BENESSE HOLDINGS INTERNATIONAL, INC.
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October 2, 1998
Berlitz International, Inc.
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Ladies and Gentlemen:
Reference is made to the Purchase Agreement, dated as of the date
hereof (the "Purchase Agreement"), between Berlitz International, Inc., a New
York corporation (the "Company"), and Benesse Holdings International, Inc., a
Delaware corporation ("Benesse"), which is being entered into simultaneously
with this letter agreement. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Purchase Agreement.
In connection with the Purchase Agreement, the parties hereby agree
as follows:
1. At the request of the Company and in order to permit the Company
to proceed with the Company Shareholder Meeting and to furnish its proxy
statement to shareholders in connection therewith, Benesse hereby irrevocably
commits, subject to satisfaction of the conditions set forth in the Purchase
Agreement and the Other Purchase Agreement to, and to the Closing of, the
issuance and sale of an aggregate of $155 million of the Company's Convertible
Exchangeable Subordinated Debentures Due 2010, Series A and B, and the
application of the proceeds thereof as contemplated therein, to lend to the
Company the principal sum of Fifty Million U.S. Dollars (US$50,000,000) on the
Closing Date upon the terms and subject to the conditions of the subordinated
promissory note attached hereto as Exhibit A .
2. This letter agreement shall not be assignable by either party
hereto without the prior written consent of both parties hereto and any
purported assignment without such consent shall be null and void.
3. This letter agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
4. This letter agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which when taken together shall
be deemed one and the same instrument.
If the foregoing correctly sets forth the agreement between the
parties hereto with respect to the subject matter hereof, kindly execute a
copy of this agreement in the space indicated below at which time this letter
agreement shall serve as a valid and binding agreement between the parties
hereto with respect to the subject matter hereof.
Very truly yours,
BENESSE HOLDINGS INTERNATIONAL, INC.
By: ___________________________
Name:
Title:
ACCEPTED AND AGREED TO:
BERLITZ INTERNATIONAL, INC.
By: _________________________
Name:
Title:
EXHIBIT A
BERLITZ INTERNATIONAL, INC.
SUBORDINATED PROMISSORY NOTE
THE SECURITY REPRESENTED BY THIS PROMISSORY NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
US$50,000,000 NEW YORK, NEW YORK
________ __, 1998
SECTION 1. PAYMENT OF PRINCIPAL AND INTEREST
BERLITZ INTERNATIONAL, INC. (the "BORROWER"), a New York corporation,
hereby promises to pay to the order of BENESSE HOLDINGS INTERNATIONAL, INC., a
Delaware corporation, or its successors or permitted assigns (the "LENDER")
the principal sum of Fifty Million U.S. Dollars (US$50,000,000). The principal
amount of this Promissory Note (herein, this "NOTE") remaining unpaid from
time to time shall bear interest from the date hereof, until paid in full,
payable in accordance with Section 2 hereof. The Borrower agrees to repay the
entire principal amount of this Note, and all accrued and unpaid interest
thereon, in a single payment on the Maturity Date. As used herein, "MATURITY
DATE" means [____________, 2010], the date which is the twelfth anniversary of
the date hereof.
SECTION 2. INTEREST.
(a) Interest on all amounts outstanding hereunder shall be payable
semi-annually in arrears on each Interest Payment Date. As used herein,
"INTEREST PAYMENT DATE" means June 30 and December 30 of each year during the
term hereof commencing December 30, 1998. If an Interest Payment Date does not
fall on a Business Day, then the Interest Payment Date shall be the next
preceding Business Day.
(b) Interest shall be paid on the unpaid principal amount of this
Note (i) until the fifth anniversary of this Note, at the Initial Interest
Rate and (ii) thereafter, at the Reset Interest Rate. As used herein, the
"INITIAL INTEREST RATE" shall be 5.90% per annum. All interest on this Note
shall be calculated on the basis of a 365 day year and the actual number of
days elapsed.
(c) The Reset Interest Rate shall be determined and agreed upon by
the Borrower and the Lender by no later than the fifth Business Day prior to
the fifth anniversary of the date of this Note (the "DETERMINATION DATE"),
provided, however, that in no event shall the Reset Interest Rate exceed the
Applicable Rate. If the Borrower and the Lender are unable to agree
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upon the Reset Interest Rate by the Determination Date, the Reset Interest
Rate shall be the Applicable Rate. As used herein, "RESET INTEREST RATE" shall
mean the rate fixed on the Determination Date at which interest on the
outstanding principal of this Note shall be calculated from and after the
fifth anniversary of this Note until this Note is fully repaid.
(d) Notwithstanding anything herein to the contrary, if on any
Interest Payment Date the payment of interest on this Note is prohibited under
Section 9, in lieu of a cash payment of such amount of interest, the then
principal amount payable under this Note shall be increased with effect from
such Interest Payment Date by an amount equal to the amount of such prohibited
cash payment. Any such amount of interest added to the principal of this Note
shall continue to be considered a "scheduled payment on account of the Debt"
for purposes of Section 9 and shall be payable as soon thereafter as is
permitted under Section 9.
(e) Notwithstanding anything herein to the contrary, the interest
payable by the Borrower with respect to this Note shall not exceed the maximum
amount permitted by applicable law and, to the extent that any payments in
excess of such permitted amount are received by the Lender, such excess shall
be considered payments in respect of the principal amount of this Note.
