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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BERLITZ INTERNATIONAL, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BERLITZ INTERNATIONAL, INC.
-----------------------------------------------------------------------
(Name of Person Filing Proxy Statement)
</TABLE>
Payment of Filing Fee (Check appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1 Title of each class of securities to which transaction
applies:
----------------------------------------------------------
2 Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
3 Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------
4 Proposed maximum aggregate value of transaction:
----------------------------------------------------------
5 Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
</TABLE>
<PAGE>
[LOGO]
April 17, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 annual meeting of shareholders
that will be held on Tuesday, June 6, 2000 at 10:00 a.m. in New York, New York.
The notice and proxy statement on the following pages contains details
concerning the business to come before the meeting. Management will report on
current operations and there will be an opportunity for discussion concerning
Berlitz International, Inc. and its activities. Please sign and return your
proxy card in the enclosed envelope to ensure that your shares will be
represented and voted at the meeting even if you cannot attend. You are urged to
sign and return the enclosed proxy card even if you plan to attend the meeting.
I look forward to personally greeting all shareholders who are able to
attend.
[SIGNATURE]
Soichiro Fukutake
CHAIRMAN
<PAGE>
[LOGO]
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 6, 2000
Notice is given that the 2000 annual meeting of shareholders of Berlitz
International, Inc. will be held at the Rihga Royal Hotel, 151 West 54th St.,
New York, New York 10019 on Tuesday, June 6, 2000 at 10:00 a.m. local time for
the following purposes:
1 To elect five directors to serve two-year terms expiring on the date of
the 2002 annual meeting of shareholders;
2 To ratify the selection by the board of directors of the company of
Deloitte & Touche LLP, independent public accountants, to audit the
company's consolidated financial statements for the fiscal year ending
December 31, 2000; and
3 To transact any other business that may properly come before the annual
meeting.
The board of directors has fixed the close of business on April 17, 2000 as
the record date for the purpose of determining shareholders entitled to notice
of and to vote at the annual meeting or any postponement or adjournment of the
annual meeting. A list of those shareholders will be open to the examination of
any shareholder during regular business hours for the ten days prior to the
annual meeting at the company's offices at 400 Alexander Park, Princeton, New
Jersey, 08540. Shareholders are entitled to one vote for each share of common
stock of the company held of record on the record date with respect to each
matter to be voted upon at the meeting.
In order to assure a quorum, it is important that the shareholders who do
not expect to attend the annual meeting in person complete, sign, date and
return the enclosed proxy in the accompanying envelope.
By Order of the Board of Directors
[SIGNATURE]
Paul H. Weinstein
SECRETARY
Princeton, New Jersey
April 17, 2000
<PAGE>
BERLITZ INTERNATIONAL, INC.
400 ALEXANDER PARK
PRINCETON, NEW JERSEY 08540
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
JUNE 6, 2000
The enclosed proxy is solicited by the board of directors of Berlitz
International, Inc. for use at the 2000 annual meeting of shareholders to be
held at the Rihga Royal Hotel, 151 West 54th St., New York, New York 10019 on
Tuesday, June 6, 2000, at 10:00 a.m. local time, and at any postponement or
adjournment of the annual meeting. The enclosed proxy, properly executed and
received by the company prior to the annual meeting, and not revoked, will be
voted in accordance with its directions; and if no directions are indicated, the
proxy will be voted for each nominee for election as a director, and for
approval of the selection of Deloitte & Touche LLP as independent public
accountants for the company for the fiscal year ending December 31, 2000. If any
other matter should be presented at the annual meeting upon which a vote may
properly be taken, the shares represented by the proxy will be voted at the
discretion of the person or persons holding the proxy. Proxies may be revoked by
shareholders at any time prior to the voting of the proxy by written notice to
the company, by submitting a new proxy or by personal ballot at the annual
meeting.
As of the close of business on April 17, 2000, the record date for
determining shareholders entitled to vote at the annual meeting, the company had
outstanding 9,529,788 shares of its $.10 par value common stock. Each share of
common stock outstanding is entitled to one vote at the annual meeting. The
first date on which this proxy statement and the enclosed form of proxy are
being sent to the company's shareholders is on or about April 18, 2000.
ELECTION OF DIRECTORS
The board of directors of the company presently consists of twelve directors
divided into two classes each having a term of two years, with the term of one
class expiring each year. At the annual meeting, five directors will be elected
to hold office for two-year terms expiring on the date of the 2002 annual
meeting of shareholders. Mr. Henry James has announced his intention to retire
as a director on June 6, 2000 when his term as a director expires. It is the
current intention of the board of directors to reduce the number of directors
from twelve to eleven at the meeting of the board of directors that will follow
the annual meeting of shareholders. Therefore, no one has been nominated to
succeed Mr. James.
All directors hold office for their designated term until their successors
have been elected and qualified or until their earlier death, resignation or
removal. Any proxy submitted by a shareholder will be voted in accordance with
its directions or, if no directions are indicated, for election of the five
directors named below whose election has been proposed and recommended by the
board of directors. If any nominee becomes unavailable for election as a
director prior to the annual meeting, the persons named in the accompanying form
of proxy will vote, in their discretion, for a person designated by the board of
directors to replace the nominee.
INFORMATION AS TO NOMINEES FOR ELECTION AS DIRECTORS AND AS TO INCUMBENT
DIRECTORS
The respective ages, positions with the company, business experience,
directorships in other companies and board committee memberships of the nominees
for election and the continuing incumbent directors are set forth below, as of
March 1, 2000. All nominees are currently directors of the company. There is no
family relationship between any of the directors of the company.
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NOMINEES FOR DIRECTOR TO BE ELECTED FOR TERMS TO EXPIRE IN 2002
HIROMASA YOKOI, 60
Mr. Yokoi was elected Vice Chairman of the Board and Chief Executive Officer
of the company in February 1993 and President effective on August 31, 1993.
Mr. Yokoi has served as a director of Benesse Corporation since June 1992 and
its director for Berlitz and North American Sector since April 1994. Prior to
that, he served as General Manager of the Overseas Operations Division (formerly
the International Division) of Benesse Corporation from October 1990 to
March 1994 and as General Manager of the President's Office of Benesse
Corporation from July 1990 to September 1990. Mr. Yokoi has served as a director
of the company since January 1991. He is currently a member of the executive
committee and the nominating committee. On March 20, 2000, the company announced
the retirement of Mr. Yokoi as Vice Chairman, Chief Executive Officer and
President effective June 30, 2000. However, Mr. Yokoi will stand for reelection
as a director to serve the two year term commencing on June 6, 2000.
JAMES KAHL, 58
Mr. Kahl was Chairman of the Board, Chief Executive Officer and President of
La Petite Academy, a provider of preschool and childcare services from 1993
until December 31, 1999. From 1991 until 1993, he was a Senior Vice President of
Knott's Berry Farm. From 1983 until 1991, he held a number of senior executive
positions at Marriott Corporation, including Senior Vice President of
Administration, Chief Financial Officer, and Senior Vice President, Operations.
From 1964 until 1982, he held a variety of positions at Arthur Andersen & Co.,
including Managing Partner. Mr. Kahl also serves on the board of directors of La
Petite Academy. Mr. Kahl has served as a director of the company since March 7,
2000. It is the current intention of the board of directors to appoint Mr. Kahl
as Vice Chairman of the Board upon the retirement of Mr. Yokoi.
EDWARD G. NELSON, 68
Since January 1985, Mr. Nelson has served as Chairman and President of
Nelson Capital Corporation. From 1983 to 1985, he was Chairman and Chief
Executive Officer of Commerce Union Corporation. He also serves on the board of
directors of ClinTrials Research, Inc., Central Parking System and
Advocat, Inc. He is a trustee of Vanderbilt University. Mr. Nelson became a
director of the company in February 1993. He is currently a member of the audit
committee, the compensation committee, the disinterested directors committee and
the nominating committee.
ROBERT L. PURDUM, 64
Mr. Purdum is the retired Chairman of the Board of Armco, Inc. and currently
is a partner with American Industrial Partners, a private investment company
located in New York and San Francisco. During his Armco career, he served in
various positions since first joining Armco in 1962, including Chairman and
Chief Executive Officer (November 1990 to December 1993), President and Chief
Executive Officer (April 1990 to November 1990), President (October 1986 to
April 1990), Chief Operating Officer (February 1985 to October 1986) and Chief
Executive Officer--Steel Group (November 1982 to February 1985). Mr. Purdum has
also served on the board of directors of Holophane Corporation since 1994.
