Exhibit 99.5
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INVESTORS AGREEMENT
among
BERLITZ INTERNATIONAL, INC.
AND
APOLLO MANAGEMENT IV, L.P.
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Dated as of October 2, 1998
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INVESTORS AGREEMENT
INVESTORS AGREEMENT, dated as of October 2, 1998 (this "Agreement"),
among Berlitz International, Inc., a New York corporation (the "Company"), and
Apollo Management IV, L.P., a Delaware limited partnership ("Apollo"), on behalf
of Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
WHEREAS, the Company and Apollo have entered into the Purchase
Agreement, dated as of October 2, 1998 (the "Purchase Agreement"), pursuant to
which the Company is issuing and selling $100 million aggregate principal amount
of convertible exchangeable subordinated debentures due 2010, Series A of the
Company (the "Debentures") to Apollo;
WHEREAS, the Debentures are convertible at any time at the option of
Apollo, in part or in whole, into shares of Common Stock as provided for in the
Purchase Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" has the meaning assigned such term in the Purchase
Agreement.
"Board" means the Board of Directors of the Company.
"Closing" and "Closing Date" have the meaning assigned such terms in
the Purchase Agreement.
"Common Stock" means common stock, par value $.10 per share, of the
Company or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Conversion Price" has the meaning assigned such term in the Purchase
Agreement.
"Converted Shares" means the actual shares of Common Stock received by
Apollo upon conversion of, some or all of, the Debentures.
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"Fixed Rate Debentures" has the meaning assigned such term in the
Purchase Agreement.
"Initial Interest" means the aggregate number of shares of Common Stock
into which the Debentures held by Apollo may be converted as of the Closing
Date.
"Investor Directors" means any person nominated by Apollo who is
elected to the Board pursuant to this Agreement.
"Issue Date" means the date of the Closing.
"Liquidation" means the liquidation under applicable bankruptcy or
reorganization legislation, or the dissolution or winding up, of the Company.
"Person" has the meaning assigned such term in the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Shares" means the aggregate amount of the Converted Shares held by
Apollo and the Converted Shares Apollo has the right to receive.
"Share Price" means, as of any date, the closing price of the Common
Stock as reported in the Wall Street Journal on the last day of trading
immediately preceding such date.
"Stockholders" mean all the holders of Common Stock and "Stockholder"
shall mean any such Person.
"Subsidiary" has the meaning assigned such term in the Purchase
Agreement.
"Transfer" has the meaning assigned such term in Section 4.2.
2. Corporate Governance.
2.1 Initial Composition. Effective at the Closing, the Company
shall cause the Board to be increased from ten directorships to twelve
directorships (one of which new directorships shall be elected for an initial
term expiring at the Company's annual meeting of Stockholders in 1999 and the
other shall be elected for an initial term expiring at the Company's annual
meeting of Stockholders in 2000). Effective at the Closing, the Board shall
elect the Investor Directors to fill the vacancies created in accordance with
this Section 2.1.
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2.2 Election of Directors.
2.2.1 So long as Apollo continues to own Shares that
represent at least 50% of the Initial Interest, Apollo shall have the right to
nominate two persons for election to the Board.
2.2.2 So long as Apollo owns Shares that represent at
least 25% but less than 50% of the Initial Interest, Apollo shall have the right
to nominate one person for election to the Board. At such time as Apollo owns
Shares that represent less than 50% of the Initial Interest, the Board shall be
reduced from twelve directorships to eleven directorships and if two Investor
Directors are serving at such time, one Investor Director nominated by Apollo
shall resign from the Board.
2.2.3 If, at any time, Apollo owns Shares that
represent less than 25% of the Initial Interest, Apollo shall no longer be
entitled to nominate persons for election to the Board and if an Investor
Director is serving at such time, such Investor Director shall resign from the
Board. At such time as Apollo owns Shares that represent less than 25% of the
Initial Interest, the Board may be reduced or increased at the option of the
Company.
2.3 Removal and Replacement of Directors.
2.3.1 Removal of Investor Directors. If at any time
Apollo notifies the Board of its wish to remove any Investor Director, the Board
shall vote so as to remove such Investor Director in accordance with the
Company's Bylaws.
2.3.2 Replacement of Directors. If at any time, a
vacancy is created on the Board by reason of the incapacity, death, removal or
resignation of any Investor Director, then Apollo shall designate an individual
to fill such vacancy until the next meeting of Stockholders.
2.4 Investor Directors.
2.4.1 The Investor Directors shall receive notice of
each meeting of the Board at the same time and in the same manner as other
members of the Board..
2.4.2 The Investor Directors shall be entitled to
compensation and indemnification rights similar to those of other non-employee
directors of the Company. The Company shall at all times maintain a directors'
and officers' insurance policy covering the Investor Directors that provides in
the aggregate substantially no less coverage than the policy covering the
current directors of the Company as of the date of this Agreement.
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3. Certain Actions of the Company.
