event of Default then
exists, at the expense of the Lender and upon reasonable prior notice
to the Borrower, to visit the principal executive office of the
Borrower, to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with the Borrower's officers, and with the consent
of the Borrower (which consent will not be unreasonably withheld) to
visit the other offices and properties of the Borrower and each
Significant Subsidiary, all at such reasonable times and as often as
may be reasonably requested in writing; and
<PAGE>
-11-
(ii) Default -- if a Default or Event of Default then exists,
at the expense of the Borrower to visit and inspect any of the offices
or properties of the Borrower or any Significant Subsidiary, to examine
all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective
officers and independent public ac countants (and by this provision the
Borrower authorizes said accountants to discuss the affairs, finances
and accounts of the Borrower and its Significant Subsidiaries), all at
such times and as often as may be requested.
(L) FURTHER DOCUMENTS. The Borrower shall execute all such other
documents and instruments and do all such other acts and things as the Lender
may from time to time reasonably require to carry out the transactions
contemplated herein.
SECTION 7. EVENTS OF DEFAULT.
Except upon the occurrence of an event under (e) or (f) below,
whereupon this Note shall become immediately due and payable without notice or
declaration by the Lender, the Lender may, subject to Section 9, by written
notice to the Borrower, declare this Note immediately due and payable, whereupon
this Note and all sums due hereunder shall become immediately due and payable
without protest, presentment, demand or notice (except the notice referred to
above in this Section 7) or without petition to any court, all of which are
expressly waived by the Borrower, if any of the following events (each an "EVENT
OF DEFAULT") shall occur:
(a) principal or interest due under this Note shall not be paid as and
when due, whether at maturity, by declaration or otherwise; or
(b) any representation by the Borrower herein shall prove to be false
or incorrect in any material respect as of the date made; or
(c) the Borrower shall default in any material respect in the due
performance of any term or covenant of this Note (which is not the subject of
another subsection of this Section 7) which default, if remediable, shall
continue unremedied for a period of thirty (30) days after the earlier of (i)
the day an officer of the Borrower obtains actual knowledge of such default, and
(ii) the day the Lender gives written notice of such default to the Borrower
(any such written notice to be identified as a "notice of default" and to refer
specifically to this paragraph (c) of Section 7); or
(d) (i) the Borrower or any Significant Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is outstanding
in an aggregate principal amount of at least $25,000,000 beyond any period of
grace provided with respect thereto, or (ii) the Borrower or any Significant
Subsidiary is in default in the performance of or compliance with any term of
<PAGE>
-12-
any evidence of any Indebtedness in an aggregate outstanding principal amount of
at least $25,000,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such default or
condition such Indebtedness has become, or has been declared, due and payable
before its stated maturity or before its regularly scheduled dates of payment;
or
(e) the Borrower or any Significant Subsidiary shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator for itself or
any of its assets or properties, (ii) admit in writing its inability to pay its
debts as they mature, (iii) make a general assignment for the benefit of
creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or any answer admitting the material allegations of a petition filed
against it in any proceeding under any such law or if action shall be taken by
the Borrower or such Significant Subsidiary for the purpose of effecting any of
the foregoing, (vi) have commenced against it any case, proceeding or other
action of a nature described in (i) through (v) above which remains undismissed
for a period of 60 days or (vii) take or be subject to any action similar to
those specified in clauses (i) through (vi) in any jurisdiction; or
(f) an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or any Significant Subsidiary,
with respect to the Borrower or such Significant Subsidiary or all or a
substantial part of the assets of the Borrower or any such Significant
Subsidiary, appointing a receiver, trustee or liquidator of the Borrower or such
Significant Subsidiary, or any similar order, judgment or decree shall be
entered or appointment made in any jurisdiction, and such order, judgment or
decree or appointment shall continue unstayed and in effect for a period of 60
days; or
(g) a final judgment or judgments for the payment of money aggregating
in excess of $10,000,000 are rendered against one or more of the Borrower and
its Significant Subsidiaries and which judgments are not, within 60 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay.
SECTION 8. APPLICATION OF PAYMENTS.