Mr. Purdum has served as a director of the company since August 1994. He is
currently a member of the audit committee, the compensation committee, the
disinterested directors committee and the nominating committee.
ANTONY P. RESSLER, 39
Mr. Ressler co-founded Apollo Advisors, L.P. in 1990. Mr. Ressler also
founded Ares Management, L.P. in 1997, the general partner of the Ares Funds,
including Ares Leveraged Investment Funds I, II and III private securities
investment funds focused primarily on debt and mezzanine/equity investments.
Prior
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to 1990, Mr. Ressler served as a Senior Vice President in the High Yield Bond
Department of Drexel Burnham Lambert Incorporated, with responsibility for the
New Issue/Syndicate Desk. Mr. Ressler serves on several boards of directors
including: Allied Waste Industries, Inc.; Prandium Inc.; and Vail
Resorts, Inc., as well as on the supervisory board of directors of Buhrmann NV.
Mr. Ressler is on the board of directors of LAAMP/LEARN, one of the largest
public school reform movements in the U.S., a member of the board of advisors of
the UCLA Medical Center, a member of the executive committee of the board of
directors of the Jonsson Comprehensive Cancer Center at UCLA and a member of the
board of trustees of the Center for Early Education. Mr. Ressler is also one of
the founding members of the board of the Painted Turtle Camp, the Southern
California chapter of The Hole in the Wall Gang Camps created to serve children
dealing with chronic and life threatening illnesses by creating memorable,
old-fashioned camping experiences. Mr. Ressler received his B.S.F.S. from
Georgetown University's School of Foreign Service and received his MBA from
Columbia University's Graduate School of Business. Mr. Ressler has served as a
director of the company since March 11, 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE FIVE
DIRECTORS NAMED ABOVE.
INCUMBENT DIRECTORS--TERMS EXPIRE IN 2001
SOICHIRO FUKUTAKE, 54
Mr. Fukutake has served as Chairman of the Board of the company since
February 1993. Mr. Fukutake joined Benesse Corporation in 1973, and since
May 1986, has served as its President and Representative Director. Benesse
Corporation, formerly known as Fukutake Publishing Co., Ltd., is a publicly-held
company that is the beneficial owner of 6,985,338 shares of outstanding common
stock and 1,664,145 shares of common stock which would be issuable upon
conversion of the $55 million convertible debentures held by Benesse Holdings
International, Inc, a wholly owned subsidiary of Benesse Corporation. See
"Security Ownership of Management and Others." Mr. Fukutake also serves on the
board of directors of a number of companies, private foundations and
associations in Japan. Mr. Fukutake became a director of the company in
February 1993. He is currently a member of the executive committee and the
nominating committee.
LAURENCE M. BERG, 33
Mr. Berg has been associated with Apollo Advisors, L.P. since 1992 and a
partner since 1995. Apollo Advisors, L.P., together with its affiliates
(including Apollo Management IV, L.P.), acts as managing general partner of
Apollo Investment Fund, L.P., AIF II, L.P., Apollo Investment Fund III, L.P. and
Apollo Investment Fund IV, L.P. which are private securities investment funds.
Prior to 1992, Mr. Berg was a member of the Mergers and Acquisitions Department
of Drexel Burnham Lambert Incorporated. Mr. Berg is a director of Continental
Graphics Holdings, Inc. and Rent-A-Center, Inc. Mr. Berg received his MBA from
the Harvard Business School and received his BS in economics from the University
of Pennsylvania's Wharton School of Business. Mr. Berg has served as a director
of the company since March 11, 1999.
TAKURO ISODA, 64
Since July 1999, Mr. Isoda has been the President of Isoda &
Associates, Inc., of Tokyo and President of Rich Capital, Inc, of Osaka. He has
been a Senior Advisor for Nippon Investment & Finance Co. Ltd. since July 1998,
and was its Chairman from June 1994 and its President from January 1990 to
May 1994. Prior to that, Mr. Isoda served in various positions with Daiwa
Securities since first joining the company in 1959, including, most recently,
Chairman & CEO of Daiwa Securities of America, Inc., New York (January 1985 to
January 1990), and Senior Managing director of Daiwa Securities Co., Ltd., Tokyo
(December 1988 to January 1990). Mr. Isoda is Vice Chairman and a director of
the New Business
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Conference, Tokyo, and a director of the Japan Academic Society for Ventures and
Entrepreneurs, each of which is a non-profit governmental policy advisory and
new venture support group. He also serves as a director of Japan.com Kabushiki
Kaisha, Tokyo, VHC Kabushiki Kaisha, Tokyo, Inter Office Co., Ltd., Tokyo,
Effetto Holding, Inc., Tokyo, and J-bridge.com. Mr. Isoda is an Advisor to
Webster Communications Corporation Plc., Wiltshire, UK, ILC, Inc., Hiroshima,
Liquid Audio Japan, Ltd., Tokyo, Harvey Labo, Inc., Tokyo, Imagawa-Misawaya
Securities Co., Ltd., Tokyo, Rich Kabushiki Kaisha, Osaka and Big Sons, Ltd.,
Osaka. He also serves as an Advisor to Americans for Indian Opportunity, New
Mexico, a non-profit organization. He is the Statutory Auditor for Just Co., of
Omiya-shi, Saitama Prefecture, Japan and Asteric, Inc. of Tokyo. Mr. Isoda has
served as a director of the company since June 1998. He is currently a member of
the audit committee, the compensation committee, and the disinterested directors
committee.
JAMES LEWIS, 42
Mr. Lewis has served as Executive Vice President and Chief Operating
Officer, Berlitz GlobalNET since January 1, 1999, prior to which he was Vice
President, Worldwide Translations since September 1, 1997. Previously,
Mr. Lewis served in a number of executive level positions with Globalink, Inc.,
including President and director (1995 to 1997) and Vice President, Worldwide
Sales and Marketing (1995); Vice President, Marketing of MAXM Systems
Corporation (1994 to 1995); and Vice President, International Operations,
Landmark Systems Corporation (1992 to 1994). During the period of 1983 to 1992,
Mr. Lewis held a number of management positions with Ashton-Tate Corporation,
and Peter Norton Computing. Mr. Lewis has served as a director of the company
since March 2, 1999.
ROBERT MINSKY, 55
Mr. Minsky has served as Executive Vice President, Corporate Planning and
Marketing of the company since August 1, 1997. On March 20, 2000, the company
announced that Mr. Minsky will assume the posts of Executive Vice President and
Chief Financial Officer of the company upon Mr. James' retirement on June 30,
2000. Prior to August 1997, he served as Executive Vice President and Chief
Operating Officer, Translations and Publishing of the company from January 1,
1995 to December 31, 1997, as Executive Vice President, Translations of the
company from October 1, 1993 to January 1995, and as Chief Financial Officer of
the company from November 1990 to January 1995. From November 1990 to
October 1993, he also served as Vice President. Mr. Minsky has served as a
director of the company since April 1991. He is currently a member of the
executive committee.
MAKOTO OBARA, 55
Mr. Obara joined Berlitz International, Inc. as Executive Vice President on
January 1, 1999, and was elected Chief Operating Officer, Worldwide Language
Services effective March 31, 1999. From March 1998 to January 1999, Mr. Obara
served as President and Chief Executive Officer of Benesse Holdings. From
August 1985 to February 1998, Mr. Obara served as Vice President of
Citibank/Citicorp, Private Banking (1992 to 1998); Vice President and Senior
Banker, Citicorp Venture Capital (1989 to 1991); Vice President and Senior
Banker, World Corporation Group of Citibank/Citicorp (1987 to 1989); and Vice
President and Executive Director, Citibank/Citicorp Mexico (1985 to 1987). From
1978 to 1985, Mr. Obara held positions of Section Manager and Deputy General
Manager with the Mitsubishi Corporation. He currently serves on the board of
directors of Technology Educational Network, and Benesse Holdings. Mr. Obara has
served as a director of the company since March 2, 1999.
