EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (this “ Agreement ”) is made
January 7, 2009 by and between Arbitron Inc., a Delaware
corporation (the “ Company ”), and
Michael P. Skarzynski, an individual (“ you
”) (and, together, “ Parties
”).
NOW THEREFORE, in
consideration of your acceptance of employment, the Parties agree
to be bound by the terms contained in this Agreement as
follows:
1.
Engagement . Beginning January 12, 2009 (the
“ Effective Date ”), the Company will
employ you as President and Chief Executive Officer of the Company.
You will report solely and directly to the Board of Directors of
the Company (the “ Board ”). You will
have the responsibilities, duties and authorities the Board
specifies from time to time, which will be commensurate with the
president and chief executive officer of public entities of similar
size and character. The Board will appoint you as a Director in a
special Board meeting before or as soon as practicable following
the Effective Date. For so long as you remain Chief Executive
Officer of the Company, the Board intends to nominate you to the
Board and, if elected by the Company’s stockholders you will
serve in such capacity without additional consideration while
employed. You will at all times comply with all policies of the
Company then in effect.
2.
Commitment. During and throughout the Employment Term
(as defined in Section 3 below), you must devote substantially
all of your full working time and attention to the Company. During
the Employment Term, you must not engage in any employment,
occupation, consulting or other activity for direct or indirect
financial remuneration unless approved by the Board;
provided , however , that you may, subject to
compliance with the notice and consent requirements set forth in
the Company’s Corporate Governance Policies and Guidelines,
(i) serve in any capacity with any professional, community,
industry, civic (including governmental boards), educational or
charitable organization, (ii) serve on for-profit entity
board(s) having obtained prior consent and written approval from
the Board’s Nominating and Corporate Governance Committee and
(iii) subject to the Company’s policies applicable to
all employees, make investments in other businesses and manage your
and your family’s personal investments and legal affairs;
provided that any such activities described in clauses
(i)-(iii) above do not materially interfere with the discharge
of your duties as the Chief Executive Officer of the Company. You
will perform your services under this Agreement at the
Company’s headquarters in Columbia, Maryland.
3.
Employment Term . You are an at-will employee. Your
employment with the Company under this Agreement will begin on the
Effective Date and will continue until your employment terminates
(such employment period, the “ Employment Term
”).
4.
Cash and Stock Compensation .
(a)
Base Salary. During your employment hereunder, you
will receive a base salary at a monthly rate of $41,666.67,
annualizing to $500,000 (“ Base Salary
”). The Company
will pay your
Base Salary in accordance with the Company’s regular payroll
practices. The Board will review your Base Salary no less
frequently than annually. If increased, the increased Base Salary
will become the Base Salary for all purposes of this Agreement.
Your Base Salary will not be decreased without your written
consent.
(b)
Incentive Bonus. Upon meeting the applicable
performance criteria established by the Company’s
Compensation and Human Resources Committee of the Board (the
“ Compensation Committee ”) in its sole
discretion, you will be eligible to receive an annual incentive
bonus (the “ Annual Bonus ”) for a given
fiscal year of the Company targeted at an amount equal to 100% of
your Base Salary in effect at the beginning of such fiscal year
(“ Target Bonus ”). For performance
exceeding such applicable performance criteria in the sole judgment
of the Compensation Committee, the Annual Bonus will be increased
to an amount in excess of the Target Bonus up to a maximum of 200%
of your Base Salary in effect at the beginning of such fiscal year,
which additional bonus amount the Compensation Committee will
determine in its sole discretion. The Annual Bonus, if any, will be
paid when other executives receive their bonuses under comparable
arrangements but, in any event, between January 1 and April 30
of the year following the year with respect to with it is earned.
The Company will pay you the 2009 Annual Bonus in the minimum
amount of $250,000 provided that you are an employee in good
standing as of December 31, 2009.
(c)
Compensatory Stock Awards. Subject to the
Compensation Committee’s approval, as soon as
administratively practicable on or following the Effective Date,
the Company will grant you an equity award to be valued at
$1,250,000 on the date of grant, with the award divided by value
into 50% stock options and 50% restricted stock units (where the
value for the options is determined using the Company’s
standard Black-Scholes assumptions applied as of the date of grant
and where the value for the restricted stock units is determined by
dividing the target value for the restricted stock units by the
Common Stock’s fair market value on the date of grant) (the
“ Inducement Grant ”), each with respect
to the Company’s common stock, par value $0.50 (the “
Common Stock ”). Subject to the Compensation
Committee’s further approval, you will receive an additional
grant (the “ First Year Grant ”) prior to
or in connection with the February 2009 grant cycle, valued at
$1,250,000 and divided into options and restricted stock units in
the same manner as the Inducement Grant but based on the fair
market value of the Common Stock on the First Year Grant date.
