BERLITZ INTERNATIONAL, INC.
EXECUTIVE RETIREMENT PLAN
FOR JAMES R. KAHL
The purpose of this defined benefit, nonqualified, deferred
compensation Executive Retirement Plan (the "Plan") sponsored by Berlitz
International Inc. (the "Company") is to encourage the productive efforts of
James R. Kahl by providing retirement income, disability benefits, retiree
medical benefits and death benefits to him and his beneficiaries.
The Plan is effective as of March 7, 2000 and reads as
follows:
ARTICLE I
DEFINITIONS
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The following terms when used in this Plan shall have the
designated meaning, unless a different meaning is clearly required by the
context.
I.1 AFFILIATE. Any trade or business, whether or not
incorporated, which (a) at the time of reference (i) controls, is controlled by
or is under common control with the Company within the meaning of section 414(b)
or (c) of the Code, or (ii) is, together with the Company, a member of an
affiliated service group within the meaning of section 414(m) of the Code, or
(b) is designated as an Affiliate by the Committee (but shall be treated as an
Affiliate only for such periods as the Committee shall prescribe in such
designation).
I.2 BENEFICIARY. The person or entity designated by the
Participant to receive the Pre-Retirement Death Benefit.
I.3 BOARD. The Board of Directors of the Company as
constituted from time to time.
I.4 CHANGE IN CONTROL. (i) The acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more (on a fully diluted basis) of the then
outstanding shares of common stock of the Company, or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); PROVIDED, HOWEVER, that for purposes of this Agreement, the
following acquisitions shall not constitute a Change of
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Control: (I) any acquisition by the Company or any Affiliate, (II) any
acquisition by any employee benefit plan sponsored or maintained by the Company
or any Affiliate.
(ii) the dissolution or liquidation of the Company;
(iii) the dissolution or liquidation of the Parent;
(iv) the sale of all or substantially all of the business
or assets of the Company.
I.5 CODE. The Internal Revenue Code of 1986, as amended.
I.6 COMMITTEE. The Compensation Committee of the Board.
I.7 COMPANY. Berlitz International, Inc. and its
successors.
I.8 CONTINUOUS SERVICE. A Participant's most recent
period of continuous employment with the Company and its Affiliates, including
employment before the Effective Date. A transfer between employment with the
Company and an Affiliate or between Affiliates shall not be deemed a Termination
of Employment or otherwise interrupt a Participant's Continuous Service. Leaves
of absence of not more than one year may be taken into account as Continuous
Service, to the extent provided by the Committee. References herein to the
Participant's employment, termination of employment and the like shall include
periods during which the Participant was serving as a director of the Company
notwithstanding that he may not have been a common law employee of the Company
or any Affiliate.
I.9 EFFECTIVE DATE. March 7, 2000.
I.10 PARTICIPANT. The sole participant in this Plan is
James R. Kahl.
I.11 NORMAL RETIREMENT DATE. The later of (a) the date on
which the Participant attains age sixty (60) and (b) the date on which the
Participant completes two (2) years of Continuous Service.
I.12 PROJECTED BASE SALARY. In the case of a Participant
who dies while employed, the Participant's imputed base salary rate (as defined
in II.2.1 below) immediately before death, projected to age 65 at an annually
compounded interest rate of four percent (4%).
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I.13 SURVIVING SPOUSE. The person, if any, legally married
to the Participant at the time of his death.
I.14 TERMINATION OF EMPLOYMENT. References to
Participant's termination of employment, the date Participant's employment
terminates and the like, shall refer to the ceasing of Participant's employment
with the Company and any Affiliates for any reason.
ARTICLE II
RETIREMENT BENEFITS
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II.1 BENEFITS.
II.1.1 NORMAL RETIREMENT BENEFIT. If the
Participant's employment on or after his Normal Retirement Date, for any reason
other than death, Disability or discharge for Cause, the Company will pay the
Participant a monthly benefit, starting on the first of the month after his
Termination of Employment and ending with the payment for the month in which his
death occurs. Such monthly benefit shall be in an amount equal to the product of
his Applicable Percentage, as defined in Section II.2.2 below, and his Final
Average Pay, as defined in Section II.2.1 below.