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OTHER DIRECTOR
HENRY D. JAMES, 62
Mr. James has served as Executive Vice President and Chief Financial Officer
of the company since November 21, 1995, and as its Vice President and Chief
Financial Officer from January 1995 to November 1995. He previously served as
Vice President and Controller of the company and its predecessor, Berlitz
Languages, Inc., since 1981. Mr. James joined Berlitz Languages in 1977 and
served as Controller with that company prior to 1981. Mr. James has served as a
director of the company since November 1995. He is currently a member of the
executive committee. Mr. James has announced his intention to retire as a
director effective June 6, 2000. On March 20, 2000, the company announced the
retirement of Mr. James as Executive Vice President and Chief Financial Officer
effective June 30, 2000.
1999 BOARD OF DIRECTORS MEETINGS, COMMITTEES AND FEES
During 1999, the board of directors of the company met four times and took
action by unanimous consent once. The board of directors had five standing
committees in 1999: executive, audit, disinterested directors, compensation, and
nominating committees.
The executive committee may, with certain exceptions, exercise the powers of
the board of directors during the intervals between meetings of the board of
directors. The executive committee did not meet during 1999.
The audit committee recommends the engagement of the independent auditors of
the company to the board of directors and reviews with the independent auditors
the scope and results of the company's audits. The audit committee reviews the
terms of all agreements between the company and its affiliates. The audit
committee meets with management and with the company's internal auditors and
independent auditors to review matters relating to the quality of financial
reporting and internal control, including the nature, extent and results of
their audits, and otherwise maintains communications between the company's
independent auditors and the board of directors. The audit committee met three
times during 1999.
The disinterested directors committee reviews and monitors all matters
affecting the relationship between the company and Benesse Corporation and its
affiliates. During 1999, the disinterested directors committee met twice and
acted by unanimous consent once.
The compensation committee reviews performance of corporate officers,
establishes overall employee compensation policies and recommends major
compensation programs to the board of directors. The compensation committee also
reviews and approves salary arrangements and other remuneration for executive
officers of the company and is responsible for review of certain employee
benefit plans. The compensation committee oversees and approves grants of stock
options and other stock-based awards pursuant to the 1989 and 1996 Stock Option
Plans and the company's Non-Employee Directors Stock Plan. The committee also
administers the 1993 Short-Term Executive Incentive Compensation Plan, the 1996
New Long-Term Executive Incentive Compensation Plan, which, together with the
1996 Stock Option Plan, replaced the 1993 Long-Term Executive Incentive
Compensation Plan, and the 1999 Long-Term Executive Incentive Compensation Plan,
and approves awards and discretionary bonuses under these plans. No member of
the compensation committee is eligible to participate in the stock option plans
or the Short-Term Incentive Plan, except for a special one-time grant on
December 9, 1997 of 500 options to each director. During 1999, the compensation
committee met in person two times and held two telephonic meetings.
The nominating committee nominates directors and considers possible
successors to senior executives. During 1999, the nominating committee met once.
The company's standard retainer payable to each director who is not an
employee of the company or any of its affiliates is $35,000 per year, plus
expenses, with an additional $2,000 for each committee meeting
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attended and $1,000 for each meeting participated in by telephone. No fees are
paid for actions taken by unanimous written consent. Directors who are also
full-time employees of the company or any of its affiliates receive no
compensation in consideration of their duties as directors, but are eligible to
participate in the health benefit plan maintained by the company. The outside
directors earned an aggregate of approximately $223,200 as cash compensation for
their services during 1999.
The company has entered into indemnification agreements with each director
pursuant to which the company agreed to pay any amount a director becomes
obligated to pay as a result of any claims made against the director because of
any alleged act, omission, neglect or breach of duty which he commits while
acting in his capacity as a director and solely because of his being a director,
subject to limitations imposed by the New York Business Corporation Law.
ANNOUNCED COMPANY RESTRUCTURING
On March 20, 2000, the company announced a restructuring. Effective July 1,
2000, the company will have two operating divisions: Berlitz Language Services
and Berlitz GlobalNET. Berlitz Language Services will include language
instruction, publishing, franchising, cross-cultural training and ELS Language
Centers. Berlitz GlobalNET will provide language-related document management,
software localization, translation and interpretation services. It is
anticipated that Mr. Obara will serve as President and Chief Executive Officer
of Berlitz Language Services and that Mr. Lewis will serve as President and
Chief Executive Officer of Berlitz GlobalNET.
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SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number and percentage of shares of common
stock beneficially owned as of March 28, 2000 by each director, nominee for
director, the Named Executive Officers, and all officers and directors as a
group. If not mentioned by name, no individual in the categories described above
beneficially owned any shares of common stock as of March 28, 2000. No security
set forth in the third column of the following table reflects an amount as to
which the beneficial owner has joint voting or investment power.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ------------------------------ -------------------- ----------
<S> <C> <C> <C>
Common........................ Soichiro Fukutake 8,934,033(1) 61.58%(8)
Common........................ Hiromasa Yokoi 49,720(2) *
Common........................ Manuel Fernandez 28,545(3) *
Common........................ Robert Minsky 24,157(4) *
Common........................ Henry D. James 25,492(5) *
Common........................ James Lewis 1,200 *
Common........................ Edward G. Nelson 1,500(6) *
Common........................ Robert L. Purdum 2,000 *
Common........................ Makoto Obara 1,500 *
Common........................ Antony Ressler --(7) *
Common........................ Laurence Berg --(7) *
Common........................ All officers and directors as 9,168,326 63.25%(8)
a group (21 in number)
</TABLE>
- ------------------------
(1) This amount includes: a) 6,985,338 shares of outstanding common stock
beneficially owned by Benesse Corporation and Benesse Holdings;
b) 1,664,145 shares of common stock which would be issuable upon conversion
of the $55 million convertible debentures held by Benesse Holdings;
c) 227,800 shares of common stock held by Mr. Fukutake; d) 6,500 shares of
common stock awarded to Mr. Fukutake in 1999 in lieu of his participation in
the 1999 LTIP; and e) 50,250 shares of common stock which would be issuable
under currently exercisable stock options held by Mr. Fukutake.
Mr. Fukutake is the President, Representative Director and principal
shareholder of Benesse Corporation. Consequently, he could be deemed to be
in ultimate control of Benesse Corporation and the beneficial owner of
shares that it beneficially owns. See "Security Ownership of Certain
Beneficial Owners."
(2) Includes options to purchase 45,720 shares which are currently exercisable.
(3) Includes options to purchase 19,800 shares which are currently exercisable.
(4) Includes options to purchase 19,800 shares which are currently exercisable.
(5) Includes options to purchase 17,820 shares which are currently exercisable.
(6) An additional 1,000 shares of common stock, for which Mr. Nelson has
disclaimed ownership, are owned by Mr. Nelson's wife.
(7) Does not include 3,025,718 shares of common stock which would be issuable
upon conversion of the $100 million convertible debentures held by Apollo
Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P., both of
which are affiliates of Apollo Management IV, L.P., a private investment
firm, and an affiliate of Apollo Advisors, L.P. Apollo Investment Fund IV,
L.P. and Apollo Overseas Partners IV, L.P. are referred to collectively as
Apollo. The beneficial ownership of these shares is disclaimed by each of
Mr. Ressler and Mr. Berg.
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(8) Assumes conversion of all convertible debentures held by Apollo and Benesse
Holdings and the exercise of all currently exercisable stock options. In the
event that Apollo converted all of its convertible debentures but Benesse
Holdings did not convert any of its convertible debentures, Apollo would own
approximately 24% of the total common stock then outstanding. Alternatively,
in the event that Benesse Holdings converted all of its convertible
debentures but Apollo did not convert any of its convertible debentures,
Benesse Holdings would own approximately 78% of the total common stock then
outstanding.
* Less than 1%
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the ownership by each person or group known
by the company to own beneficially more than 5% of common stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL
TITLE OF CLASS OWNER OWNERSHIP PERCENT OF CLASS
- -------------- --------------------------------- --------- ----------------
<S> <C> <C> <C>
Common........................... Benesse Corporation(1) 8,934,033 61.58%(3)
3-17-17 Minamigata
Okayama-shi 700, Japan
Common........................... Apollo Investment Fund IV, L.P. 3,025,718(2) 20.87%(3)
1999 Avenue of the Stars
Los Angeles, CA 90067
Common........................... Dimensional Fund Advisors Inc. 503,872 5.29%(4)
1299 Ocean Avenue
Santa Monica, CA 90401
</TABLE>
- ------------------------
(1) Fukutake Publishing Co., Ltd. changed its name to Benesse Corporation on
April 1, 1995. As of March 28, 2000, 6,972,138 shares of outstanding common
stock are held by Benesse Holdings and 13,200 shares of outstanding common
stock are held directly by Benesse Corporation. In addition, 1,664,145
shares of common stock would be issuable upon conversion of the convertible
debentures held by Benesse Holdings. Mr. Fukutake holds 227,800 shares of
common stock, and another 6,500 shares of common stock were awarded to
Mr. Fukutake in 1999 in lieu of his participation in the 1999 LTIP. An
additional 50,250 shares of common stock would be issuable upon exercise of
currently exercisable stock options held by Mr. Fukutake. Soichiro Fukutake
is the President, Representative Director and principal shareholder of
Benesse Corporation.