SECTION 3. PAYMENT.
Principal and interest hereunder shall be payable to the Lender
without set-off or counterclaim in U.S. Dollars in immediately available funds
to the bank account of the Lender as notified in writing to the Borrower.
SECTION 4. OPTIONAL REDEMPTION.
At its option, the Borrower may prepay this Note at any time from and
after the tenth anniversary of the date of this Note if, as of such time, all
of the Convertible Debentures have been repaid or converted into Common Stock
(the "OPTIONAL REDEMPTION"). If the Borrower exercises such Optional
Redemption, there shall be no prepayment penalty or premium.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender that:
(A) ORGANIZATION; POWER AND AUTHORITY. The Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Borrower has the corporate
power and authority to own or hold under lease the properties it purports to
own or hold under lease, to
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transact the business it transacts and proposes to transact, to execute and
deliver this Note and the Convertible Debentures and to perform the provisions
hereof and thereof.
(B) AUTHORIZATION, ETC. This Note and the Convertible Debentures have
been duly authorized by all necessary corporate action on the part of the
Borrower, and each of this Note and the Convertible Debentures constitutes a
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(C) CAPITALIZATION; SUBSIDIARIES. (i) As of the date hereof, the
authorized capital stock of the Borrower consists of: (x) 40,000,000 shares of
common stock, par value $.10 per share ("COMMON STOCK"), of which 9,529,788
shares are issued and outstanding and (y) 180,000 shares of preferred stock,
par value $1.00 per share, of which no shares are issued and outstanding.
(ii) The outstanding shares of Common Stock of the Borrower
have been duly authorized and are validly issued and outstanding, fully paid
and nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(iii) The Borrower has disclosed in Schedule 5.4 to the
Debenture Purchase Agreement a list of all its Subsidiaries together with the
jurisdiction of organization of each such Subsidiary. All of the outstanding
shares of capital stock or similar equity interests of each Subsidiary of the
Borrower have been validly issued, are fully paid and nonassessable and are
owned by the Borrower or another Subsidiary (except for certain shares owned
by nominees and third parties as disclosed on Schedules 5.4(a)(i) and
5.4(a)(ii), respectively, to the Debenture Purchase Agreement) free and clear
of any lien, except for liens on certain Subsidiaries' shares as indicated on
Schedule 5.4(b) to the Debenture Purchase Agreement.
(iv) Each Subsidiary of the Borrower is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a
foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or other power
and authority to own or hold under lease the properties it purports to own or
hold under lease and to transact the business it transacts and proposes to
transact.
(D) FILED DOCUMENTS AND FINANCIAL STATEMENTS. (i) Each of the
documents filed with the Securities and Exchange Commission since January 1,
1998 complied as to form in all material respects with all of the requirements
of the Securities Act of 1933, as amended or the Securities Exchange Act of
1934, as amended, as applicable, and did not contain any untrue
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statement of a material fact or omit to state any material fact required to be
contained therein or necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading. Any financial statements contained in such filings (including in
each case the related schedules and notes) fairly represent in all material
respects the consolidated financial position of the Borrower and its
Subsidiaries as of the respective dates and the consolidated results of their
operations and cash flows for the respective periods and have been prepared in
accordance with GAAP consistently applied throughout the periods involved
except as set forth in the notes thereto (subject, in the case of any interim
financial statements, to normal year-end adjustments). Since December 31,
1997, there has been no change in the financial condition, operations,
business or properties of the Borrower or any of its Subsidiaries except as
disclosed in the Borrower's consolidated financial statements or changes that
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
(ii) The Borrower's unaudited interim financial statements,
included in the information listed in Schedule 5.5(b) to the Debenture
Purchase Agreement and delivered to the Lender, were prepared in all material
respects on the same basis as the financial statements contained in the
documents filed with the Securities and Exchange Commission and fairly present
the financial position of the Borrower as of the dates referenced therein.
(iii) The Borrower's financial projections, included in the
information listed in Schedule 5.5(c) and delivered to the Lender, were
prepared in good faith based on assumptions believed to have been reasonable
at the time made and were prepared in all material respects consistent with
past accounting practices; however, no representation or warranty is made with
respect to actual financial results which will vary and may vary materially
from such projections.
(E) COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Borrower of this Note and the Convertible
Debentures will not (i) 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 Borrower or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, credit agreement, corporate charter or by-laws, or any
other material agreement, lease or instrument to which the Borrower or any
Subsidiary is bound or by which the Borrower or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result
in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or governmental authority
applicable to the Borrower or any Subsidiary or (iii) violate any provision of
any statute or other rule or regulation of any governmental authority
applicable to the Borrower or any Subsidiary, which violation would reasonably
be expected to have a Material Adverse Effect. No representation or warranty
is made with respect to the Borrower's agreement with NationsBank, National
Association, all amounts owing under which have been repaid on or prior to the
date of this Note.
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(F) GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any
governmental authority is required in connection with the execution, delivery
or performance by the Borrower of this Note.