Grants will be under the Company’s 1999 Stock Incentive Plan
or 2008 Equity Compensation Plan as the Compensation Committee
selects (as applicable and with any successor plan, the “
Stock Plan ”). Assuming continued employment,
the options under the Inducement and First Year Grants will each
vest in equal amounts on an annual basis over a three year period
following the date of grant (beginning with one-third on the first
anniversary), and otherwise will contain the same terms and
conditions as the Company’s standard form of nonqualified
stock option agreement adopted for use under the applicable Stock
Plan, except as modified by this Agreement. Assuming continued
employment, the restricted stock units under the Inducement and
First Year Grants will each vest in equal amounts on an annual
basis over a four year period following the date of grant
(beginning with 25% on the first anniversary) and otherwise will
contain the same terms and conditions as the Company’s
standard form of restricted stock unit agreement adopted for use
under the applicable Stock Plan, except as modified by this
Agreement. The Compensation Committee at its sole discretion will
consider the grant of additional compensatory stock awards to you
no less frequently than annually.
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(d)
Relocation Expenses and Temporary Living Expenses .
The Company directs you to work at its Columbia, Maryland
headquarters and will assist in relocation expenses. You agree that
you will use best efforts to relocate your primary residence during
2009. Providing that you relocate to a residence in proximity to
Columbia, Maryland, the Company will reimburse you for relocation
expenses and temporary living expenses up to a maximum of $300,000.
The residual balance of relocation expenses and temporary living
expenses will expire if not used by December 31, 2010.
Qualified relocation and temporary living expenses will cover real
estate commission fees and transfer tax fees for the sale of your
residence in New Jersey, moving costs, temporary housing rental
fees, moving costs, legal fees, inspection fees, mortgage financing
fees for the purchase of your new residence in proximity to the
Company’s headquarters in Columbia, Maryland and applicable
gross-up for federal taxes. Without limiting the foregoing and
notwithstanding any other provision of this Agreement to the
contrary, in no event will reimbursement for temporary housing
rental fees exceed $5,000 for any month. Any payments or expenses
provided in this Section 4(d) will be paid in accordance with
Section 7(c). If your employment ends before December 31,
2010 (the “ Relocation Repayment Date ”)
as a result of your resignation or your termination for Cause, you
agree to repay a pro rata portion of the relocation expenses, with
the proration determined based on the number of days remaining
between the date your employment ends and the Relocation Repayment
Date as compared with the total number of days between the
Effective Date and the Relocation Repayment Date.
(e)
Tax Preparation and Financial Planning . The Company
will pay you an annual allowance of $10,000 for tax preparation and
financial planning. Any payments or expenses provided in this
Section 4(e) will be paid in accordance with
Section 7(c).
(a)
Employee Welfare and Retirement Plans. You will, to
the extent eligible, be entitled to participate at a level
commensurate with your position in all employee welfare benefit and
retirement plans and programs the Company provides to its
executives in accordance with Company policies.
(b)
Business Expenses. Upon submission of appropriate
documentation in accordance with its policies , the Company will
promptly pay to or reimburse you for all reasonable business
expenses that you incur in performing your duties under this
Agreement, including, but not limited to, travel, entertainment,
professional dues and subscriptions, as long as such expenses are
reimbursable under the Company’s policies. Any payments or
expenses provided in this Section 5(b) will be paid in accordance
with Section 7(c).
(c)
Paid Time Off. You will be entitled to paid time off
in accordance with the standard written policies of the Company
with regard to executives.
6. Termination of At-Will Employment.
(a)
General . Subject in each case to the provisions of
this Section 6, nothing in this Agreement interferes with or
limits in any way the Company’s right to terminate your
employment at any time, for any reason or no reason, with or
without notice, and nothing in this Agreement confers on you any
right to continue in the Company’s employ. If your employment
ceases due to death or for any other reason or for no reason, you
will be entitled to receive (in addition to any compensation and
benefits you are entitled to receive under Section 6(b) or
6(c) below): (i) any earned but unpaid Base Salary through and
including the date of termination of
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your
employment, (ii) any earned but unpaid Annual Bonus,
(iii) unreimbursed business expenses in accordance with the
Company’s policies; (iv) unpaid relocation or temporary
living expenses incurred as of such date (subject to the
requirements of Section 4(d)); and (v) any amounts or
benefits to which you are then entitled under the terms of the
benefit plans then sponsored by the Company in accordance with
their terms (and not accelerated to the extent acceleration does
not satisfy Section 409A of the Internal Revenue Code of 1986,
as amended (“ Section 409A ” of the
“ Code ”)). Notwithstanding any other
provision in this Agreement to the contrary, any severance benefits
to which you may be entitled will be provided exclusively through
the terms of this Section 6 of this Agreement.
(b)
Termination Without Cause. If, during the Employment
Term, the Company terminates your employment without Cause (defined
below), you will be entitled to the following severance
benefits:
(i)
Cash Severance . The Company will pay to you in cash
(i) an amount equal to two times your Base Salary, paid in
equal installments over a 24 month period following the
Effective Release Date (as defined below) in accordance with the
Company’s standard payroll policies and procedures and in a
manner not inconsistent with Section 7 hereof, and (ii) a
bonus component (the “ Bonus Component
”). If you are terminated without cause during 2009, the
Bonus Component will be $500,000. If, for subsequent years, the
Annual Bonus for your year of termination is determined by the
Compensation Committee under a program intended to qualify as
performance-based for purposes of Section 162(m) of the Code (an
“ Exempt Bonus ”), you will be paid the
Bonus Component under the timing provided in Section 4(b) of this
Agreement as though you had remained employed, with the Bonus
Component determined under the factors for such Annual Bonus, but
without the exercise by the Compensation Committee of negative
discretion as provided in Treas. Reg.
§ 1.162-27(e)(2)(iii)(A) (with the expectation, if all
performance factors are satisfied, that the Bonus Component would
be two times Target Bonus). If the Annual Bonus for your year of
termination is not intended to be an Exempt Bonus, the Bonus
Component will be two times Target Bonus paid in the timing
provided in Section 4(b) of this Agreement.
(ii)
Benefits . The Company will also pay the full cost of the
health care premiums otherwise payable by you upon your election of
health care continuation coverage for yourself and your qualified
beneficiaries as provided under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“ COBRA ”)
until the earlier of 18 months or your ceasing to qualify for
COBRA coverage (such as by obtaining subsequent
coverage).
(iii)
Release . To receive any severance benefits provided for
under this Agreement or otherwise, you must deliver to the Company
of a general release of claims on the form the Company provides,
which must become irrevocable within 60 days following the
date of your termination of employment. Benefits will be paid or
commence no later than 30 days after such release becomes
effective (except for delays described above for the Bonus
Component); provided, however , that if the last day of the
60 day period for an effective release falls in the calendar
year following the year of your date of termination, the severance
payments will be paid or commence no earlier than January 1 of such
subsequent calendar year. The date on which your release of
claims
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becomes
effective is the “ Effective Release Date
.” You must continue to comply with the covenants under
Sections 8 and 9 below to continue to receive severance
benefits.
(c)
Change in Control . If, within 12 months
following a Change in Control, your employment ends on a
termination without Cause, in addition to the compensation and
benefits described in Section 2(b)(i) and (ii) above and
subject to the release required under Section 2(b)(iii), any
outstanding equity compensation awards will fully and immediately
vest and, as applicable, become exercisable, provided that the
Board will have the right to suspend exercises or sales with
respect to such equity compensation pending satisfaction of the
release requirement, and provided that the vesting will not
accelerate the distribution of shares underlying equity awards if
such acceleration would trigger taxation under
Section 409A(a)(1)(B). The treatment in this Section 6(c)
applies notwithstanding any contrary provisions in the applicable
Stock Plan or any award agreement. For the purpose of this
Agreement, “ Change of Control ”
means:
(i)
consummation of a merger or consolidation to which the Company is a
party if the individuals and entities who were stockholders of the
Company immediately before the effective date of such merger or
consolidation have beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of less than 50% of the
total combined voting power for election of directors of the
surviving Company immediately following the effective date of such
merger or consolidation; or
(ii)
the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) in the aggregate of
securities of the Company representing 51% or more of the total
combined voting power of the Company’s then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert; provided,
however, that for purposes hereof, any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company will not
constitute a Change of Control; or
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