II.1.2 DISABILITY RETIREMENT BENEFIT. If the
Participant shall incur a Disability while employed by the Company or any
Affiliate, the Company shall pay such Participant a monthly benefit starting on
the first of the month after his Termination of Employment and ending with the
payment for the month in which his death occurs. Such monthly benefit shall be
calculated in the same manner as a Normal Retirement Benefit as set forth in
Section II.1.1 but shall be based on his Final Average Pay when his employment
terminates due to the Disability and shall be reduced by the amount of any
disability benefits payable under the Company's Long Term Disability Policy. For
purposes of this Section II.1.2, "Disability" means the Participant's total
inability to perform the customary duties of his employment by reason of any
medical or psychological illness or condition incurred while employed by the
Company which is expected to be permanent or of indefinite duration, excluding
any such illness or condition which results from self-inflicted injury,
alcoholism or drug abuse. Whether or not the Participant has incurred a
Disability shall be determined solely by the Committee in its discretion, on the
basis of evidence satisfactory to it. If the Participant incurs a Disability
while employed by the Company and thereafter shall cease to be disabled, no
benefits shall be paid on
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account of such Disability with respect to periods after recovery from such
Disability. If the recovered Participant shall thereafter be re-employed by the
Company, he shall be entitled to participate in the Plan as if he had been
employed throughout the period of his Disability and shall be deemed to have
received compensation during such period of Disability at a rate equal to his
rate of Final Average Pay determined immediately prior to his Disability. The
benefit, if any, ultimately payable to or on behalf of the Participant shall be
determined without regard to Disability benefits previously paid.
II.1.3 RETIREE MEDICAL BENEFITS. If the Participant
retires under II.1.1 (Normal Retirement) or II.1.2 (Disability Retirement), or
if the Participant dies while employed prior to the Normal Retirement Date, the
Company will provide medical coverage to the Participant and his spouse, for
their lifetimes, which is substantially similar, in all material respects, to
the coverage to which the Participant was entitled at the time of his
Termination of Employment; provided, that in the case of Disability, such
coverage shall cease if the Participant recovers from his Disability prior to
his Normal Retirement Date.
II.2 DEFINITIONS RELATING TO BENEFIT CALCULATIONS:
II.2.1 FINAL AVERAGE PAY. Final Average Pay with
respect to the Participant shall mean the sum of (a) the average imputed monthly
base salary of the Participant for the last 24 consecutive month period of
Continuous Service prior to Termination of Employment and (b) 1/24 of the sum of
the last two annual Short Term Incentive Bonuses paid to the Participant prior
to his Termination of Employment, with payment for any partial year to be
annualized for the purpose of calculating Final Average Pay hereunder.
If, as is the case as of the date hereof, the
Participant, with the approval of the Committee, continues to receive a base
salary that reflects less than full-time presence in Company offices, the
monthly base salary used to calculate Participant's Benefits shall be that
amount which reflects the salary Participant would have earned had Participant's
salary not been pro-rated (hereafter the "imputed base salary").
To avoid doubt, in the event the base salary received
by Participant is $100,000 per year and was calculated to reflect his presence
in Company office's of one week per month, the imputed base salary of the
Participant, for the purpose of calculating benefits hereunder, shall be
$400,000 per year.
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II.2.2 APPLICABLE PERCENTAGE. The Applicable
Percentage with respect to the Participant shall be thirty percent (30%).
II.3 SPECIAL PAYMENT. If it shall be determined by a final
administrative decision of the Internal Revenue Service (which is not appealed
by the Participant) or by a final decision of a court of competent jurisdiction
(which is not appealed by the Participant) that the value of all or any part of
any benefit contemplated by the Plan is includable in the income of the
Participant for federal income tax purposes prior to the actual receipt of such
benefit, the Company shall make a special payment to Participant, in discharge
of the actuarially equivalent value of any benefits otherwise due hereunder, in
an amount equal to Participant's estimated federal, state and local income tax
liabilities related to such inclusion and to the inclusion in income of such
special payment. The Participant shall have no obligation to appeal any
determination made by the Internal Revenue Service or the decision of any such
court. The foregoing special payment shall not be payable on account of the
Participant's share of FICA, FUTA, Medicare or other payroll taxes.