(G) LITIGATION; OBSERVANCE OF STATUTES AND ORDERS. (i) There are no
actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Subsidiary or any property
of the Borrower or any Subsidiary in any court or before any arbitrator of any
kind or before or by any governmental authority that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(ii) Neither the Borrower nor any Subsidiary is in default
under any order, judgment, decree or ruling of any court, arbitrator or
governmental authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation environmental laws) of any
governmental authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(H) TAXES. The Borrower and its Subsidiaries have filed all income
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (i) the amount of which, or the failure to file with
respect to which, is not individually or in the aggregate material or (ii) the
amount, applicability or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which the Borrower
or a Subsidiary, as the case may be, has established adequate reserves in
accordance with GAAP. The Federal income tax liabilities of the Borrower and
its Subsidiaries have been audited by the Internal Revenue Service and paid
for all fiscal years up to and including the fiscal year ended 1994.
(I) TITLE TO PROPERTY; LEASES. The Borrower and its Subsidiaries have
good title to their respective properties, including all such properties
reflected in the audited balance sheet as of December 31, 1997 or purported to
have been acquired by the Borrower or any Subsidiary after said date (except
as sold or otherwise disposed of), in each case free and clear of liens,
except for those defects in title and liens that, individually or in the
aggregate, would not have a Material Adverse Effect or as otherwise set forth
on Schedule 5.10 to the Debenture Purchase Agreement. All material leases are
valid and subsisting and are in full force and effect in all material
respects.
(J) LICENSES, PERMITS, ETC. The Borrower and its Subsidiaries own or
possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
are material, without conflict with the rights of others, except for those
conflicts that, individually or in the aggregate, would not have a Material
Adverse Effect.
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(K) PRIVATE OFFERING BY THE BORROWER. Neither the Borrower nor anyone
acting on its behalf has offered this Note or any similar securities for sale
to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any person other than the
Lender, which has been offered this Note at a private sale for investment.
Neither the Borrower nor anyone acting on its behalf has taken, or will take,
any action that would subject the issuance or sale of this Note to the
registration requirements of Section 5 of the Securities Act of 1933, as
amended.
(L) USE OF PROCEEDS. The Borrower will as promptly as practicable
apply substantially all the proceeds of the sale of this Note and the
Convertible Debentures to retire existing indebtedness in accordance with
Schedule 5.14 to the Debenture Purchase Agreement.
(M) EXISTING INDEBTEDNESS. Neither the Borrower nor any Subsidiary is
in default, and no waiver of default is currently in effect, in the payment of
any principal of or interest on any Indebtedness of the Borrower or such
Subsidiary in an aggregate principal amount in excess of $3,000,000 and no
event or condition exists with respect to any such Indebtedness of the
Borrower or any Subsidiary that would (i) permit (or that with notice or the
lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before
its regularly scheduled dates of payment or (ii) prevent the Borrower or any
Subsidiary from prepaying any such Indebtedness without prepayment penalty or
premium (except (A) for the Borrower's agreement with NationsBank, National
Association, all amounts owing under which have been repaid on or prior to the
date of this Note, and (B) that a prepayment penalty or premium might become
payable in connection with any early termination of the Borrower's interest
rate, currency or similar swaps).
(N) FOREIGN CORRUPT PRACTICES ACT. The Borrower is not in violation
of Section 30A of the Securities Exchange Act of 1934, as amended.
(O) NO BROKERS OR FINDERS. No agent, broker, finder, or investment or
commercial banker (other than ▇▇▇▇▇▇▇, Sachs & Co., as to whose fees and
expenses the Borrower shall have full responsibility and the Lender shall have
no responsibility) or other Person or firm engaged by or acting on behalf of
the Borrower or any Subsidiary in connection with the negotiation, execution
or performance of this Note, is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Note.
(P) "BERLITZ" TRADEMARK. Except as disclosed in Schedule 5.21 to the
Debenture Purchase Agreement, the Borrower has valid title and ownership of,
and has properly registered the "Berlitz" trademark, and use of such trademark
in the Borrower's business as now conducted or as currently proposed to be
conducted causes no known conflict with or infringement of the rights of
others except for any such failure or conflict which would not be expected to
have a Material Adverse Effect. Except as disclosed in Schedule 5.21 to the
Debenture Purchase Agreement, neither the Borrower nor any Subsidiary has
received any written notice challenging the Borrower's rights or making any
other claim with respect to the "Berlitz" trademark or is
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aware of any such threatened challenge or claim; and such trademark is free
and clear of any liens except as disclosed in Schedule 5.21 to the Debenture
Purchase Agreement.
SECTION 6. COVENANTS.
In addition to the other undertakings herein contained, the Borrower
hereby covenants to the Lender that so long as any amount payable hereunder is
outstanding the Borrower shall perform the following obligations:
(A) USE OF PROCEEDS. The Borrower shall use the proceeds of this Note
only for prepayment of amounts outstanding under the Benesse Facilities,
prepayment of amounts outstanding under the Bank Credit Facilities, repayments
of other Indebtedness or for any other purpose if approved by the Lender in
writing.
(B) OTHER AGREEMENTS. The Borrower shall perform all of its
obligations as and when required pursuant and with respect to the Convertible
Debentures as in effect on the date hereof.
(C) INFORMATION. The Borrower shall furnish to the Lender:
(i) promptly, such financial and other information as the
Lender may from time to time reasonably request; and
(ii) promptly, any financial and other information provided
to the holders of the Convertible Debentures pursuant to subsection
(b).
(D) COMPLIANCE WITH LAW. The Borrower will and will cause each of its
Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
environmental laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure
that non-compliance with such laws, ordinances or governmental rules or
regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(E) INSURANCE. The Borrower will and will cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective 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.