Each payment or prepayment received by the Lender hereunder, except as
expressly set forth herein, shall be applied, first, to the payment of accrued
interest on this Note to the date of such payment and second, to the payment of
the principal amount of this Note.
SECTION 9. SUBORDINATION AGREEMENT.
(a) The Borrower covenants and agrees and the Lender, by the Lender's
acceptance hereof, likewise covenants and agrees, for itself and any future
holder of this Note or the
<PAGE>
-13-
indebtedness evidenced hereby, that, to the extent and in the manner set forth
below in this Section 9, the Company's Senior Obligations will be senior in
right of payment to the Debt. The Lender by accepting this Note acknowledges and
agrees that the subordination provisions set forth in this Section 9 are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Obligation, whether such Senior Obligation was created or acquired before
or after the issuance of this Note, to acquire and continue to hold, or to
continue to hold, such Senior Obligation and such holder of Senior Obligations
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or continuing to hold, such Senior
Obligations.
(b) As used herein, "SENIOR IN RIGHT OF PAYMENT" means that:
(i) no part of the Debt shall have any claim to the assets of
the Borrower on a parity with or prior to the claim of the Senior
Obligations;
(ii) unless and until the Senior Obligations have been paid in
full, without the express prior written consent of all holders of such
Senior Obligations, the Lender will not take, demand (including by
means of any legal action) or receive from the Borrower, and the
Borrower will not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment of or
security for the whole or any part of the Debt; provided, however, that
(x) at any time, the Borrower may make, and the Lender may receive,
scheduled payments on account of the Debt in accordance with the terms
hereof except if a default in the performance or observance of any term
or condition relating to any Senior Obligations (other than a default
in the payment of any principal of, premium if any, or interest on the
Senior Obligations) has occurred and is continuing that permits the
holders of the Senior Obligations to declare such Senior Obligations to
be due and payable, the holders of Senior Obligations may give notice
(a "SENIOR BLOCKAGE NOTICE") to the Borrower (provided, however, no
more than one Senior Blockage Notice may be given during any 365
consecutive day period) that until all Senior Obligations are paid in
full, no scheduled payments may be made by the Borrower on account of
the Debt during the period ("SENIOR BLOCKAGE PERIOD") commencing on the
date of such Senior Blockage Notice and ending on the earliest of: (A)
189 days after the date of such Senior Blockage Notice; (B) the date of
such default is cured or waived; and (C) the date that the holders of
the Senior Obligations shall have given notice to the Borrower of
termination of the Senior Blockage Period, and except when a default in
the payment of any principal of, premium if any, or interest on the
Senior Obligations has occurred and is continuing or would result
therefrom and (y) upon the acceleration of the maturity of any Senior
Obligations, the Lender may accelerate the scheduled maturities of the
Debt if and to the extent permitted hereby at such time but such
acceleration shall not give the Lender any right to take, demand
(including by means of any legal action) or receive from the Borrower,
or the Borrower the right to make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any
<PAGE>
-14-
other manner, any payment of or security for the whole or any part of
the Debt unless and until the Senior Obligations have been paid in
full.
(c) Any payment or distribution of assets of the Borrower, whether in
cash, property or securities, to which the Lender would be entitled except for
the provisions hereof, shall be paid or delivered by the Lender, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other
Person making such payment or distribution, to the holders of the Senior
Obligations or their representative, ratably in accordance with the amounts
thereof, to the extent necessary to pay in full all Senior Obligations, before
any payment or distribution shall be made to the Lender.
(d) The expressions "prior payment in full," "payment in full," "paid
in full" and any other similar terms or phrases when used herein with respect to
the Senior Obligations shall mean the payment in full in cash, in immediately
available funds, of all the Senior Obligations and the expression "any payment
of or security for the whole or any part of the Debt" and any other similar
terms of phrases when used herein shall not be deemed to include a payment or
distribution of stock or securities of the Borrower provided for by a plan or
reorganization or readjustment authorized by an order or decree of a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or of any other corporation provided for by such plan of
reorganization or readjustment, which stock or securities are subordinated in
right of payment to all then outstanding Senior Obligations to substantially the
same extent as this Note is so subordinated as provided in this Section 9. The
consolidation of the Borrower with, or the merger of the Borrower into, another
Person or the liquidation or dissolution of the Borrower following the
conveyance or transfer of all or substantially all of its properties and assets
as an entirety to another Person upon the terms and conditions set forth in
Section 6(j) shall not be deemed a "proceeding" for the purposes of this Section
9 if the Person formed by such consolidation or into which the Borrower is
merged or the Person which acquires by conveyance or transfer such properties
and assets as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Section 6(j).