II.4 EFFECT OF CHANGE IN CONTROL. No benefits payable
hereunder shall be reduced or limited in the event of Change in Control,(as
defined in I.4).
ARTICLE III
SURVIVOR BENEFITS
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III.1 POST-RETIREMENT SURVIVOR BENEFIT. Upon Participant's
death after payment of his benefits under Article II has started, the Company
shall pay a monthly benefit to Participant's Surviving Spouse, if any, for her
lifetime, starting on the first of the month immediately following the month in
which the Participant dies. Such monthly benefit shall be in an amount equal to
50% of the monthly benefit the Participant was receiving under the Plan.
III.2 PRE-RETIREMENT DEATH BENEFIT. If Participant dies
while employed by the Company, the Company shall pay a lump sum benefit of One
Million ($1,000,000) Dollars to the Participant's Surviving Spouse, and if no
spouse survives, to the Participant's estate.
ARTICLE IV
FORFEITURES
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IV.1 FORFEITURE FOR COMPETITIVE EMPLOYMENT/ DIVULGING
CONFIDENTIAL INFORMATION. If Participant enters Competitive Employment, as
defined in Section IV.3.1 below,
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or divulges any Confidential Information, as defined in Section IV.3.3 below, to
any person or organization which could be of aid or assistance to a Competitive
Business, as defined in Section IV.3.2 below, without prior authorization by the
Company and within three years after his employment terminates he shall forever
and irrevocably forfeit all benefits otherwise due him under the terms of the
Plan. If Participant first enters Competitive Employment more than three years
after his employment terminates, any benefits otherwise payable to such
Participant during the period of such Competitive Employment shall not be so
paid and shall be forever and irrevocably forfeited, and only after such period
of Competitive Employment ends shall any benefits otherwise due hereunder
commence or continue to be paid.
IV.2 FORFEITURE FOR CAUSE. If Participant's employment is
terminated for Cause, as defined in Section IV.3.4 below, he shall forever and
irrevocably forfeit all benefits otherwise due him under the terms of the Plan.
There shall be no forfeiture of benefits in the event Participant is terminated
other than for Cause.
IV.3 RELATED DEFINITIONS.
IV.3.1 COMPETITIVE EMPLOYMENT. For purposes of
Section 5.1, "Competitive Employment" means a Participant's (i) entering into
the employ of or rendering any services to any "Competitive Business," or (ii)
engaging in any Competitive Business for his own account, or (iii) becoming
interested in any Competitive Business as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; provided, however, that
nothing contained in this Article V shall be deemed to prohibit the Participant
from acquiring, solely as an investment through market purchases, securities of
any corporation which are registered under Section 12 of the Securities Exchange
Act of 1934 and which are publicly traded so long as he is not part of any
control group of such corporation.
IV.3.2 COMPETITIVE BUSINESS. For purposes of this
Section, the term "Competitive Business" shall mean any line of business that is
substantially the same as any line of any operating business engaged in or
conducted by the Company or any Affiliate and which, when the Participant's
employment terminates, the Company (or any Affiliate) was engaged in or
conducting, or had, to the knowledge of the Participant, definitively planned to
engage in or conduct.
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IV.3.3 CONFIDENTIAL INFORMATION. For purposes of
this Section, Confidential Information means any information with respect to the
Company's (or any Affiliate's) customers, processes, and procedures, other than
information that is generally known or available to the public.
IV.3.4 CAUSE. For purposes of this Section, Cause
shall mean (i) serious and repeated willful misconduct in respect of
Participant's duties which has resulted in material, economic damage to the
Company or any Affiliate, and, to the extent such misconduct is susceptible of
being cured, such misconduct continues for thirty days following written notice
to the Participant by the Company detailing such misconduct, (ii) the final,
non-appealable conviction in a court of law of any crime or offense (A) for
which the Participant is imprisoned or (B) that involves the commission of fraud
or theft against, or embezzlement from, the Company or any Affiliate, or (iii)
chronic alcohol or substance abuse.
IV.4 OTHER FORFEITURES. If Participant's employment
terminates for any reason other than death at a time when he is not eligible for
benefits hereunder, such Participant shall irrevocably forfeit any and all
rights to any benefits hereunder and his prior Continuous Service shall be
cancelled.
IV.5 LIMITATION. If any provision of this Article V shall
be unenforceable as a matter of law, it shall be construed to apply to the
greatest extent permitted by law so as to give effect to its intended purpose.
ARTICLE V
CONDITIONS RELATED TO BENEFITS
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V.1 ADMINISTRATION OF PLAN. The Committee shall
administer the Plan and shall have the sole and exclusive authority to
interpret, construe and apply its provisions, and shall have full discretionary
power and authority to construe the document, rectify errors, supply omissions
and resolve ambiguities. The Committee shall have the power to establish, adopt
and revise such rules and regulations as it may deem necessary or advisable for
the administration of the Plan and the operation of the Committee's activities
in connection therewith. The Committee shall file with the Department of Labor
and distribute to the Participant any reports and other information required by
applicable law and shall be entitled to rely conclusively upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller,
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counsel or other person employed or engaged by it with respect to the Plan. To
the maximum extent permitted by law, all interpretations and other decisions of
the Committee shall be conclusive and binding on all parties. All decisions of
the Committee shall be by vote or written consent of the majority of its members
and shall be final and binding.
V.2 GRANTOR TRUST. The Company may create a grantor trust
(within the meaning of section 671 of the Code) in connection with the adoption
of this Plan to which it may from time to time contribute amounts to accumulate
an appropriate reserve against its obligations hereunder. Notwithstanding the
creation of such trust, the benefits hereunder shall be a general obligation of
the Company. Payment of benefits from such trust shall, to that extent,
discharge the Company's obligations under this Plan. The Participant shall have
only a contractual right as a general creditor of the Company to the amounts, if
any, payable hereunder and such right shall not be secured by any assets of the
Company or the trust.
V.3 NO RIGHT TO COMPANY ASSETS. Neither the Participant
nor any other person shall acquire by reason of the Plan any right in or title
to any assets, funds or property of the Company whatsoever including, without
limiting the generality of the foregoing, any specific funds or assets which the
Company may set aside in anticipation of a liability hereunder, or in or to any
policy or policies of insurance on the life of the Participant owned by the
Company.
V.4 NO EMPLOYMENT RIGHTS. Nothing herein shall constitute
a contract of continuing employment or in any manner obligate the Company or any
Affiliate to continue the service of the Participant, or obligate the
Participant to continue in the service of the Company or any Affiliate, and
nothing herein shall be construed as fixing or regulating the compensation paid
to the Participant.
V.5 COMPANY'S RIGHT TO TERMINATE AND AMEND. The Company
reserves the right in its sole discretion at any time to amend the Plan in any
respect or terminate the Plan. Notwithstanding the foregoing, no such amendment
or termination shall reduce the amount of the benefit theretofore accrued by the
Participant or change the conditions required to be satisfied to receive payment
of such past accrued benefit (including contingent spousal death benefits) based
on the provisions of the Plan as theretofore in effect (in each case, unless the
Participant expressly consents thereto in writing).
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V.6 PROTECTIVE PROVISIONS. The Participant shall
cooperate with the Company by furnishing any and all information requested by
the Company in order to facilitate the payment of benefits hereunder.