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(F) MAINTENANCE OF PROPERTIES. The Borrower 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 Borrower or any Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance
is desirable in the conduct of its business and the Borrower has concluded
that such discontinuance would not, individually or in the aggregate, have a
Material Adverse Effect.
(G) PAYMENT OF TAXES. The Borrower will and will cause each of its
Subsidiaries to file all income tax or similar tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due
and payable on such returns and all other taxes, assessments, governmental
charges, or levies payable by any of them, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent, provided that neither the Borrower nor any Subsidiary need pay any
such tax or assessment if (i) the amount, applicability or validity thereof is
contested by the Borrower or such Subsidiary on a timely basis in good faith
and in appropriate proceedings, and the Borrower or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Borrower or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
(H) CORPORATE EXISTENCE, ETC. Except as provided in Section 6(j), the
Borrower will at all times preserve and keep in full force and effect its
corporate existence. Subject to Section 6(j), the Borrower will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries (unless merged or consolidated into the Borrower or a
Subsidiary) and all rights and franchises of the Borrower and its Subsidiaries
unless, in the good faith judgment of the Borrower, the termination of or
failure to preserve and keep in full force and effect such corporate
existence, right or franchise would not, individually or in the aggregate,
have a Material Adverse Effect.
(I) REPURCHASE OF NOTE AT THE OPTION OF THE LENDER UPON A CHANGE OF
CONTROL.
(i) Upon the occurrence of a Change of Control or a Benesse
Sale Event, the Lender shall have the right, at the Lender's option,
pursuant to an offer (subject only to conditions required by
applicable law, if any) by the Borrower (the "CHANGE OF CONTROL
OFFER"), to require the Borrower to repurchase for cash all or any
part of this Note (provided, that the principal amount of this Note
to be repurchased must be $1,000,000 or an integral multiple thereof)
on a date (the "CHANGE OF CONTROL PURCHASE DATE") that is no later
than 150 days after the occurrence of such Change of Control or
Benesse Sale Event, whichever it may be, at the Change of Control
Purchase Price specified below, plus accrued and unpaid interest to
the Change of Control Purchase Date. The Change of Control Offer
shall be made within 15 business days following a Change of Control
or Benesse Sale Event, whichever it may be, and shall remain open for
20 Business Days following its commencement (the "CHANGE OF CONTROL
OFFER PERIOD"). Upon expiration
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of the Change of Control Offer Period, the Borrower promptly, but, in
any event, no later than 150 days from the Change of Control, shall
purchase this Note (or part thereof) properly tendered in response to
the Change of Control Offer.
(ii) As used herein, a "CHANGE OF CONTROL" means:
(A) any merger or consolidation of the Borrower
with or into any Person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets
of the Borrower on a consolidated basis, in one transaction or a
series of related transactions, if, immediately after giving effect
to such transaction(s), any "person" or "group" (as such terms are
used for purposes of Section 13(d) and 14(d) of the Exchange Act,
whether or not applicable), other than Benesse, Corporation or any of
its Affiliates (collectively, the "BENESSE GROUP"), is or becomes the
beneficial owner (as such term is used in Rule 13d-3 of the Exchange
Act or any successor provision thereto), directly or indirectly, of
more than 50% of the total voting power in the aggregate normally
entitled to vote in the election of directors, managers or trustees,
as applicable, of the transferee(s) or surviving entity or entities,
(B) any "person" or "group" other than the Benesse
Group, becomes the beneficial owner, directly or indirectly, of more
than 50% of the total voting power in the aggregate of the all
classes of capital stock of the Borrower then outstanding normally
entitled to vote in election of directors, or
(C) during any period of 12 consecutive months
after the date of this Note, individuals, together with successors
selected by such individuals, who at the beginning of any such
12-month period constituted the Board of Directors of the Borrower
cease for any reason (other than a planned retirement) to constitute
a majority of the Board of Directors of the Borrower then in office,
as applicable.
A "BENESSE SALE EVENT" means the sale by the Benesse Group
of 80% or more of the aggregate number of shares of Common Stock directly or
indirectly owned by the Benesse Group on the date of this Note.
The "CHANGE OF CONTROL PURCHASE PRICE" means 101% of the
principal amount of the Note.
(iii) On or before the Change of Control Purchase
Date, the Borrower will (A) accept for payment this Note or portion
thereof properly tendered pursuant to the Change of Control Offer,
(B) promptly pay the Lender an amount equal to the Change of Control
Purchase Price (together with accrued and unpaid interest, if any),
and (C) authenticate and deliver to the Lender a new Note equal in
principal amount to any unpurchased portion of the Note surrendered.
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(J) MERGER, CONSOLIDATION, ETC. The Borrower shall not consolidate
with or merge with any other corporation or convey, transfer or lease
substantially all of its assets in a single transaction or series of
transactions to any Person unless:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Borrower as
an entirety, as the case may be, shall be a solvent corporation
organized and existing under the laws of the United States or any
State thereof (including the District of Columbia), and, if the
Borrower is not such corporation, such corporation shall have
executed and delivered to the Lender its assumption of the due and
punctual performance and observance of each covenant and condition of
this Note; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of
the Borrower shall have the effect of releasing the Borrower or any successor
corporation that shall theretofore have become such in the manner prescribed
in this Section 6(j) from its liability under this Note.