(e) If any payment or distribution, whether consisting of money,
property or securities, be collected or received by the Lender in respect of the
Debt, except payments of principal or interest permitted hereunder, the Lender
forthwith shall deliver the same to the holders of the Senior Obligations or
their representative, ratably in accordance with the amounts thereof, in the
form received, duly endorsed to such holders or such representative, if
required, to be applied to the payment or prepayment of the Senior Obligations
until the Senior Obligations are paid in full. Until so delivered, such payment
or distribution shall be held in trust by the Lender as the property of such
holders of Senior Obligations, segregated from other funds and property held by
the Lender.
<PAGE>
-15-
(f) As used herein, "SENIOR OBLIGATIONS" shall mean collectively the
unpaid principal of, premium, if any, and interest on (including, without
limitation, interest accruing after the maturity thereof and interest accruing
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Convertible Debentures, any other debentures for which the
Convertible Debentures may be exchangeable, and all other Indebtedness of the
Borrower having an initial principal amount in excess of $5,000,000, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter incurred, in each case whether on account of principal, premium
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise which by its express terms states it is a "Senior Obligation" as such
term is used in this Note.
SECTION 10. ADDITIONAL DEFINITIONS.
As used herein, the following terms have the respective meanings set
forth below:
"APPLICABLE RATE" means the interest rate per annum calculated as the
sum of (x) LIBOR plus (y) that number of basis points over LIBOR determined from
the following table based upon the Consolidated Leverage Ratio computed as of
the same day as of which LIBOR is determined, less (z) 50.0 basis points:
BASIS POINTS OVER
CONSOLIDATED LEVERAGE RATIO LIBOR
- ------------------------------------------------- ---------------------
Less than or equal to 1.25 37.5 bps
Less than or equal to 2.0 but greater than 1.25 42.5 bps
Less than or equal to 2.5 but greater than 2.0 50.0 bps
Less than or equal to 3.0 but greater than 2.5 62.5 bps
Greater than 3.0 87.5 bps
"BANK CREDIT FACILITIES" means the $120 million term loan and the $70
million revolving credit facility by and among Nationsbank, National
Association, as agent, the other lenders party thereto and Berlitz
International, Inc., as Borrower, dated August 28, 1997, as amended.
"BENESSE FACILITIES" means all amounts owed under the $20 million
subordinated non-negotiable note dated September 21, 1994 issued by Berlitz
International, Inc. payable to Benesse Holdings International, Inc. (f/k/a/
Fukutake Holdings (America), Inc.); the $6 million subordinated promissory note
dated March 25, 1996 issued by Berlitz International, Inc. payable
<PAGE>
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to Benesse Holdings International, Inc., and the (Y)1 Billion subordinated
promissory note dated September 21, 1994 issued by Berlitz Japan, Inc. payable
to Benesse Corporation.
"BUSINESS DAY" means, for the purposes of this Note, any day other than
a Saturday, a Sunday or a day on which commercial banks in New York are required
or authorized to be closed.
"CAPITAL LEASES" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"COMMON STOCK" means shares of common stock, par value $.10 per share,
of the Borrower.
"CONSISTENT BASIS" in reference to the application of GAAP means the
accounting principles observed in the period referred to are comparable in all
material respects to those applied in the preparation of the audited financial
statements of the Borrower in prior periods, except to the extent any deviation
therefrom is disclosed to the Lender by the Borrower and approved by the Lender
and Deloitte & Touche LLP or any other independent accountants of nationally
recognized standing.
"CONSOLIDATED LEVERAGE RATIO" means, as of the date of computation
thereof, the ratio of (i) the total amount outstanding under all Senior
Obligations (as determined at such date) minus Subordinated Debt (as determined
at such date) to (ii) EBITDA for the most recent Four- Quarter Period ending at
least 45 (or in the case of a Four-Quarter Period ending on the last day of the
Borrower's fiscal year, 90) days prior to such date of computation.