V.7 FACILITY OF PAYMENT. Whenever and as often as any
person entitled to payments hereunder shall be under a legal disability, or in
the sole judgment of the Committee shall otherwise be unable to apply such
payments to his own best interest and advantage, the Committee, in the exercise
of its discretion, may direct all or any portion of such payments to be made in
any one or more of the following ways:
(a) Directly to such person;
(b) To his legal curator, guardian, or
conservator, or other court-appointed or court-recognized representatives; or
(c) To his spouse, to another member of his
family, or to any other person, to be expended for his benefit.
V.8 CLAIMS PROCEDURES. In the event that any claim for
benefits is denied (in whole or in part) hereunder, the claimant shall receive
from the Committee notice in writing, written in a manner calculated to be
understood by the claimant, setting forth the specific reasons for denial, with
specific reference to pertinent provisions of this Plan. Such notice shall be
provided within 90 days of the Participant's claim for benefits. Any
disagreements about such interpretations and construction may be appealed within
90 days to the Committee. The Committee shall respond to such appeal within 60
days with a notice in writing fully disclosing its decision and the reasons
therefore. No member of the Committee shall be liable to any person for any
action taken hereunder except those actions undertaken with lack of good faith.
V.9 NO RIGHT OF OFFSET. If at the time any payment is to
be made hereunder the Participant or his spouse or both are indebted to the
Company (or an Affiliate) or otherwise subject to a monetary claim by the
Company (or an Affiliate), the payments remaining to be paid to the Participant
or his spouse or both shall nevertheless be paid without reduction by or set off
against the amount of such indebtedness or claim.
V.10 NO THIRD PARTY RIGHTS. Nothing in this Plan or any
trust established pursuant to Section 6.2 hereof shall be construed to create
any rights hereunder in favor of the spouse of any Participant prior to the
Participant's death or in favor of any other person (other
<PAGE>
than the Company and any Participant) or to limit the Company's right to amend
or terminate the Plan in any manner subject to the consent of the Participant to
the extent provided in Section 6.5 notwithstanding that such amendment or
termination might result in such spouse receiving no benefits under the Plan.
V.11 ERISA ACT OF 1974. The Plan is intended to qualify as
a plan maintained primarily for the purpose of providing deferred compensation
for the Participant, a highly compensated employee, and, as such, to be exempt
from certain provisions of the Employee Retirement Income Security Act of 1974,
as amended.
ARTICLE VI
MISCELLANEOUS
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VI.1 NONASSIGNABILITY. No rights or payments under this
Plan shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, whether voluntary or involuntary, and
no attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge the same shall be valid, nor shall any such benefit or payment be in
any way liable for or subject to the debts, contracts, liabilities, engagements
or torts of any person entitled to such benefit or payment or subject to levy,
garnishment, attachment, execution or other legal or equitable process. No part
of the amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
VI.2 WITHHOLDING. To the extent required by law the
Company shall be entitled to withhold from any payments due hereunder any
federal, state and local taxes required to be withheld in connection with such
payment.
VI.3 GENDER AND NUMBER. Wherever appropriate herein, the
masculine shall mean the feminine and the singular shall mean the plural or vice
versa.
VI.4 NOTICE. Any notice required or permitted to be made
under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to (a) in the case of notice to the Company or the
Committee, the principal office of the Company at: 400 Alexander Park,
Princeton, New Jersey 08450, Attention: General Counsel, and (b) in the case of
the Participant or the Participant's spouse, the Participant's (or such
spouse's) mailing address
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maintained in the Company's personnel records. Such notice shall be deemed given
as of the date of delivery or, if delivery is made by mail, as of the date shown
on the postmark or on the receipt for registration or certification.
VI.5 VALIDITY. In the event any provision of this Plan is
held invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.
VI.6 APPLICABLE LAW. This Plan shall be governed and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this BERLITZ
INTERNATIONAL, INC. EXECUTIVE RETIREMENT PLAN FOR JAMES R. KAHL to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed on
this 26TH day of OCTOBER, 2000.
BERLITZ INTERNATIONAL, INC.
By /s/ Alistair D. Gatoff
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Its Vice President
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Attest: /s/ Paul H. Weinstein
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[SEAL]