(K) INSPECTION. The Borrower shall permit the representatives of the
Lender:
(i) No Default -- if no Default or Event of Default then
exists, at the expense of the Lender and upon reasonable prior notice
to the Borrower, to visit the principal executive office of the
Borrower, to discuss the affairs, finances and accounts of the
Borrower and its Subsidiaries with the Borrower's officers, and with
the consent of the Borrower (which consent will not be unreasonably
withheld) to visit the other offices and properties of the Borrower
and each Significant Subsidiary, all at such reasonable times and as
often as may be reasonably requested in writing; and
(ii) Default -- if a Default or Event of Default then
exists, at the expense of the Borrower to visit and inspect any of
the offices or properties of the Borrower or any Significant
Subsidiary, to examine all their respective books of account,
records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public
accountants (and by this provision the Borrower authorizes said
accountants to discuss the affairs, finances and accounts of the
Borrower and its Significant Subsidiaries), all at such times and as
often as may be requested.
(L) FURTHER DOCUMENTS. The Borrower shall execute all such other
documents and instruments and do all such other acts and things as the Lender
may from time to time reasonably require to carry out the transactions
contemplated herein.
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SECTION 7. EVENTS OF DEFAULT.
Except upon the occurrence of an event under (e) or (f) below,
whereupon this Note shall become immediately due and payable without notice or
declaration by the Lender, the Lender may, subject to Section 9, by written
notice to the Borrower, declare this Note immediately due and payable,
whereupon this Note and all sums due hereunder shall become immediately due
and payable without protest, presentment, demand or notice (except the notice
referred to above in this Section 7) or without petition to any court, all of
which are expressly waived by the Borrower, if any of the following events
(each an "EVENT OF DEFAULT") shall occur:
(a) principal or interest due under this Note shall not be paid as
and when due, whether at maturity, by declaration or otherwise; or
(b) any representation by the Borrower herein shall prove to be false
or incorrect in any material respect as of the date made; or
(c) the Borrower shall default in any material respect in the due
performance of any term or covenant of this Note (which is not the subject of
another subsection of this Section 7) which default, if remediable, shall
continue unremedied for a period of thirty (30) days after the earlier of (i)
the day an officer of the Borrower obtains actual knowledge of such default,
and (ii) the day the Lender gives written notice of such default to the
Borrower (any such written notice to be identified as a "notice of default"
and to refer specifically to this paragraph (c) of Section 7); or
(d) (i) the Borrower or any Significant Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of
or premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $25,000,000 beyond
any period of grace provided with respect thereto, or (ii) the Borrower or any
Significant Subsidiary is in default in the performance of or compliance with
any term of any evidence of any Indebtedness in an aggregate outstanding
principal amount of at least $25,000,000 or of any mortgage, indenture or
other agreement relating thereto or any other condition exists, and as a
consequence of such default or condition such Indebtedness has become, or has
been declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment; or
(e) the Borrower or any Significant Subsidiary shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator for itself or
any of its assets or properties, (ii) admit in writing its inability to pay
its debts as they mature, (iii) make a general assignment for the benefit of
creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or
an arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
law or statute, or any answer admitting the material allegations of a petition
filed against it in any proceeding under any such law or if action shall be
taken by the Borrower or such Significant Subsidiary for the purpose of
effecting any of the foregoing,
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(vi) have commenced against it any case, proceeding or other action of a
nature described in (i) through (v) above which remains undismissed for a
period of 60 days or (vii) take or be subject to any action similar to those
specified in clauses (i) through (vi) in any jurisdiction; or
(f) an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or any Significant
Subsidiary, with respect to the Borrower or such Significant Subsidiary or all
or a substantial part of the assets of the Borrower or any such Significant
Subsidiary, appointing a receiver, trustee or liquidator of the Borrower or
such Significant Subsidiary, or any similar order, judgment or decree shall be
entered or appointment made in any jurisdiction, and such order, judgment or
decree or appointment shall continue unstayed and in effect for a period of 60
days; or
(g) a final judgment or judgments for the payment of money
aggregating in excess of $10,000,000 are rendered against one or more of the
Borrower and its Significant Subsidiaries and which judgments are not, within
60 days after entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within 60 days after the expiration of such stay.
SECTION 8. APPLICATION OF PAYMENTS.
Each payment or prepayment received by the Lender hereunder, except
as expressly set forth herein, shall be applied, first, to the payment of
accrued interest on this Note to the date of such payment and second, to the
payment of the principal amount of this Note.
SECTION 9. SUBORDINATION AGREEMENT.
(a) The Borrower covenants and agrees and the Lender, by the Lender's
acceptance hereof, likewise covenants and agrees, for itself and any future
holder of this Note or the indebtedness evidenced hereby, that, to the extent
and in the manner set forth below in this Section 9, the Company's Senior
Obligations will be senior in right of payment to the Debt. The Lender by
accepting this Note acknowledges and agrees that the subordination provisions
set forth in this Section 9 are, and are intended to be, an inducement and a
consideration to each holder of any Senior Obligation, whether such Senior
Obligation was created or acquired before or after the issuance of this Note,
to acquire and continue to hold, or to continue to hold, such Senior
Obligation and such holder of Senior Obligations shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or continuing to hold, such Senior Obligations.