3.1 Actions of the Company. Subject to Section 3.2, the
Company shall not take, approve or otherwise ratify any of the following actions
(whether occurring in one or a series of related transactions) without the
approval of at least one of the Investor Directors present at a meeting of the
Board duly called:
(i) any Transfer (as defined in Section 4.2) to
another Person of any of the assets of the Company which will result in
aggregate gross proceeds to the Company in excess of $50 million;
(ii) any acquisition by the Company of assets if the
aggregate value of the consideration paid by the Company is in excess
of $50 million;
(iii) (x) any transaction, merger or consolidation of
the Company or any of its subsidiaries into or with one or more Persons
or (y) any transaction, merger or consolidation of one or more Persons
into or with the Company or any of its subsidiaries if, in either such
case, the aggregate value of the consideration received or paid by the
Company is in excess of $50 million;
(iv) any transaction entered into after the date
hereof between the Company, on the one hand, and any Affiliate of the
Company (other than a Subsidiary of the Company), on the other hand, if
the aggregate value of the consideration received or paid by the
Company is in excess of $5 million, other than (x) transactions
substantially similar to those transactions set forth on Annex A and
(y) the Company's repurchase of Benesse's interest in Berlitz Japan, in
whole or in part, provided, that, the purchase price and the terms of
the repurchase are approved by the Disinterested Directors of the
Board, the Board and Apollo; provided further, that, if Apollo
disagrees with the Company's valuation of the consideration received or
paid by the Company in any such transaction, such disagreement shall be
submitted to an independent investment banker agreed to by Apollo and
the Company for resolution as soon as practicable.
(v) the creation, incurrence, guarantee, assumption
or refinancing of any additional indebtedness for borrowed money which
(i) has an aggregate principal amount in excess of $50 million and (ii)
ranks senior in right of payment to the Debentures; provided, however,
that the approval of an Investor Director shall not be required for the
creation, incurrence, guarantee, assumption or refinancing of
indebtedness for borrowed money incurred to finance one or more related
acquisitions in which the aggregate value of the consideration paid by
the Company in all such related acquisitions does not exceed $50
million in any twelve month period or $100 million in the
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aggregate. If one of the Investor Directors agrees to vote in favor of
a proposed transaction pursuant to Section 3.1(ii), 3.1(iii) or
3.1(iv), the approval of an Investor Director shall not be required for
the creation, incurrence, guarantee, assumption or refinancing of any
indebtedness in connection with such transaction;
(vi) any declaration or payment of any dividend or
other payment to holders of securities junior in right of payment to
the Debentures (other than scheduled interest and principal payments
with respect to any indebtedness of the Company) which, individually or
in the aggregate, exceeds (i) 50% of net income of the Company for the
12 months preceding the date of such payment or (ii) $5 million in any
12 month period. For purposes of this clause (vi), "net income" of the
Company for any period will be determined on a consolidated basis by
reference to the item in the Company's financial statements showing net
income for such period.
(vii) the issuance of any equity securities of the
Company, in a public offering or otherwise; provided, however, the
approval of an Investor Director shall not be required (x) for the
issuance of Common Stock upon conversion of the Company's Convertible
Exchangeable Subordinated Debentures due 2010, Series B (the "Benesse
Debentures"), or (y) if at the time of such issuance the Share Price
reflects an increase of 10%, compounded annually from the Issue Date,
from the Conversion Price; and
(viii) the voluntary filing for Liquidation by the
Company.
3.2 The rights contained in Section 3.1 shall terminate upon
the earlier to occur of (i) the fifth anniversary of the Issue Date, and (ii)
the date on which Apollo owns Shares that represent, on a fully diluted basis
(excluding any additional Common Stock acquired by Benesse Holdings
International, Inc., a Delaware corporation ("BHI"), or Benesse Corporation, a
Japanese corporation ("Benesse"), or any of their Affiliates after the date
hereof other than Common Stock issued upon conversion of any Benesse
Debentures), less than 10% of the issued and outstanding Common Stock. The
provisions of Section 3.1 shall not apply to any action taken by the Company in
accordance with the provisions of the Purchase Agreement, dated as of October 2,
1998 between the Company and BHI, the Benesse Debentures issued thereunder or
the Subordinated Promissory Note in aggregate principal amount of $50 million to
be issued by the Company to BHI on the Closing Date.
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4. Transfer of Interest.
4.1 Apollo may Transfer any or all of its interest in the
Debentures or Converted Shares to any Person provided, that, in each case, such
Transfer is made in accordance with this Section 4. Any such Transfer not
permitted by the terms of this Section 4 shall be null and void, and the Company
is authorized to refuse to transfer ownership on the books of the Company or the
transfer agent of any Debentures or Converted Shares Transferred in violation of
this Agreement.