(2) Represents 3,025,718 shares of common stock which would be issuable upon
conversion of the convertible debentures held by Apollo.
(3) Assumes conversion of all convertible debentures held by Apollo and Benesse
Holdings and the exercise of all currently exercisable stock options. In the
event that Apollo converted all of its convertible debentures but Benesse
Holdings did not convert any of its convertible debentures, Apollo would own
approximately 24% of the total common stock then outstanding. Alternatively,
in the event that Benesse Holdings converted all of its convertible
debentures but Apollo did not convert any of its convertible debentures,
Benesse Holdings would own approximately 78% of the total common stock then
outstanding.
(4) Does not assume the conversion of all convertible debentures held by Apollo
and Benesse Holdings or the exercise of all currently exercisable stock
options.
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EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following Summary Compensation Table sets forth the compensation awarded
to, earned by or paid to the Chief Executive Officer and certain executive
officers during the fiscal years ended December 31, 1999, 1998 and 1997 for
services rendered in all capacities to the company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- -----------------------
OTHER ANNUAL AWARDS OF ALL OTHER
COMPENSATION OPTIONS/ LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(2) SARS(#) PAYOUTS ($) ($)(3)
- --------------------------- -------- ---------- --------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hiromasa Yokoi........................ 1999 534,539 -- 65,720 -- -- 9,448
Vice Chairman of the Board, 1998 523,912 186,700 65,724 -- 530,000 10,400
CEO and President 1997 499,052 202,200 65,730 46,220 -- 10,390
Manuel Fernandez...................... 1999 262,196 -- 1,274 -- -- 10,326
Executive Vice President 1998 259,512 55,500 1,165 -- 200,000 10,400
and Chief Operating Officer, 1997 251,908 65,000 23,671 20,300 -- 10,400
Worldwide Language Services
Robert Minsky......................... 1999 253,305 -- 1,032 -- -- 10,400
Executive Vice President, 1998 247,117 52,800 979 -- 200,000 10,400
Corporate Planning and Marketing 1997 240,000 35,000 926 20,300 -- 10,400
Henry D. James........................ 1999 249,769 -- 972 -- -- 10,400
Executive Vice President 1998 234,809 69,800 894 -- 186,000 10,400
and Chief Financial Officer 1997 218,335 75,300 826 20,300 -- 10,334
James Lewis (1)....................... 1999 249,685 -- 306 -- -- 10,400
Executive Vice President 1998 229,449 82,600 9,677 10,000 -- 4,281
and Chief Operating Officer, 1997 72,692 33,800 124,911 5,120 -- --
Berlitz GlobalNET
Makoto Obara.......................... 1999 275,693 -- 50,359 20,000 -- --
Executive Vice President
and Chief Operating Officer,
Worldwide Language Services
</TABLE>
- ------------------------------
(1) Mr. Lewis' employment with the company commenced on September 2, 1997.
(2) Other Annual Compensation for Mr. Yokoi primarily represents monthly housing
allowances. For Mr. Obara, this column represents monthly housing and
commuting costs. For Mr. Fernandez, this column includes relocation expense
reimbursements of $22,600 in 1997. For Mr. Lewis, this column represents
relocation expense reimbursements.
(3) The amounts reported in this column for 1999 include a contribution of up to
$4,800 made by the company for the account of each Named Executive Officer
pursuant to the thrift portion of the Berlitz Retirement Savings Plan. The
amounts reported also include a contribution of up to $5,600 made by the
company for the account of each Named Executive Officer pursuant to the
retirement portion of the Retirement Savings Plan.
9
<PAGE>
PENSION PLAN TABLE
The company's Supplemental Executive Retirement Plan, effective January 1,
1996, is a defined benefit plan which provides retirement income/disability
retirement benefits, retiree medical benefits and death benefits to the Chairman
of the Board(1), certain designated executives and their designated
beneficiaries. The following table shows the estimated annual retirement
income/disability retirement benefits (assuming payments made on the normal life
annuity) payable upon retirement at age 60 to a participant in specified
compensation and years of service classifications.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------
INITIAL PARTICIPANT ALL OTHER PARTICIPANTS
------------------- --------------------------------
COMPENSATION 5 OR MORE 5 10 15 OR MORE
------------ ------------------- -------- -------- ----------
<S> <C> <C> <C> <C>
100,00$0....... 30,000 10,000 20,000 30,000
150,000....... 45,000 15,000 30,000 45,000
200,000....... 60,000 20,000 40,000 60,000
250,000....... 75,000 25,000 50,000 75,000
300,000....... 90,000 30,000 60,000 90,000
400,000....... 120,000 40,000 80,000 120,000
550,000....... 165,000 55,000 110,000 165,000
750,000....... 225,000 75,000 150,000 225,000
</TABLE>
Under the SERP, monthly benefits are available to any participant who
retires at age 60 or above, with at least 5 years of service with the company.
The participants designated as of January 1, 1996 are referred to as the Initial
Participants. The retirement income/disability retirement benefits are based on
a percentage of an average monthly salary (calculated on the base salary over
the last 36 months of employment(2) and 1/36th of the last three short-term
bonuses paid) and will be paid to the retired participant for life, with 50% of
the benefit paid to the participant's surviving spouse for life upon the retired
participant's death. The percentage of average monthly salary for the Initial
Participants is 30%, and that percentage for all other participants will be 2%
(or such other percentage as the board of directors may determine) multiplied by
years of service, not to exceed 30%. On December 7, 1999, however, the
compensation committee and the board of directors approved an increase in the
SERP percentage from 30% to 40% of average final pay for four employees, Robert
C. Hendon, Jr., Hiromasa Yokoi, Henry D. James and David Horn, in anticipation
of their pending retirement. Mr. Hendon retired on December 31, 1999, and
Mr. Yokoi, Mr. James and Mr. Horn are expected to retire on June 30, 2000. The
company will also provide each retired participant and their surviving spouse
with medical coverage for both of their lives. If a participant with at least
5 years of service dies before retirement, the participant's designated
beneficiary will receive, in lieu of the above-mentioned benefits, a one-time
payment equal to the participant's base salary projected to age 65 at a 4%
annual increase.
Awards under the SERP are not subject to deduction for Social Security or
other offset amounts, except to the extent of any disability benefits payable
under the company's long-term disability insurance policy. The company intends
to fund the SERP through a combination of funds generated from operations and
life insurance policies on the participants.
In 1998, the company established an irrevocable grantor trust and
contributed life insurance policies and annuity contracts on the SERP
participants to the trust. Subject to the claims of the company's general
creditors in the event of the company's insolvency, the trust's principal and
income shall be held by the
- ------------------------
(1) The Chairman relinquished all benefits under the SERP in exchange for the
grant of 50,000 options on June 30, 1997 under the company's 1996 Stock
Option Plan.
(2) In the case of the Chairman, who does not receive a salary from the company,
the SERP benefits were based on an imputed salary determined by the
company's board of directors.
10
<PAGE>
trust until paid to the SERP participants in such manner and at such times as
specified in the SERP. It is the intention of the company that the trust
constitutes an unfunded arrangement and does not affect the status of the SERP
as an unfunded plan. Included within "Other assets" on the company's
Consolidated Balance Sheet at December 31, 1999 is $3.5 million held by the
trust.
The Named Executive Officers, all of whom are Initial Participants except
for Mr. Lewis and Mr. Obara, will each have at least 5 years of service at age
60. The compensation covered under the SERP for each of the Named Executive
Officers is shown under the "Salary" and "Bonus" columns of the Summary
Compensation Table.