(b) As used herein, "SENIOR IN RIGHT OF PAYMENT" means that:
(i) no part of the Debt shall have any claim to the assets
of the Borrower on a parity with or prior to the claim of the Senior
Obligations;
(ii) unless and until the Senior Obligations have been paid
in full, without the express prior written consent of all holders of
such Senior Obligations, the Lender will
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not take, demand (including by means of any legal action) or receive
from the Borrower, and the Borrower will not make, give or permit,
directly or indirectly, by set-off, redemption, purchase or in any
other manner, any payment of or security for the whole or any part of
the Debt; provided, however, that (x) at any time, the Borrower may
make, and the Lender may receive, scheduled payments on account of
the Debt in accordance with the terms hereof except if a default in
the performance or observance of any term or condition relating to
any Senior Obligations (other than a default in the payment of any
principal of, premium if any, or interest on the Senior Obligations)
has occurred and is continuing that permits the holders of the Senior
Obligations to declare such Senior Obligations to be due and payable,
the holders of Senior Obligations may give notice (a "SENIOR BLOCKAGE
NOTICE") to the Borrower (provided, however, no more than one Senior
Blockage Notice may be given during any 365 consecutive day period)
that until all Senior Obligations are paid in full, no scheduled
payments may be made by the Borrower on account of the Debt during
the period ("SENIOR BLOCKAGE PERIOD") commencing on the date of such
Senior Blockage Notice and ending on the earliest of: (A) 189 days
after the date of such Senior Blockage Notice; (B) the date of such
default is cured or waived; and (C) the date that the holders of the
Senior Obligations shall have given notice to the Borrower of
termination of the Senior Blockage Period, and except when a default
in the payment of any principal of, premium if any, or interest on
the Senior Obligations has occurred and is continuing or would result
therefrom and (y) upon the acceleration of the maturity of any Senior
Obligations, the Lender may accelerate the scheduled maturities of
the Debt if and to the extent permitted hereby at such time but such
acceleration shall not give the Lender any right to take, demand
(including by means of any legal action) or receive from the
Borrower, or the Borrower the right to make, give or permit, directly
or indirectly, by set-off, redemption, purchase or in any other
manner, any payment of or security for the whole or any part of the
Debt unless and until the Senior Obligations have been paid in full.
(c) Any payment or distribution of assets of the Borrower, whether in
cash, property or securities, to which the Lender would be entitled except for
the provisions hereof, shall be paid or delivered by the Lender, or any
receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or
other Person making such payment or distribution, to the holders of the Senior
Obligations or their representative, ratably in accordance with the amounts
thereof, to the extent necessary to pay in full all Senior Obligations, before
any payment or distribution shall be made to the Lender.
(d) The expressions "prior payment in full," "payment in full," "paid
in full" and any other similar terms or phrases when used herein with respect
to the Senior Obligations shall mean the payment in full in cash, in
immediately available funds, of all the Senior Obligations and the expression
"any payment of or security for the whole or any part of the Debt" and any
other similar terms of phrases when used herein shall not be deemed to include
a payment or distribution of stock or securities of the Borrower provided for
by a plan or reorganization or readjustment authorized by an order or decree
of a court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law or of any other corporation
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provided for by such plan of reorganization or readjustment, which stock or
securities are subordinated in right of payment to all then outstanding Senior
Obligations to substantially the same extent as this Note is so subordinated
as provided in this Section 9. The consolidation of the Borrower with, or the
merger of the Borrower into, another Person or the liquidation or dissolution
of the Borrower following the conveyance or transfer of all or substantially
all of its properties and assets as an entirety to another Person upon the
terms and conditions set forth in Section 6(j) shall not be deemed a
"proceeding" for the purposes of this Section 9 if the Person formed by such
consolidation or into which the Borrower is merged or the Person which
acquires by conveyance or transfer such properties and assets as an entirety,
as the case may be, shall, as a part of such consolidation, merger, conveyance
or transfer, comply with the conditions set forth in Section 6(j).
(e) If any payment or distribution, whether consisting of money,
property or securities, be collected or received by the Lender in respect of
the Debt, except payments of principal or interest permitted hereunder, the
Lender forthwith shall deliver the same to the holders of the Senior
Obligations or their representative, ratably in accordance with the amounts
thereof, in the form received, duly endorsed to such holders or such
representative, if required, to be applied to the payment or prepayment of the
Senior Obligations until the Senior Obligations are paid in full. Until so
delivered, such payment or distribution shall be held in trust by the Lender
as the property of such holders of Senior Obligations, segregated from other
funds and property held by the Lender.
(f) As used herein, "SENIOR OBLIGATIONS" shall mean collectively the
unpaid principal of, premium, if any, and interest on (including, without
limitation, interest accruing after the maturity thereof and interest accruing
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Convertible Debentures, any other debentures for which
the Convertible Debentures may be exchangeable, and all other Indebtedness of
the Borrower having an initial principal amount in excess of $5,000,000,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred, in each case whether on account of principal,
premium interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise which by its express terms states it is a "Senior
Obligation" as such term is used in this Note.
SECTION 10. ADDITIONAL DEFINITIONS.