4.2 Apollo shall have the right to (i) sell, assign, transfer
(voluntarily or involuntarily), exchange (by merger or otherwise) or otherwise
dispose of or (ii) xxxxx x xxxx, encumbrance, pledge or other form of security
interest (each a "Transfer") in any or all of its interest in the Debentures or
Converted Shares, pursuant to the following terms and conditions:
(i) Subject to the terms of paragraph (iv) below,
Apollo may transfer any or all of its interest in the Debentures or the
Converted Shares to an Affiliate of Apollo at any time;
(ii) from the date hereof until the first anniversary
of the Issue Date, Apollo shall not Transfer any or all of its interest
in the Debentures or the Converted Shares (other than to an Affiliate
of Apollo) without the consent of the Company, which consent may be
unreasonably withheld;
(iii) from the first anniversary until the third
anniversary of the Issue Date, Apollo shall not Transfer any or all of
its interest in the Debentures or the Converted Shares (other than to
an Affiliate of Apollo) without the consent of the Company, which
consent shall not be unreasonably withheld; and
(iv) Apollo shall not Transfer any or all of its
interest in the Debentures or the Converted Shares (i) to those
entities set forth on Annex B or (ii) if the Board determines that such
Transfer is to a Person (including an Affiliate) engaging in a business
that is competitive with the business of the Company or a business the
Board has taken action to enter or the Company disclosed publicly that
it plans to enter and such transfer involves more than 1.0% of the
outstanding shares of Common Stock of the Company.
4.3 Notwithstanding the provisions of Section 4.2, the
obligations of Apollo hereunder (including the transfer restrictions contained
in this Section 4) shall be binding upon each transferee to whom Debentures or
Converted Shares are transferred, whether or not such Transfer is permitted
under the terms of this Agreement, except for Transfers pursuant to a public
offering. Prior to consummation of any Transfer, except for Transfers pursuant
to a public offering, the
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transferee shall agree in writing to be bound by the terms and conditions of
this Agreement. Prompt notice shall be given to the Company by the transferor of
any Transfer of Debentures or Converted Shares.
4.4 The Company shall cause each certificate representing a
Converted Share or a Debenture to contain a legend stating that the Transfer of
such Converted Share or Debenture is restricted and subject to the terms and
conditions of this Agreement.
4.5 In addition to the other restrictions provided for in this
Agreement, each holder of Debentures or Converted Shares agrees that it will
not, directly or indirectly, Transfer any Debentures or Converted Shares, except
as permitted under the Securities Act and other applicable federal or state
securities laws.
4.6 The transferee of Debentures or Converted Shares (other
than an Affiliate of Apollo) shall not be entitled to (i) nominate any person to
the Board under Section 2; (ii) any approval rights pursuant to Section 3; or
(iii) participate in a sale of the Company pursuant to Section 5.
5. Sale of the Company. If the Company intends to pursue a sale of the
Company, 80% or more of the shares held by BHI and its Affiliates in the Company
or all or substantially all of the assets of the Company, the Company shall (i)
retain a nationally recognized investment bank, reasonably acceptable to Apollo,
to advise the Company with respect to the sale process; (ii) provide Apollo
written notice of the Company's intention to sell the Company or all or
substantially all of the assets of the Company prior to retaining potential
investment banks or contacting buyers; and (iii) provide Apollo, from time to
time as reasonably requested, with reports of the progress of any such sale.
Apollo is aware of its obligations under the federal securities laws with
respect to any non-public information it obtains pursuant to this Section 5.
6. Miscellaneous.
6.1 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by facsimile, certified, registered or express mail, postage prepaid. Any
such notice shall be deemed given when so delivered personally, or sent by
facsimile, certified,
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registered or express mail or, if mailed, five days after the date of deposit in
the United States mail, as follows:
(a) if to the Company:
Berlitz International, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
(b) if to the Investor:
Apollo Management IV, L.P.
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Any party may, by notice given in accordance with this Section 6.1, designate
another address or person for receipt of notices hereunder.
6.2 Amendment and Waiver.
6.2.1 No failure or delay on the part of any party
hereto in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right,
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power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the parties hereto at law, in
equity or otherwise.
6.2.2 Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by the Company and Apollo and (ii) only in the specific
instance and for the specific purpose for which made or given.
6.3 Specific Performance. The parties hereto intend that each
of the parties has the right to seek damages or specific performance in the
event that any other party hereto wilfully fails to perform such party's
obligations hereunder. Therefore, if any party shall institute any action or
proceeding to enforce the provisions hereof, any party against whom such action
or proceeding is brought hereby waives any claim or defense therein that the
plaintiff party has an adequate remedy at law.
6.4 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
6.5 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
6.6 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
6.8 Further Assurances. Each of the parties shall, and shall
cause their respective Affiliates to, execute such instruments and take such
action as
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may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby.
6.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective permitted
successors and assigns. This Agreement is not assignable by the Company and is
not assignable by Apollo except to an Affiliate of Apollo.
6.10 No Third Party Beneficiaries. This Agreement is not
intended to, and does not, create any rights or benefits of any Person other
than the parties hereto.
6.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
6.12 Effectiveness. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement shall not become effective, and
Apollo shall have no rights hereunder, unless and until the purchase and sale of
the Debentures pursuant to the Purchase Agreement is consummated.
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
BERLITZ INTERNATIONAL, INC.
By: /s/ Xxxxxxxx Xxxxx
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Name: Xxxxxxxx Xxxxx
Title: Chairman, CEO & President
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Xxxxxxxx Xxxx
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Name: Xxxxxxxx Xxxx
Title: Partner
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: /s/ Xxxxxxxx Xxxx
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Name: Xxxxxxxx Xxxx
Title: Partner