"CONVERTIBLE DEBENTURES" shall mean the $155,000,000 aggregate
principal amount of 5% Convertible Exchangeable Subordinated Debentures due
2010, Series A and Series B, of the Borrower.
"DEBENTURE PURCHASE AGREEMENT" means the Purchase Agreement, dated as
of October 2, 1998, between the Borrower, as issuer, and the Lender, as
purchaser, pursuant to which the Lender is purchasing on the date of this Note
$55,000,000 principal amount of Series B of the Convertible Debentures.
"DEBT" means collectively the unpaid principal of, premium, if any, and
interest on (including, without limitation, interest accruing after the maturity
date of this Note and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post- filing or
post-petition interest is allowed in such proceeding) this Note and all other
indebtedness of the Borrower in respect thereof, whether direct or indirect,
absolute or contingent, due or to
<PAGE>
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become due, now existing or hereafter incurred, in each case whether on account
of principal, premium, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"EBITDA" means, with respect to the Borrower for any Four-Quarter
Period ending on the date of computation thereof, the sum of, without
duplication, (i) Net Income, (ii) Interest Expense, (iii) taxes on income, (iv)
amortization, (v) depreciation, (vi) other non-cash liabilities, expenses and
minority interests otherwise deducted in calculating Net Income, all determined
on a consolidated basis in accordance with GAAP applied on a Consistent Basis;
provided, however, that there shall be added to EBITDA the amount otherwise
deducted therefrom attributable to foreign currency exchange translation
adjustment losses.
"FOUR-QUARTER PERIOD" means a period of four full consecutive fiscal
quarters of the Borrower, taken together as one accounting period.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment
of such indebt edness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available
funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
<PAGE>
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In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"INDEBTEDNESS" with respect to any Person, means, on any date of
determination (without duplication):
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (f) hereof.
"INTEREST EXPENSE" means, with respect to any period of computation
thereof, the difference of (a) the gross interest expense of the Borrower for
such period, including without limitation (i) the current amortized portion of
debt discounts to the extent included in gross interest expense, (ii) the
current amortized portion of all fees (including fees payable in respect of any
swap agreement) payable in connection with the incurrence of Indebtedness to the
extent included in gross interest expense and (iii) the portion of any payments
made in connection with Capital Leases allocable to interest expense, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis, less (b) all interest on Subordinated Debt accrued but not
paid in cash during such period.
<PAGE>
-19-
"JOINT VENTURE" means any corporation, partnership or other entity in
which the Borrower, directly or indirectly has any equity interest, the accounts
of which are not consolidated with those of the Borrower in accordance with
GAAP.
"LIBOR" means the six month LIBOR rate on the London banking day agreed
to by the Borrower and the Lender in determining the Reset Interest Rate or,
absent such agreement, on the second London banking day prior to the fifth
anniversary of this Note, in each case, as published in the Wall Street Journal
on the next succeeding Business Day.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Borrower and its Subsidiaries taken as a whole, or (b) the ability of the
Borrower to perform its obligations under this Note, or (c) the validity or
enforceability of this Note.
"NET INCOME" means, for any period of computation thereof, the gross
revenues from operations and income of the Borrower, other than Joint Ventures
(including payments received by the Borrower, other than Joint Ventures, of
interest income and dividends and distributions made in the ordinary course of
their businesses by those entities in which investment is permitted pursuant to
this Note and not related to an extraordinary event, including without
limitation royalties, dividends and distributions made in cash from accumulated
net earnings of a Joint Venture to the Borrower), less all operating and
non-operating expenses of the Borrower, other than Joint Ventures, including
taxes on income, all determined on a consolidated basis in accordance with GAAP
applied on a Consistent Basis; but excluding from Net Income for all purposes,
(i) any gain resulting from foreign currency translation adjustments, (ii) any
positive adjustment for minority interests, (iii) net gains on the sale,
conversion or other disposition of capital assets, (iv) net gains on the
acquisition, retirement, sale or other disposition of capital stock and other
securities of the Borrower, (v) net gains on the collection of proceeds of life
insurance policies, (vi) any write-up of any asset, and (vii) any other net gain
or credit of an extraordinary nature as determined in accordance with GAAP
applied on a Consistent Basis.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"SUBORDINATED DEBT" means this Note, and all other indebtedness of the
Borrower which (i) is subordinated to the Senior Obligations, or (ii) has a
maturity date later than this Note and provides that no cash payments of
principal, interest or fees may be made prior to the Maturity Date of this Note.
