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BERLITZ INTERNATIONAL, INC.
$55,000,000
5% Convertible Exchangeable Subordinated
Debentures due 2010, Series B
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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
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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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 Xxxx, Weiss, Rifkind, Xxxxxxx
& Xxxxxxxx, special counsel for the Company
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Berlitz International, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
5.00% Convertible Exchangeable Subordinated Debentures due 2010, Series B
as of October 2, 1998
Benesse Holdings International, Inc.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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
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 Xxxxxxxx & Xxxxxxxx,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, 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 you. At the Closing
the Company will deliver to you the Convertible Debentures to be purchased 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 prior to or at the Closing and after giving effect to
the issue and sale of the Debentures
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(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 Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 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.
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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
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
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
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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.
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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 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, 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
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.
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.
9
(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 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 (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 Xxxxxxx, Xxxxx & 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 Xxxxxxx, 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.
11
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).
12
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 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:
(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 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,
13
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 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 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;
14
(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
15
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 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 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.
16
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
17
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
18
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
19
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.
20
(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
21
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
22
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.
23
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
24
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
25
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 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
26
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.
27
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
28
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:
29
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
30
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
31
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.
32
(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
33
(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 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 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
34
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-
35
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 rescind 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
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 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.
36
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
37
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
38
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
restructuring 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, Xxxxxxx, Xxxxx & Co. and its counsel, Xxxx, Weiss, Rifkind, Xxxxxxx
& Xxxxxxxx, 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.
39
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 Required 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
40
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:
41
(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 Xxxxxx X. Xxxxxx,
Xx., 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.
42
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 purchaser 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 Section
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
43
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
44
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
45
Company or any Subsidiary, or (d) constitutes financial statements delivered
to you under Section 7.1 that are otherwise publicly available.
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 Company, whereupon the foregoing shall become a binding agreement
between you and the Company.
Very truly yours,
BERLITZ INTERNATIONAL, INC.
By_________________________
Name:
Title:
The foregoing is hereby
agreed to as of the
date thereof.
BENESSE HOLDINGS INTERNATIONAL, INC.
By_________________________
Name:
Title:
46
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.
1
"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, permits, concessions, grants, franchises, licenses,
agreements or governmental restrictions
2
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 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:
3
(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 Xxxx-Xxxxx-Xxxxxx 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);
4
(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 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).
5
"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 corporation.
"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, xxxxxx 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.
6
"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 "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 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
7
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.
8
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
1
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
2
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 4.4
FORM OF OPINION OF SPECIAL COUNSEL TO THE COMPANY
[Letterhead of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx]
[Closing Date]
Benesse Holdings International, Inc.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
We have acted as special counsel to Berlitz International,
Inc., a New York corporation (the "COMPANY"), in connection with the Purchase
Agreement (the "PURCHASE AGREEMENT") dated as of October 2, 1998 between the
Company and Benesse Holdings International Inc., a Delaware corporation
("BHI"). This opinion is being furnished to you at the request of the Company
as provided by Section 4.4 of the Purchase Agreement. Capitalized terms used
and not otherwise defined in this opinion have the respective meanings given
those terms in the Purchase Agreement.
In connection with the furnishing of this opinion, we have
examined originals of the following documents, each dated as of the date set
forth below (collectively, the "DOCUMENTS"):
1. the Purchase Agreement;
2. the Convertible Exchangeable Subordinated
Debentures due 2010, Series B, in the aggregate
principal amount of $55,000,000 issued to you by
the Company pursuant to the Purchase Agreement on
the date hereof;
3. the Registration Rights Agreement, dated as of
October 2, 1998; and
4. the Subordinated Promissory Note in the principal
amount of $50,000,000 issued to you by the Company
on the date hereof (the "SUBORDINATED NOTE").
In addition, we have examined: (i) those corporate records
of the Company as we have considered appropriate, including copies of the
restated certificate of incorporation and the amended and restated by-laws of
the Company certified by it as in effect on the date of this letter
(collectively, the "CHARTER DOCUMENTS") and copies of resolutions of the board
of directors of the Company certified by the Company; and (ii) those other
certificates, agreements and documents as we deemed relevant and necessary as
a basis for the opinions expressed below.
We have also relied upon the factual matters contained in the representations
and warranties of the Company made in the Documents and, as to factual matters,
upon certificates of public officials and the Company.
In our examination of the documents referred to above, we
have assumed, without independent investigation, the genuineness of all
signatures, the legal capacity of all individuals who have executed any of the
documents reviewed by us, the authenticity of all documents submitted to us as
originals, the conformity to the originals of all documents submitted to us as
certified, photostatic, reproduced or conformed copies of valid existing
agreements or other documents, the authenticity of the latter documents and
that the statements regarding matters of fact in the certificates, records,
agreements, instruments and documents that we have examined are accurate and
complete. We have also assumed, without independent investigation, the
enforceability of the Documents against each party other than the Company.
Whenever we indicate that our opinion is based upon our
knowledge or words of similar import, our opinion is based solely on an
officer's certificate of the Company and without any independent verification
or investigation.
Based upon the foregoing, and subject to the assumptions,
exceptions and qualifications set forth in this letter, we are of the opinion
that:
1. The Company is a subsisting New York corporation in good
standing under the laws of the State of New York.
2. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under each Document.
The execution, delivery and performance by the Company of each Document have
been duly authorized by all necessary corporate and shareholder action on the
part of the Company and do not violate its Charter Documents.
3. Each Document has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its terms.
4. The execution and delivery by the Company of each of the
Documents and the performance by the Company of its obligations under the
Documents do not and will not violate or result in a breach of or default
under any Covered Law (as defined below) including Regulations U or X of the
Board of Governors of the Federal Reserve System of the United States, or any
order, writ, injunction or decree of which we have knowledge of any court or
governmental authority or agency binding upon the Company or to which the
Company is subject.
5. Except for any filings, authorizations or approvals
specifically provided for in the Documents, no authorizations or approvals of,
and no filings with, any governmental
-2-
or regulatory authority or agency are necessary under any Covered Law for the
issuance and delivery of the Convertible Debentures and the Subordinated Note
and the execution, delivery or performance by the Company of the Documents.
6. The Company is not required to be registered as an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
7. The shares of Common Stock issuable upon conversion of
the Convertible Debentures have been duly authorized by all necessary
corporate and shareholder action on the part of the Company and, if and when
issued and delivered in accordance with the terms of the Purchase Agreement
and the Convertible Debentures, will be validly issued, fully paid and
non-assessable.
8. Assuming the accuracy of the representations and
warranties of BHI contained in Section 6 of the Purchase Agreement and the
accuracy as to factual matters of the representations and warranties of the
Company contained in Section 5 of the Purchase Agreement, the issuance and
sale of the Debentures in the manner contemplated in the Purchase Agreement
and the issuance and sale of the Subordinated Note are exempt from the
registration requirements of the Securities Act. It is not necessary to
qualify an indenture under the Trust Indenture Act of 1939, as amended, in
connection with the offer, sale and delivery of the Debentures in the manner
contemplated by the Purchase Agreement or of the Subordinated Note.
The foregoing opinion is subject to the following
assumptions, exceptions and qualifications:
(a) The enforceability of the Documents may
be: (i) subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting
creditors' rights generally; and (ii) subject to general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(b) We express no opinion as to: (i) the
enforceability of any provisions contained in the Documents that purport to
establish (or may be construed to establish) evidentiary standards; or (ii) the
enforceability of any premiums or penalties which are payable in the event of
default, (iii) the enforceability of forum selection clauses in the federal
courts; or (iv) the enforceability of any provision which is deemed to be
violative of any public policy or law.
The opinions expressed above are limited to the laws of the
State of New York and the federal laws of the United States of America that,
in each case, in our experience, are normally applicable to transactions of
the type contemplated by the Purchase Agreement (collectively, the "COVERED
LAWS"). Our opinions are rendered only with respect to the laws, and the
rules, regulations and orders under those laws, that are currently in effect.
This letter is furnished by us solely for your benefit in
connection with the transactions referred to in the Purchase Agreement and the
Subordinated Note and may not be
-3-
circulated to, or relied upon by, any other Person except any Person who
hereafter acquires a Debenture or all or part of the Subordinated Note.
Very truly yours,