As used herein, the following terms have the respective meanings set
forth below:
"APPLICABLE RATE" means the interest rate per annum calculated as the
sum of (x) LIBOR plus (y) that number of basis points over LIBOR determined
from the following table based upon the Consolidated Leverage Ratio computed
as of the same day as of which LIBOR is determined, less (z) 50.0 basis
points:
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇ OVER
CONSOLIDATED LEVERAGE RATIO LIBOR
------------------------------------------------------------------------ ----------------------
Less than or equal to 1.25 37.5 bps
Less than or equal to 2.0 but greater than 1.25 42.5 bps
Less than or equal to 2.5 but greater than 2.0 50.0 bps
Less than or equal to 3.0 but greater than 2.5 62.5 bps
Greater than 3.0 87.5 bps
"BANK CREDIT FACILITIES" means the $120 million term loan and the $70
million revolving credit facility by and among Nationsbank, National
Association, as agent, the other lenders party thereto and Berlitz
International, Inc., as Borrower, dated August 28, 1997, as amended.
"BENESSE FACILITIES" means all amounts owed under the $20 million
subordinated non-negotiable note dated September 21, 1994 issued by Berlitz
International, Inc. payable to Benesse Holdings International, Inc. (f/k/a/
Fukutake Holdings (America), Inc.); the $6 million subordinated promissory
note dated March 25, 1996 issued by Berlitz International, Inc. payable to
Benesse Holdings International, Inc., and the (Y)1 Billion subordinated
promissory note dated September 21, 1994 issued by Berlitz Japan, Inc. payable
to Benesse Corporation.
"BUSINESS DAY" means, for the purposes of this Note, any day other
than a Saturday, a Sunday or a day on which commercial banks in New York are
required or authorized to be closed.
"CAPITAL LEASES" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of an asset
and the incurrence of a liability in accordance with GAAP.
"COMMON STOCK" means shares of common stock, par value $.10 per
share, of the Borrower.
"CONSISTENT BASIS" in reference to the application of GAAP means the
accounting principles observed in the period referred to are comparable in all
material respects to those applied in the preparation of the audited financial
statements of the Borrower in prior periods, except to the extent any
deviation therefrom is disclosed to the Lender by the Borrower and approved by
the Lender and Deloitte & Touche LLP or any other independent accountants of
nationally recognized standing.
"CONSOLIDATED LEVERAGE RATIO" means, as of the date of computation
thereof, the ratio of (i) the total amount outstanding under all Senior
Obligations (as determined at such date) minus Subordinated Debt (as
determined at such date) to (ii) EBITDA for the most recent Four-
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Quarter Period ending at least 45 (or in the case of a Four-Quarter Period
ending on the last day of the Borrower's fiscal year, 90) days prior to such
date of computation.
"CONVERTIBLE DEBENTURES" shall mean the $155,000,000 aggregate
principal amount of 5% Convertible Exchangeable Subordinated Debentures due
2010, Series A and Series B, of the Borrower.
"DEBENTURE PURCHASE AGREEMENT" means the Purchase Agreement, dated as
of October 2, 1998, between the Borrower, as issuer, and the Lender, as
purchaser, pursuant to which the Lender is purchasing on the date of this Note
$55,000,000 principal amount of Series B of the Convertible Debentures.
"DEBT" means collectively the unpaid principal of, premium, if any,
and interest on (including, without limitation, interest accruing after the
maturity date of this Note and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Borrower, whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding) this Note and
all other indebtedness of the Borrower in respect thereof, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, in each case whether on account of principal, premium,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"EBITDA" means, with respect to the Borrower for any Four-Quarter
Period ending on the date of computation thereof, the sum of, without
duplication, (i) Net Income, (ii) Interest Expense, (iii) taxes on income,
(iv) amortization, (v) depreciation, (vi) other non-cash liabilities, expenses
and minority interests otherwise deducted in calculating Net Income, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis; provided, however, that there shall be added to EBITDA the
amount otherwise deducted therefrom attributable to foreign currency exchange
translation adjustment losses.
"FOUR-QUARTER PERIOD" means a period of four full consecutive fiscal
quarters of the Borrower, taken together as one accounting period.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other
Person in any manner, whether directly or indirectly, including (without
limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person:
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(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or
make available funds for the purchase or payment of such indebtedness
or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
"INDEBTEDNESS" with respect to any Person, means, on any date of
determination (without duplication):
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising
in the ordinary course of business but including all liabilities
created or arising under any conditional sale or other title
retention agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);
(f) Swaps of such Person; and
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(g) any Guaranty of such Person with respect to liabilities
of a type described in any of clauses (a) through (f) hereof.
"INTEREST EXPENSE" means, with respect to any period of computation
thereof, the difference of (a) the gross interest expense of the Borrower for
such period, including without limitation (i) the current amortized portion of
debt discounts to the extent included in gross interest expense, (ii) the
current amortized portion of all fees (including fees payable in respect of
any swap agreement) payable in connection with the incurrence of Indebtedness
to the extent included in gross interest expense and (iii) the portion of any
payments made in connection with Capital Leases allocable to interest expense,
all determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis, less (b) all interest on Subordinated Debt accrued but not
paid in cash during such period.
"JOINT VENTURE" means any corporation, partnership or other entity in
which the Borrower, directly or indirectly has any equity interest, the
accounts of which are not consolidated with those of the Borrower in
accordance with GAAP.