<PAGE>
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"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary that would at
such time constitute a "significant subsidiary" (as such term is defined in
Regulation S-X of the Securities and Exchange Commission as in effect on the
date of this Note) of the Borrower.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Borrower.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Note, the amount of the
obligation under any Swap shall be the amount determined in respect thereof as
of the end of the then most recently ended fiscal quarter of such Person, based
on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
SECTION 11. RELATION TO OTHER TRANSACTIONS.
Except as expressly set forth herein, the obligations of the Borrower
hereunder are unconditional and no reference to any other document or agreement
herein is intended or shall be deemed to render the Borrower's obligations
hereunder conditional. The illegality or unenforceability of, or the default by
any party under, any other document or agreement referred to herein shall not
constitute a defense to any claim by the Lender for the payment of principal,
interest or any other amount hereunder. Notwithstanding the foregoing, this
Section 11 shall in no manner affect or be deemed to affect the subordination of
this Note pursuant to Section 9 hereof or the rights of the holders of the
Senior Obligations.
SECTION 12. ASSIGNMENT, ETC.
This Note shall be binding upon each of the Borrower, the Lender and
their respective successors and assigns; provided, however, the Borrower may not
assign this Note without the
<PAGE>
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prior written consent of the Lender. The Lender may sell, assign or transfer
this Note without any requirement of consent by the Borrower.
SECTION 13. INDEMNIFICATION.
The Borrower shall pay, indemnify, and hold the Lender harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys' fees and
expenses) or disbursements of any kind or nature whatsoever ("LOSSES") arising
out of or in connection with (a) the enforcement of any rights of the Lender
under this Note, and (b) any claim (whether or not asserted in any legal
proceeding), litigation, investigation, arbitration or proceeding relating to
this Note (collectively, "INDEMNIFIED LIABILITIES") provided that the Borrower
shall have no obligation hereunder to the Lender with respect to indemnified
liabilities arising from (i) the gross negligence or willful misconduct of the
Lender, (ii) legal proceedings commenced against the Lender by any security
holder or creditor of the Lender arising out of or based upon rights afforded
any such security holder or creditor solely in its capacity as such. The
agreements in this section shall survive for -5- eighteen (18) months after
repayment of this Note and all other amounts payable hereunder.
SECTION 14. NO WAIVER, CUMULATIVE REMEDIES.
The Lender shall not by any act (except by a written instrument signed
by the Lender), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Lender
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
SECTION 15. EXPENSES.
Each party hereto agrees to pay or reimburse, or cause to be paid or
reimbursed, all of its costs and expenses incurred in connection with the
preparation, execution, and delivery of this Note including, without limitation,
the fees and disbursements of counsel.
SECTION 16. GOVERNING LAW.
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This note and the rights and obligations of the Borrower and Lender
under this Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
SECTION 17. WAIVERS OF JURY TRIAL.
The Borrower and, by acceptance hereof, the Lender hereby irrevocably
and unconditionally waive trial by jury in any legal action or proceeding
relating to this Note or any other documents related hereto and for any
counterclaim therein.
IN WITNESS WHEREOF, the Borrower has caused a duly authorized officer
of the Borrower, solely in such officer's capacity as such, to duly execute this
Note on behalf of the Borrower in New York, New York as of the date hereof.
BERLITZ INTERNATIONAL, INC.
By:_______________________
Name:
Title:
AGREED TO AND ACCEPTED:
BENESSE HOLDINGS INTERNATIONAL,
INC.
By:_______________________
Name:
Title:
Exhibit 99.8
BERLITZ INTERNATIONAL, INC. ENTERS INTO AN INVESTMENT
AGREEMENT WITH APOLLO MANAGEMENT IV, L.P.
PRINCETON, N.J., October 7, 1998 -- Berlitz International, Inc.
("Berlitz" or the "Company") (NYSE: BTZ), the world's premier language services
company with leading positions in language instruction and translation services,
announced today it had entered into adefinitive investment agreement with Apollo
Management IV, L.P. and its affiliates (together, "Apollo"), a private
investment firm. As part of the investment, Apollo will purchase $100 million of
convertible debentures from the Company. In addition, Benesse Holdings
International, Inc. ("Benesse Holdings"), the Company's largest shareholder,
will purchase $55 million of convertible debentures on similar terms. In a
separate transaction, Berlitz has agreed to issue to Benesse Holdings a $50
million subordinated note. Proceeds from the sale of the convertible debentures,
as well as proceeds from the note issuance, will be used to retire all of the
Company's existing funded indebtedness and will provide the Company with greater
flexibility to pursue internal growth initiatives in the language and education
related business sectors. Goldman, Sachs and Co. acted as financial advisor to
Berlitz in this transaction.
The Apollo and Benesse Holdings investments were unanimously approved
by the Company's board of directors. Documents related to the investments are
expected to be filed with the U.S. Securities and Exchange Commission within the
next few weeks. The issuance of the convertible debentures is subject to a
shareholder vote, and proxy materials are expected to be mailed to Berlitz
shareholders within the next 60 days. In connection with the investments,
Benesse Holdings has agreed with Apollo to vote Benesse Holdings' shares in
favor of the transaction.
Assuming conversion of all of the debentures issued in the transaction,
Apollo will own approximately 20% of the outstanding common stock of Berlitz and
Benesse Holdings will own approximately 60%. Upon closing of the transaction,
Berlitz will expand its board of directors and will ask Mr. Antony Ressler and
Mr. Laurence Berg, both senior partners of Apollo, to join the Company's board
of directors.
Mr. Hiromasa Yokoi, Vice Chairman, Chief Executive Officer and
President of Berlitz, stated that "Berlitz is very excited about our investment
relationship with Apollo. We look forward to welcoming Tony and Larry to the
board and to a successful relationship with Apollo. We believe Apollo's
commitment to the fields of language and education related business, extensive
experience with acquisitions and strategic partnerships, and relationships with
the investment community will bring an important expertise to the Company and
should provide Berlitz with numerous opportunities to pursue strategic
initiatives to enhance shareholder value."
Mr. Ressler of Apollo called Berlitz "a premier education franchise
with a well-known worldwide brand-name." He continued, "we look forward to a
mutually beneficial relationship with Berlitz. Apollo views Berlitz as the
dominant provider of language instruction and translation services and strongly
believes that the Berlitz franchise is a unique platform for growth in the
language, education and training sectors. We believe Berlitz is well-positioned
to benefit from the accelerating trend
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2
towards a global economy and from paradigm shifts in the way education is
delivered."
Since inception in 1990, Apollo and its affiliated investment funds
have invested over $8.5 billion of capital. The firm's current equity fund,
Apollo Investment Fund IV, recently closed on approximately $3.6 billion of
equity commitments. Through offices in Los Angeles and New York, Apollo, through
its investment funds, has invested in a wide variety of industries, both
domestically and internationally, in a flexible manner according to the needs of
its strategic partners.
For over 120 years, Berlitz has come to mean excellence in language
services. Since its founding, the Company has established a highly recognized
brand name and superior reputation throughout the world as a result of the
Company's tradition of teaching excellence. Through over 400 locations,
predominantly Company-owned, in over 50 countries, Berlitz offers language
instruction, cross-cultural training, document translation, software
localization and interpretation services. In addition, Berlitz offers a wide
range of published products including dictionaries, phrase books, travel guides
and self-study language instruction materials including CD-ROM formats. In the
last 12 months, the Company has completed several small acquisitions of
technology-based translation companies and has launched several distance
learning and other technology-based learning initiatives. Berlitz is traded on
the New York Stock Exchange under the ticker symbol BTZ. For more information on
Berlitz, please visit the Company's website at www. berlitz.com.
Contact: Robert Minsky, Executive Vice President - Corporate Planning and
Marketing
(609) 514-3008