OPTION/SAR GRANTS IN FISCAL YEAR 1999
The following awards were made pursuant to the 1996 Stock Option Plan. See
the "Compensation Committee Report" for a further description.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL GRANT DATE
SECURITIES OPTIONS GRANTED EXERCISE PRESENT
GRANT UNDERLYING OPTIONS TO EMPLOYEES IN PRICE EXPIRATION VALUE
NAME DATE GRANTED (#) FISCAL YEAR ($/SH) DATE ($)(1)
- ---- -------- ------------------ --------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Makoto Obara.................. 1/11/99 20,000 100.00% $28.3125 1/10/06 $162,200
</TABLE>
- ------------------------
(1) The fair value of each option grant during 1999, as set forth in the
following table, is estimated on the date of grant using the Black-Scholes
option pricing model, with the following assumptions:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE ASSUMPTIONS USED TO
ESTIMATE FAIR VALUE:
------------------------------------
<S> <C>
Dividend yield.............................................. 0.00%
Expected volatility......................................... 20.00%
Risk free interest rate..................................... 4.76%
Expected lives in years..................................... 5.00
Fair value of each option granted........................... $8.11
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The company has a severance agreement with Robert Minsky which provides that
if Mr. Minsky is terminated other than for cause, he is to be paid one year's
severance at his then current annual base salary plus a prorated amount of the
award under the company's Short-Term Incentive Plan to which he would have been
entitled for that year and the continuation of certain other benefits.
The company also has a severance agreement with James Lewis which provides
that if Mr. Lewis is terminated other than for cause, he is to be paid
15 months of severance at his then current annual base salary plus a prorated
amount of the award under the company's Short-Term Incentive Plan to which he
would have been entitled for such year. He also would receive a one-time
relocation payment equal to that which he received when joining the company.
Due to his long service with the company (36 years), Berlitz has agreed to
pay Mr. Fernandez a special monthly retirement benefit, commencing on his
retirement, equal to 10% of his average monthly salary and short-term incentive
payments during the 36 months preceding his retirement. This special payment is
in addition to the SERP payments payable to Mr. Fernandez and will continue
until Mr. Fernandez' death, after which one half of the special retirement
benefit will be paid to Mr. Fernandez' wife until her death. In addition, the
company has agreed to pay Mr. Fernandez consulting fees totaling $180,000 for
consulting or advisory services as requested by the company to be rendered by
Mr. Fernandez through December 31, 2000. The company has also agreed to pay
Mr. Fernandez reasonable moving expenses to relocate to his retirement home in
Florida.
11
<PAGE>
The company is a party to indemnification agreements with each director and
executive officer pursuant to which the company agrees to pay, subject to
limitations imposed by the New York Business Corporation Law, any amount such
director or executive officer becomes obligated to pay as a result of any claims
made against such director or executive officer because of any alleged act or
omission or neglect or breach of duty which he commits while acting in his
capacity as a director or executive officer, as the case may be.
COMPENSATION COMMITTEE REPORT FOR FISCAL YEAR 1999
The compensation committee of the board of directors reviews and determines
the compensation of the company's executive officers. It also reviews and
approves any employment, severance or similar agreements for executive officers.
The committee determines the amount, if any, of the company's contributions
pursuant to the Retirement Savings Plan, and oversees and approves grants of
stock options and other stock-based awards pursuant to the Stock Option Plans
and the Directors' Stock Plan. The committee also administers the Short-Term
Incentive Plan, the 1996 LTIP, and the 1999 LTIP and approves awards and
discretionary bonuses under each of such plans.
The company seeks to compensate executive officers at levels competitive
with other companies with similar annual revenues and to provide incentives for
superior individual and corporate performance. Salaries are set to correspond to
the mid-range of salaries paid by competitive companies. In setting
compensation, the company compares itself with companies with similar annual
revenues rather than with industry peers because the company is the only
publicly-held language instruction company.
The key components of executive officer compensation are base salary, cash
bonuses, and awards pursuant to incentive-based plans. The committee attempts to
combine these components in such a way to attract, motivate and retain key
executives critical to the long-term success of the company. A discussion of the
various components of executive compensation for the fiscal year 1999 follows.
BASE SALARY
Each executive officer receives a base salary, with the potential for annual
salary increases based largely on merit from prior annual performance.
The proposed annual compensation of company employees for the 1999 and 2000
calendar years was discussed at compensation committee meetings held in 1998 and
1999. Base salary recommendations were made by management of the company for the
committee to approve. After review and consideration by the committee of
management's recommendations, the committee approved base salary adjustments for
executive officers considering individual and company performance. Such
adjustments averaged 1.0% and 3.4% for 2000 and 1999, respectively. The criteria
used to evaluate company performance were sales and earnings figures, and return
on equity. The committee believes that all such criteria were accorded equal
weight.
BONUSES
In 1993, the committee approved the Short-Term Incentive Plan, commencing
with the 1993 calendar year, pursuant to which each executive officer is
eligible for an annual bonus based upon the officer's present employment
position, individual performance, and, through 1994, the total company's
performance compared to earnings goals. In 1995, the committee amended the
Short-Term Incentive Plan so that division Vice Presidents would receive 1995
and subsequent years' awards based on 60% of divisional performance and 40% of
total company performance. The committee believes that individual performance
and company performance are given approximately equal weight. The Short-Term
Incentive Plan also permits the committee to award discretionary cash awards to
employees, who may or may not be participants under the Short-Term Incentive
Plan, subject to those terms and conditions as the committee shall determine in
its sole discretion.
12
<PAGE>
At its March 2000 meeting, the committee approved, after discussion, a
discretionary special 1999 bonus for certain executive officers based upon
exceptional individual performance. In 1999, $100,000 was accrued for the
special bonus.
STOCK OPTIONS AND RESTRICTED STOCK
The 1989 Stock Option Plan provides for the award of stock options,
restricted stock and other stock-based awards to senior management of the
company. Grants under this plan are intended to provide executives with the
promise of longer-term rewards which appreciate in value with favorable future
performance of the company. In determining grants of stock options and
restricted stock, the compensation committee reviews individual performance and
company performance. The criteria used to evaluate company performance include
sales and earnings figures, and return on equity. The committee believes that
all such criteria are accorded equal weight. The committee did not approve, and
the company did not make, any grants of stock options, restricted stock, or any
other stock-based award under the 1989 Stock Option Plan in 1999, and there are
no outstanding option grants under this plan.
In September 1996, the company adopted the 1996 Stock Option Plan, which,
together with the 1996 LTIP, replaced the company's then existing 1993 LTIP. The
1996 Stock Option Plan, as amended, authorizes the issuance of a maximum of
503,225 options to directors and key executive employees of the company. The
company granted 327,200 of these options on June 30, 1997 at an exercise price
of $24.9375, 46,190 options on December 9, 1997 at an exercise price of
$26.5625, 25,740 options on December 4, 1998 at an exercise price of $30.00, and
20,000 options on January 11, 1999 at an exercise price of $28.3125. The
exercise prices were based on the closing market price of the company's common
stock on the New York Stock Exchange on the date of grant.
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLANS
In September 1996, the committee adopted the 1996 LTIP, which together with
the 1996 Stock Option Plan, replaced the 1993 LTIP. The 1996 LTIP provided for
potential cash awards in 1999 to key executive employees and the Chairman of the
Board if sales and earnings goals were met for the year ended December 31, 1998.
The price of the common stock did not impact potential awards, which could not
exceed $5.0 million in the aggregate. While the 1996 LTIP's minimum threshold
for potential awards was lower than under the 1993 LTIP, the 1993 LTIP did not
contain a limitation on maximum awards. At its March 1999 meeting, the committee
approved, after discussion, the issuance of $2.9 million in awards under the
1996 LTIP.
In 1999, the company's shareholders approved the adoption of the 1999 LTIP
which provides for potential cash awards to be paid to senior management in 2002
if revenue, earnings and cash flow targets are achieved for the three year
period from 1999 to 2001. The 1999 LTIP is an unfunded plan, and the company is
not required to establish any fund or segregate any assets for payments under
it.
The 1999 LTIP is administered by the compensation committee. The committee
may amend or alter the 1999 LTIP, but no amendment or alteration shall be made
that would (i) impair the rights of any participant without the participant's
consent, or (ii) cause compensation payable under the 1999 LTIP to fail to
satisfy the requirements of Section 162(m) of the Internal Revenue Code. In the
event of a change in control, the compensation committee may provide for each of
the participants to receive a payout immediately prior to the change of control.
Soichiro Fukutake, Chairman of the Board, will not participate in the 1999
LTIP. However, in lieu of his participation, Mr. Fukutake will be granted awards
of shares of common stock in each of 1999, 2000 and 2001. Mr. Fukutake's common
stock awards are based on an imputed annual salary of $145,000 (determined by
the company's board of directors) divided by the average closing price of the
common stock for the 10 trading days commencing on March 31 in each of 1999,
2000 and 2001, rounded to the nearest 100 shares. Mr. Fukutake's common stock
award for 1999 will be 6,500 shares.
13
<PAGE>
OTHER COMPENSATION
The executive officers also are eligible to participate in the pension plan.
The pension plan provides for the company to make regular contributions based on
salaries of eligible employees. During 1999, the company contributed 3.5% of
eligible employees' respective base salary to the pension plan, and provided
matching contributions under the 401(k) Plan to all domestic employees up to a
maximum of 3% of the employee's salary.
CHIEF EXECUTIVE OFFICER COMPENSATION
Hiromasa Yokoi's base salary for 1999 was approximately $534,500. The
compensation committee approved and ratified the compensation paid to Mr. Yokoi
for fiscal year 1999 based on Mr. Yokoi's business experience and familiarity
with the company, and his responsibilities to guide, among other things, the
company's daily affairs and the company's long-term strategic plan in a global
marketplace. The company's 1999 performance was taken into consideration in
determining Mr. Yokoi's 1999 compensation package. The committee believes that
Mr. Yokoi's 1999 compensation package was in line with compensation packages of
chief executive officers of other companies with similar annual revenues.
TAX LEGISLATION
The committee has reviewed regulations issued by the U.S. Internal Revenue
Service which limit deductions for certain compensation in excess of $1 million
annually paid to executive officers of public companies. In early 1999, the
committee determined that Mr. Yokoi's total scheduled compensation in 1999 may
exceed $1 million. As a result, the committee authorized the preparation,
execution and delivery of the Nonqualified Individual Deferred Compensation
Agreement between Mr. Yokoi and the company.
COMPENSATION COMMITTEE MEMBERSHIP
During 1999, the compensation committee consisted of Edward G. Nelson,
Robert L. Purdum and Takuro Isoda. All of the views expressed by the
compensation committee in 1999 may not have been the views of each member of the
compensation committee individually. However, all decisions affecting
compensation were approved by all of the members of the compensation committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the compensation committee consisted of Edward G. Nelson,
Robert L. Purdum and Takuro Isoda. None of these committee members were officers
of the company or any of its subsidiaries during 1999 or any previous year.
Soichiro Fukutake serves as the Chairman of the Board. In addition to his
role in presiding over board meetings, Mr. Fukutake is actively involved in
creating and monitoring strategies for the company's global growth. In
consideration of the significant time and effort spent by Mr. Fukutake in
monitoring long-term strategies for the company, apart from his duties as
Chairman, the compensation committee (with Mr. Fukutake absent), upon
recommendation of management and after discussion, approved the following at
various meetings held in 1993, 1995, 1996, 1997 and 1999: i) the inclusion in
1993 of Mr. Fukutake as a participant in the 1993 LTIP; ii) the inclusion in
1995 of Mr. Fukutake as a participant in the SERP and the granting in 1995 of
additional performance units to Mr. Fukutake under the 1993 LTIP; iii) the
inclusion in 1996 of Mr. Fukutake in the 1996 Stock Option Plan; iv) the
issuance in 1997 of an additional 50,000 options under the 1996 Stock Option
Plan to Mr. Fukutake in exchange for his complete relinquishment of benefits
under the SERP; and v) the grant of shares of common stock to Mr. Fukutake in
lieu of his participation in the 1999 LTIP.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James Kahl currently serves as the Benesse Corporation nominee on the board
of directors of the company in connection with the acquisition by Benesse
Corporation in January 1991 of a 20% interest in Berlitz Japan, Inc., a
subsidiary of the company.
On December 9, 1992, the company and Benesse Corporation entered into a
merger agreement pursuant to which Benesse Corporation agreed to acquire,
through a merger of the company with an indirect wholly owned U.S. subsidiary of
Benesse Corporation, approximately 6.7 million shares of the common stock.
Additionally, on May 12, 1997, the company sold 250,000 shares of its common
stock at $24.44 per share, the average market price for the ten days ended on
April 29, 1997, to Benesse Holdings in a private placement exempt from
registration under the Securities Act of 1933. Furthermore, on September 17,
1999, pursuant to a Stock Purchase Agreement dated September 7, 1999 between
Mr. Fukutake and MCC Proceeds, Inc., as Trustee of the Maxwell Macmillan
Realization Liquidating Trust, Mr. Fukutake acquired 227,800 shares of common
stock. As a result of these transactions, Benesse Corporation currently
beneficially owns 8,934,033 shares, which represents approximately 61.58%, of
the 9,529,788 shares of common stock outstanding at April 17, 2000. Public
shareholders of the company held the remaining outstanding common stock.
Soichiro Fukutake is the President, Representative Director and principal
shareholder of Benesse Corporation. On June 30, 1997, the company granted
100,250 stock options to Mr. Fukutake at an exercise price of $24.9375, equal to
the closing price of the company's common stock on the New York Stock Exchange
on the date of grant. 50,000 of these options, which expired on December 31,
1999, had been granted in exchange for the complete relinquishment by
Mr. Fukutake of all benefits under the company's SERP.
In September 1994, the company borrowed $20.0 million from a U.S. subsidiary
of Benesse Corporation, as evidenced by a subordinated promissory note bearing
interest at a rate of 6.93% per year. Berlitz-Japan also borrowed Y1.0 billion
(approximately $10.1 million) from Benesse Corporation as evidenced by an
interest-free subordinated promissory note. In March 1996, the company received
the proceeds of an additional $6.0 million subordinated promissory note payable
to a U.S. subsidiary of Benesse Corporation, bearing interest at a rate of the
six month LIBOR plus 1% per year, reset semi-annually. Payment obligations under
the $20.0 million note were guaranteed by the company and its significant U.S.
subsidiaries, subject to senior guarantees of the 1997 credit agreement. The
company and its significant U.S. subsidiaries also executed a guarantee of
payment obligations under the Y1.0 billion note, effective as of the day
following the date upon which all payment obligations under the 1997 credit
agreement are satisfied. These notes provided for maturity on the earlier of
June 30, 2003 or twelve months from the date that all payment obligations under
the company's 1997 credit agreement had been satisfied. To the extent that
interest payments on these notes were not permitted while any amounts remained
outstanding under the 1997 credit agreement, such accrued interest rolled over
semiannually into the note principal. All of these notes were repaid in full on
March 11, 1999 with the proceeds from the issuance of the convertible
debentures.
On March 11, 1999, the company issued $155.0 million aggregate principal
amount convertible debentures with a 12-year maturity in a private placement.
These convertible debentures were issued as follows: a) $100.0 million aggregate
principal amount to Apollo; and b) $55.0 million aggregate principal amount to
Benesse Holdings.
In a separate transaction, on March 11, 1999, Benesse Holdings loaned
$50.0 million to the company, evidenced by a 12-year fixed rate subordinated
promissory note. The company used the proceeds from the sale of the convertible
debentures, as well as proceeds from this note, to repay in full all outstanding
indebtedness pursuant to the company's existing 1997 credit agreement and the
three outstanding notes, and for general corporate purposes. Assuming conversion
of all of the convertible debentures issued in the
15
<PAGE>
transaction, Apollo will own approximately 20% of the outstanding common stock
of the company and Benesse Holdings will own approximately 60% of the
outstanding common stock of the company.
The convertible debentures bear interest at 5% per year, payable
semi-annually. Principal amounts outstanding under the convertible debentures
are not due until March 2011, and the company is not required to establish a
bond sinking fund for repayment of this principal.
The convertible debentures are convertible at any time into shares of the
company's common stock at a conversion price of $33.05 per share, subject to
anti-dilution related adjustments to offset the effects of stock dividends and
other changes in equity. The company will reserve out of its authorized but
unissued common stock the full number of shares then issuable upon conversion of
all outstanding convertible debentures.
The convertible debentures provide for optional redemption by the company,
in whole but not in part, anytime after 3 years and 2 months. If the average
closing price of the company's common stock for the 30 trading days following
the third anniversary of the Issue Date exceeds $39.66 per share, the company
may redeem at par. Otherwise, if the convertible debentures are redeemed, the
company shall pay a redemption premium, expressed as a percentage of outstanding
principal, as follows: a) 4% for redemptions occurring in the fourth year after
issue; b) 2% for redemptions occurring in the fifth year after issue; and c) 0%
for redemptions occurring after the fifth year. All such redemptions are subject
to the holders' right to convert into common stock.
The convertible debentures also allow Apollo and Benesse Holdings to elect
to exchange their convertible debentures, in whole, into non-convertible, 7-year
fixed rate debt. This election may only be made if the average closing price of
the common stock during the 30 trading days immediately preceding the third
anniversary of the Issue Date does not exceed $33.05. Furthermore, Benesse
Holdings may only effect an exchange if Apollo does so. Upon the determination
by an independent financial institution of the fixed interest rate, Apollo and
Benesse Holdings shall irrevocably decide whether to proceed with their
exchanges. If only Apollo proceeds with such an exchange, the company, no later
than 150 days from the third anniversary of the Issue Date, must either
a) redeem all of Apollo's convertible debentures at par, or b) deliver evidence
of the fixed rate debt to Apollo. If both Apollo and Benesse Holdings proceed
with their exchanges, the company, within the same 150 day period, shall either
a) redeem the convertible debentures held by Apollo and Benesse Holdings, or
b) deliver the fixed rate debt to both Apollo and Benesse Holdings.
Principal amounts outstanding under the fixed rate debt would not be payable
until maturity, while interest payments would be made semi-annually. The fixed
rate debt interest rate is subject to a cap of a) the applicable U.S. treasury
rate + 5% (not to exceed 13%) if only Apollo receives fixed rate debt, or
b) the applicable U.S. treasury rate + 7% (not to exceed 14%) if both Apollo and
Benesse Holdings receives fixed rate debt. The fixed rate debt may be redeemed
by the company after the third anniversary of their issue upon payment of
principal amounts of the fixed rate debt and the following redemption premiums,
expressed as a percentage of the outstanding principal amount: a) one half of
the per annum interest rate for redemptions occurring in the fourth year after
issue; b) one quarter of the per annum interest rate for redemptions occurring
in the fifth year after issue; and c) no premium for redemptions occurring after
the fifth year.
Prior to the third anniversary of the Issue Date, if Benesse Corporation
sells 80% or more of the shares of common stock owned directly or indirectly by
it on the Issue Date, the company shall be required to make an offer to
repurchase for cash: i) convertible debentures held by Apollo at a value equal
to 110% of the principal amount then outstanding; and ii) convertible debentures
held by Benesse Holdings at a value equal to 101% of the principal amount then
outstanding. In addition, if at any time on or after the Issue Date a change of
control occurs but Benesse Corporation sells less than 80% of its shares, or if
Benesse Corporation sells 80% of its shares on or after the third anniversary of
the Issue Date, the
16
<PAGE>
company shall be required to make an offer to repurchase for cash the
convertible debentures (but not the fixed rate debt) at a value equal to 101% of
the principal amount of the convertible debentures.
The convertible debentures are subject to standard affirmative covenants,
including financial and other informational reporting, compliance with laws,
maintenance of insurance, maintenance of properties, payment of taxes, and
preservation of corporate existence. Negative covenants that the convertible
debentures are subject to include: prohibitions on certain mergers,
consolidations and asset transfers; forbearance from restrictions on rights of
holders to convert or exchange the convertible debentures; and, in the case of
convertible debentures held by Apollo, forbearance from amending certain
understandings between the company, Berlitz Japan, Inc. and Benesse Corporation.
The agreements entered into in connection with the issuance of the
convertible debentures include a number of other provisions, including: a) the
granting of registration rights to the holders of the convertible debentures;
b) the granting of seats on the company's board of directors to Apollo; c) the
granting of approval rights to Apollo, at the company's board level, over
certain transactions; and d) certain restrictions on the transferability of the
convertible debentures held by Apollo.
The note entered into on March 11, 1999 with Benesse Holdings bears interest
for the first five years at 5.2% per year, and, after the fifth year, at a
renegotiated fixed rate approximating LIBOR plus a margin based on the company's
then existing leverage. Interest is payable semiannually in cash while principal
repayment is deferred until maturity. This note includes standard covenants
similar to those included in the convertible debentures. In the event of a
change in control, the note provides for redemption by the company, at the
option of Benesse Holdings, at a price equal to 101% of the note's principal
amount.
The company and Benesse Corporation maintain a joint Directors and Officers
insurance policy covering acts by directors and officers of both Benesse
Corporation and the company. Consequently, the premium on the D&O policy is
allocated 60% to Benesse Corporation and 40% to the company, except that in
1997, the premium for entity coverage, which benefited the company only, was
allocated 100% to the company, resulting in a total D&O allocation of 57% to
Benesse Corporation and 43% to the company for 1997. Since May 1995, the company
has also maintained a stand-alone Employment Practices Liability insurance
policy covering the company, its officers and directors (including the Benesse
Corporation directors who are also directors of the company). The premium on
this EPL policy is allocated 30% to Benesse Corporation and 70% to the company.
The company and Benesse Corporation participated in certain other joint
business arrangements during 1999, in the ordinary course of business, including
the following:
- Pursuant to extended industrial block contracts, Berlitz-Japan provided
lessons to Benesse Corporation at its standard rate for prepaid industrial
lessons which was approximately 20% below the rate charged for individual
instruction. Revenues under these contracts aggregated 27.3 million Yen
(approximately $240,500 at an average 1999 exchange rate of Y113.34).
- The company's subsidiary, Berlitz Franchising Corporation, is party to a
standard franchise agreement dated July 30, 1997 with the Okayama Language
Center, Inc., a corporation formed by Benesse Corporation and the Okayama
Institute of Languages, the latter being controlled by Mr. Fukutake's
sister-in-law.
- Berlitz-Japan entered into an advisory agreement, dated April 1, 1998,
with Shinken Ad Co. Ltd. (owned 25% by Benesse Corporation) under which
Shinken Ad Co. Ltd. provides advisory services to Berlitz-Japan for an
annual fee of 10 million Yen (approximately $88,000 at an average 1999
exchange rate of Y113.34).
- Pursuant to a services agreement, Benesse Corporation periodically offered
its customers language and homestay programs arranged and operated by the
company's specialty instruction program, Berlitz Study
Abroad-Registered Trademark-. Benesse Corporation also periodically
offered its customers language study
17
<PAGE>
and homestay programs arranged and operated by Berlitz on
Campus-Registered Trademark-, another of the company's specialty
instruction programs. The company and Benesse Corporation also
participated in certain other joint business arrangements in the ordinary
course of business, none of which had a material effect on the financial
statements.
Management believes that the company has entered into all such agreements on
terms no less favorable than it would have received in an arm's-length
transaction with independent third parties. Each of the transactions with
Benesse Corporation entered into after the merger was approved by the
disinterested directors committee.
PERFORMANCE GRAPHS
The following graphs set forth the company's total shareholder return as
compared to the S&P 400 Industrial Index and a peer group index (described
below) over a five-year period, beginning on December 31, 1994, and ending on
December 31, 1999. The total shareholder return assumes $100 invested at the
beginning of the period in the company's common stock, the S&P 400 Industrial
Index and the peer group index. It also assumes reinvestment of all dividends.
As the company is the only publicly-held language instruction company, there
are no directly comparable companies. Therefore, the company has created a peer
group index of selected publicly-held companies in the educational services and
educational publishing industries. The companies included in this peer group
are: ITT Educational Services, Inc. (a leading proprietary provider of technical
post secondary degree programs in the U.S.); Education Management Corporation
(among the largest providers of proprietary post-secondary education in the U.S.
offering degree and non-degree programs in the areas of design, media arts,
culinary arts, fashion and paralegal studies); and three educational publishing
companies: Houghton Mifflin, John Wiley & Sons and McGraw-Hill, Inc. While none
of these companies are directly comparable to the company, the company believes
they come under the same broad rubric of education-related activities as the
company. ITT Educational Services, Inc. and Education Management Corporation
replace Flightsafety International and National Education Corporation, two
companies which were formerly included in the company's peer group, but which
were no longer publicly traded beginning in 1997.
ITT Educational Services, Inc. has been publicly traded since
December 1994, and Education Management Corporation has been publicly traded
since October 1996. For purposes of creating the peer group index, these two
companies have been given a market capitalization weighting of zero for those
periods prior to their initial public trading dates.
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<PAGE>
COMPARISON OF STOCK PRICES
BERLITZ INTERNATIONAL, INC., THE S&P 400 INDUSTRIAL INDEX
AND PEER GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEXED SHARE PRICES
<S> <C> <C> <C>
Berlitz S&P 400 Index Peer Group Index
1994 100 100 100
1995 127 132 154
1996 160 159 231
1997 208 205 294
1998 223 270 445
1999 132 336 302
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Berlitz..................................................... $100 $127 $160 $208 $223 $132
S&P 400 Index............................................... $100 $132 $159 $205 $270 $336
Peer Group Index............................................ $100 $154 $231 $294 $445 $302
</TABLE>
19
<PAGE>
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
On March 7, 2000, upon recommendation of the audit committee, the board of
directors selected Deloitte & Touche LLP to serve as independent public
accountants of the company for the fiscal year ending December 31, 2000. The
board of directors proposes and recommends that the shareholders ratify the
selection of the firm of Deloitte & Touche LLP to serve as independent public
accountants of the company for the fiscal year ending December 31, 2000.
Deloitte & Touche LLP has served as the company's independent public accountants
since 1993.
Unless otherwise directed by the shareholders, proxies will be voted in
favor of the ratification of the selection of Deloitte & Touche LLP to serve as
independent public accountants of the company for the fiscal year ending
December 31, 2000. A representative of Deloitte & Touche LLP will attend the
meetings, and will have an opportunity to make a statement if he or she so
desires and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
VOTE REQUIRED
Under the New York Business Corporation Law and the company's bylaws, the
affirmative vote of a plurality of the votes cast at the meeting will be
required to elect the nominees for directors. The affirmative vote of a majority
of the votes cast at the meeting will be required to ratify Deloitte & Touche
LLP as independent public accountants of the company and to transact any other
business that may be presented at the meeting.
Abstentions and "non-votes" will be counted as present for all purposes in
determining the existence of a quorum. (A "non-vote" occurs when a nominee
(typically, a broker-dealer) holding shares for a beneficial owner attends a
meeting with respect to such shares (in person or by proxy) but does not vote on
one or more proposals because the nominee does not have discretionary voting
power with respect thereto and has not received instructions from the beneficial
owner.) The holders of record of one-third of the company's outstanding shares
entitled to vote at the meeting, present in person or represented by proxy at
the meeting, will constitute a quorum for the transaction of business at the
meeting.
The vote occurring at the annual meeting will be overseen by an inspector.
The inspector's duties include determining the number of shares represented at
the annual meeting, counting all votes and ballots and certifying the
determination of the number of shares represented and the outcome of the
balloting. The aggregate number of votes entitled to be cast by all shareholders
present in person or represented by proxy at the annual meeting will be counted
for purposes of determining the minimum number of affirmative votes required for
the election of directors and for the ratification of appointment of auditors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of the company's knowledge, there are no events of delinquent
filing requiring disclosure under Item 405 of Regulation S-K, except that
Benesse Holdings did not timely file a Form 4 with respect to its acquisition of
250,000 shares in April 1997. Benesse Holdings has since filed a Form 4 with
respect to the acquisition of those shares.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS
Appropriate proposals from shareholders intending to be present at the 2001
annual meeting of shareholders must be received by the company for inclusion in
the company's proxy statement and form of proxy relating to that annual meeting
on or before December 31, 2000. The board of directors will consider whether any
proposal should be submitted to a shareholder vote in light of applicable rules
and
20
<PAGE>
interpretations promulgated by the U.S. Securities and Exchange Commission, but
a shareholder's timely submission of a proposal will not automatically confer a
right to have that proposal presented for a vote at the company's 2001 annual
meeting.
MISCELLANEOUS
The company will bear all of the costs of the solicitation of proxies for
use at the meeting. In addition to the use of the mails, proxies may be
solicited by a personal interview, telephone and telegram by directors, officers
and employees of the company, who will undertake such activities without
additional compensation. Banks, brokerage houses and other institutions,
nominees or fiduciaries will be requested to forward the proxy materials to the
beneficial owners of the shares of common stock held of record by such persons
and entities and will be reimbursed for their reasonable expenses incurred in
connection with forwarding such materials.
Shareholders who do not expect to attend in person are urged to sign, date
and return the enclosed proxy in the envelope provided. In order to avoid
unnecessary expense, we ask your cooperation in mailing your proxy promptly, no
matter how large or how small your holdings may be.
As of the date of this proxy statement, management has no knowledge of any
business, other than that described herein, which will be presented for
consideration at the meeting. In the event any other business is properly
presented at the annual meeting, it is intended that the persons named in the
enclosed proxy will have authority to vote such proxy in accordance with their
judgment on such business.
The information required under Item 401 of Regulation S-K with respect to
executive officers of the company is incorporated in this proxy statement by
reference to the section entitled "Executive Officers and Directors of the
Registrant" set forth in part I of the company's annual report on Form 10-K, for
the year ended December 31, 1999. The financial statements and schedules
included in the Form 10-K under Item 8 are incorporated in this proxy statement
by reference.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO BUT NOT INCLUDING
EXHIBITS, WILL BE MAILED UPON ORAL OR WRITTEN REQUEST, WITHOUT CHARGE, TO ANY
SHAREHOLDER OF THE COMPANY. ALL REQUESTS SHOULD BE DIRECTED TO PAUL H.
WEINSTEIN, SECRETARY, BERLITZ INTERNATIONAL, INC., 400 ALEXANDER PARK,
PRINCETON, NEW JERSEY, 08540, (609) 514-9650.
21
<PAGE>
BERLITZ INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF BERLITZ INTERNATIONAL, INC.
IN CONNECTION WITH ITS 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 6, 2000
The undersigned shareholder of Berlitz International, Inc. (the
"Company") hereby appoints Paul H. Weinstein and Robert Minsky or either of
them, the true and lawful attorneys, agents and proxies of the undersigned, with
full power of substitution, to vote all shares of Common Stock of the Company
which the undersigned may be entitled to vote at the 2000 annual meeting of
shareholders of the Company to be held on June 6, 2000, and at any adjournment
or postponement of such meeting with all powers which the undersigned would
possess if personally present, for the following purposes:
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED
(CONTINUED ON THE REVERSE SIDE)
FOLD AND DETACH HERE
BERLITZ INTERNATIONAL, INC.
ANNUAL MEETING
OF
SHAREHOLDERS
TUESDAY--JUNE 6, 2000
10:00 A.M.
BERLITZ INTERNATIONAL, INC.
RIHGA ROYAL HOTEL
151 WEST 54TH STREET
NEW YORK, NEW YORK 10019
<PAGE>
1. ELECTION OF NOMINEES - To elect each of Hiromasa Yokol, James R. Kahl,
Edward G. Nelson, Robert L. Purdum and Antony P. Ressler as a director of the
Company to serve until the Company's 2002 annual meeting of shareholders, in
each case until their successors are elected and qualified or their earlier
death, resignation or removal.
<TABLE>
<CAPTION>
<S> <C> <C>
FOR all WITHHOLD (INSTRUCTION: To withhold authority to vote for any individual
nominees AUTHORITY nominee, write that nominee's name in the space provided below.)
/ / / /
2. RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS-To ratify the
selection of the firm of Deloitte & Touche LLP to serve as independent
accountants of the Company for 2000.
3. OTHER-in their discretion upon such other matters, including withholding a
quorum if necessary, as may properly come before the Meeting.
FOR AGAINST ABSTAIN
/ / / / / /
This Proxy will be voted as directed or, if
no direction is given, will be FOR the
election of the nominees and the approval of
the property described above.
Dated: , 2000
-------------------------------------
--------------------------------------------
(Signature)
--------------------------------------------
(Signature)
--------------------------------------------
(Title or Capacity)
(Please sign your name or names exactly as it
appears on your stock certificate(s). When
signing as attorney, executor, administrator,
trustee, guardian or corporate executor,
please give your full title as such. For
joint accounts, all co-owners should sign.)
</TABLE>
FOLD AND DETACH HERE