"LIBOR" means the six month LIBOR rate on the London banking day
agreed to by the Borrower and the Lender in determining the Reset Interest
Rate or, absent such agreement, on the second London banking day prior to the
fifth anniversary of this Note, in each case, as published in the Wall Street
Journal on the next succeeding Business Day.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of
the Borrower and its Subsidiaries taken as a whole, or (b) the ability of the
Borrower to perform its obligations under this Note, or (c) the validity or
enforceability of this Note.
"NET INCOME" means, for any period of computation thereof, the gross
revenues from operations and income of the Borrower, other than Joint Ventures
(including payments received by the Borrower, other than Joint Ventures, of
interest income and dividends and distributions made in the ordinary course of
their businesses by those entities in which investment is permitted pursuant
to this Note and not related to an extraordinary event, including without
limitation royalties, dividends and distributions made in cash from
accumulated net earnings of a Joint Venture to the Borrower), less all
operating and non-operating expenses of the Borrower, other than Joint
Ventures, including taxes on income, all determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis; but excluding from Net
Income for all purposes, (i) any gain resulting from foreign currency
translation adjustments, (ii) any positive adjustment for minority interests,
(iii) net gains on the sale, conversion or other disposition of capital
assets, (iv) net gains on the acquisition, retirement, sale or other
disposition of capital stock and other securities of the Borrower, (v) net
gains on the collection of proceeds of life insurance policies, (vi) any
write-up of any asset, and (vii) any other net gain or credit of an
extraordinary nature as determined in accordance with GAAP applied on a
Consistent Basis.
-19-
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"SUBORDINATED DEBT" means this Note, and all other indebtedness of
the Borrower which (i) is subordinated to the Senior Obligations, or (ii) has
a maturity date later than this Note and provides that no cash payments of
principal, interest or fees may be made prior to the Maturity Date of this
Note.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary that would
at such time constitute a "significant subsidiary" (as such term is defined in
Regulation S-X of the Securities and Exchange Commission as in effect on the
date of this Note) of the Borrower.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if
more than a 50% interest in the profits or capital thereof is owned by such
Person or one or more of its Subsidiaries or such Person and one or more of
its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Borrower.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Note, the amount of the
obligation under any Swap shall be the amount determined in respect thereof as
of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such
fiscal quarter, and in making such determination, if any agreement relating to
such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
SECTION 11. RELATION TO OTHER TRANSACTIONS.
Except as expressly set forth herein, the obligations of the Borrower
hereunder are unconditional and no reference to any other document or
agreement herein is intended or shall be deemed to render the Borrower's
obligations hereunder conditional. The illegality or
-20-
unenforceability of, or the default by any party under, any other document or
agreement referred to herein shall not constitute a defense to any claim by
the Lender for the payment of principal, interest or any other amount
hereunder. Notwithstanding the foregoing, this Section 11 shall in no manner
affect or be deemed to affect the subordination of this Note pursuant to
Section 9 hereof or the rights of the holders of the Senior Obligations.
SECTION 12. ASSIGNMENT, ETC.
This Note shall be binding upon each of the Borrower, the Lender and
their respective successors and assigns; provided, however, the Borrower may
not assign this Note without the prior written consent of the Lender. The
Lender may sell, assign or transfer this Note without any requirement of
consent by the Borrower.
SECTION 13. INDEMNIFICATION.
The Borrower shall pay, indemnify, and hold the Lender harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys' fees and
expenses) or disbursements of any kind or nature whatsoever ("LOSSES") arising
out of or in connection with (a) the enforcement of any rights of the Lender
under this Note, and (b) any claim (whether or not asserted in any legal
proceeding), litigation, investigation, arbitration or proceeding relating to
this Note (collectively, "INDEMNIFIED LIABILITIES") provided that the Borrower
shall have no obligation hereunder to the Lender with respect to indemnified
liabilities arising from (i) the gross negligence or willful misconduct of the
Lender, (ii) legal proceedings commenced against the Lender by any security
holder or creditor of the Lender arising out of or based upon rights afforded
any such security holder or creditor solely in its capacity as such. The
agreements in this section shall survive for eighteen (18) months after
repayment of this Note and all other amounts payable hereunder.
SECTION 14. NO WAIVER, CUMULATIVE REMEDIES.
The Lender shall not by any act (except by a written instrument
signed by the Lender), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Event
of Default or in any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the part of the Lender,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Lender would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
-21-
SECTION 15. EXPENSES.
Each party hereto agrees to pay or reimburse, or cause to be paid or
reimbursed, all of its costs and expenses incurred in connection with the
preparation, execution, and delivery of this Note including, without
limitation, the fees and disbursements of counsel.
SECTION 16. GOVERNING LAW.
This note and the rights and obligations of the Borrower and Lender
under this Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York.
SECTION 17. WAIVERS OF JURY TRIAL.
The Borrower and, by acceptance hereof, the Lender hereby irrevocably
and unconditionally waive trial by jury in any legal action or proceeding
relating to this Note or any other documents related hereto and for any
counterclaim therein.
IN WITNESS WHEREOF, the Borrower has caused a duly authorized officer
of the Borrower, solely in such officer's capacity as such, to duly execute
this Note on behalf of the Borrower in New York, New York as of the date
hereof.
BERLITZ INTERNATIONAL, INC.
By:______________________________
Name:
Title:
AGREED TO AND ACCEPTED:
BENESSE HOLDINGS INTERNATIONAL, INC.
By: ________________________________
Name:
Title: