ARBITRON INC. FORM OF EXECUTIVE RETENTION AGREEMENT
Exhibit 10.3
THIS EXECUTIVE RETENTION AGREEMENT is entered into as of August 26, 2008 (the “Effective
Date”), by and between Arbitron Inc., a Delaware corporation (the “Company ”), and
(the “Executive”). This Agreement amends and supersedes the Executive Retention Agreement between
the Company and the Executive dated November 9, 2001, as further amended May 24, 2006. This
Agreement is effective only with respect to an employment cessation under Sections 2.1
through 2.4, a Leadership Change, or a Change of Control that occurs after the Effective
Date and on or before August 25, 2013 (the “Agreement Expiration Date”).
WHEREAS, the Executive is currently employed by the Company and is an executive officer of the
Company;
WHEREAS, the Company has implemented a severance program for executive officers and wishes to
document under this Agreement the provisions applicable to the Executive in the event of his or her
termination of employment;
WHEREAS, in addition, the Company recognizes that a Change of Control or Leadership Change may
result in material alteration or diminishment of the Executive’s position and responsibilities and
substantially frustrate the purpose of Executive’s commitment to the Company and forbearance of
career options, and has determined therefore to provide enhanced severance and other benefits in
the event of a Change of Control or Leadership Change; and
WHEREAS, the parties wish to replace any and all prior agreements and undertakings with
respect to the Executive’s termination of employment, non-competition, non-recruitment, and
non-disparagement obligations, and Change of Control occurrences and compensation, other than the
agreements governing the Executive’s equity participation in the Company (as the same are modified
by Section 2.5(a)(iii), Section 3, and Section 6 of this Agreement).
NOW THEREFORE, in consideration of the Executive’s acceptance of and continuance in
Executive’s employment, the parties agree to be bound by the terms contained in this agreement as
follows:
1. “At-Will” Employment. The Company may terminate the Executive’s employment at any
time for any reason pursuant to a Notice of Termination. The Executive may terminate his or her
employment with the Company at any time for any reason pursuant to a Notice of Termination. If the
Executive dies while still an employee of the Company, the Executive’s death shall be a termination
of employment from the Company. Any termination of the Executive’s employment by the Company or
the Executive (other than because of the Executive’s death) shall be communicated by written Notice
of Termination to the other party hereto in accordance with Section 7.1 below. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon, if any, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated. The Company’s notice shall be given in
writing by the Chief Executive Officer. Termination of the Executive’s employment shall take
effect on the Date of
Employment Termination, the setting of which shall require the minimum notice period described
under the definition of “Date of Employment Termination.”
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2. Compensation Upon Termination.
2.1. Death. Except as provided in Section 2.5, if the Executive’s
employment
is terminated as a result of the Executive’s death, the Company shall pay to the Executive’s
estate, or as may be directed by the legal representatives of such estate, the Executive’s then
current base salary through the Date of Employment Termination and all other unpaid amounts, if
any, to which Executive is entitled as of the Date of Employment Termination. The payments
contemplated by this Section 2.1 shall be paid at the time they are due in accordance with
the regular payroll schedule, and the Company shall have no further obligations to the Executive or
his or her estate under this Agreement.
2.2. Disability. Except as provided in Section 2.5, if the Company
terminates
the Executive’s employment because of the Executive’s Disability, the Company shall pay the
Executive the Executive’s then current base salary through the Date of Employment Termination and
all other unpaid amounts, if any, to which Executive is entitled as of the Date of Employment
Termination. The payments contemplated by this Section 2.2 shall be paid at the time they
are due in accordance with the regular payroll schedule, and the Company shall have no further
obligations to the Executive under this Agreement; provided, however, that the base salary shall be
reduced by the amount of any disability benefit payments made to the Executive during a period of
Disability from any insurance or other policies provided by the Company.
2.3. By the Company for Cause or by the Executive Other than for Position
Diminishment. Except as provided in Section 2.5, if the Executive’s employment with
the Company is terminated in accordance with this Section 2.3, the Company shall pay the
Executive the Executive’s then current base salary through the Date of Employment Termination and
all other unpaid amounts, if any, to which Executive is entitled as of the Date of Employment
Termination. The Executive’s termination is covered by this Section 2.3 (i) if the
Executive voluntarily terminates his or her employment other than during the Window Period as
described in Section 2.5 or for Position Diminishment, or (ii) if the Company terminates
the Executive’s employment for Cause. The payments contemplated by this Section 2.3 shall
be paid at the time such payments are due in accordance with the regular payroll schedule, and the
Company shall have no further obligations to the Executive under this Agreement.
2.4. By the Company other than for Cause or by the Executive for Position
Diminishment. Except as provided in Section 2.5, if the Company terminates the
Executive’s employment other than for Cause or Disability or the Executive resigns as a result of
Position Diminishment, the Company shall pay the Executive the Executive’s then current base salary
through the Date of Employment Termination and all other unpaid amounts, if any, to which the
Executive is entitled as of the Date of Employment Termination, plus the following amounts:
(a) Severance Amount. The Executive shall receive a
severance payment equal to the
sum of (i) 18 times the Executive’s Reference Compensation and (ii) the product of (x) [0.40][0.45]
[0.50][0.55] times the Executive’s Annual Salary divided by twelve and (y) the number of full
months elapsed in the calendar year before the Executive’s Date of Employment Termination. This
severance payment amount shall be paid in a lump sum, within 90 days following the Executive’s Date
of Employment Termination in accordance with Section 7.2; provided, however, that the
severance payment amount shall not be paid prior to the
Company’s receipt of a duly executed Waiver and Release Agreement that is not revoked during
the applicable regulatory revocation period and, if the 90th day is in the calendar year
following the Date of Employment Termination, not before the first day of that subsequent calendar
year.
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(b) Health and Welfare Benefits Continuation. Commencing
on his or her Date of
Employment Termination, and except as next provided, for the duration of the Benefit Continuation
Period, the Executive shall be entitled to receive from the Company the same or equivalent health,
dental, accidental death and dismemberment, short and long-term disability, life insurance
coverages, and all other insurance policies and health and welfare benefits programs, policies or
arrangements, at the same levels and coverages as Executive was receiving on the day immediately
prior to his or her Date of Employment Termination, if and to the extent such coverage is available
from the Company’s benefit plans with respect to former employees (such as through continuation of
health coverage for 18 months). If and to the extent such coverage is not available or ceases
(such as through expiration of the continued health coverage), the Company shall take commercially
reasonable steps to arrange for coverage under individual or conversion policies and shall, in any
event, pay as premiums (or to Executive if coverage cannot reasonably be obtained), the same dollar
level of premiums as it paid for Executive as an active employee, with the premium payments grossed
up for taxes to the extent that providing the coverage post-employment under an employer’s insured
plan would be tax free if such coverage were available. With respect to any particular benefit, the
benefit’s continuation described in this paragraph shall end earlier than the end of the Benefit
Continuation Period if the Executive (or in the case of dependent coverage, the Executive’s
dependent), becomes eligible for the benefit under a plan, program or arrangement of a subsequent
employer that provides the same type of benefit.
(c) Outplacement. Commencing on his or her Date of
Employment Termination, the
Company shall reimburse expenses reasonably incurred by the Executive in securing outplacement
services through a professional person or entity of the Company’s choice, at a level commensurate
with the Executive’s position, during the Benefit Continuation Period, provided
that the cost therefor to the Company shall not exceed $50,000 nor extend beyond the
earlier to occur of (i) the end of the Executive’s second taxable year following the taxable year
in which the termination date occurs and (ii) the date on which the Executive commences other full
time employment. The Company shall reimburse the Executive for any such permitted expenses on or
before the end of the Executive’s third taxable year following the taxable year in which the
termination date occurs.
(d) The Executive may only resign as a result of a Position
Diminishment under this
Section 2.4 if (i) the Date of Position Diminishment occurs outside a Window Period; and
(ii) he or she (x) provides notice to the Company within 90 days following the Date of Position
Diminishment that he or she considers the Position Diminishment to be grounds to resign; (y)
provides the Company a period of 30 days to cure the Position Diminishment, and (z) actually ceases
employment, if the Position Diminishment is not cured, by six months following the Date of Position
Diminishment.
2.5. Termination During Window Period Following a Change of Control or Leadership
Change.
(a) If the Executive’s employment with the Company
terminates (x) during a Window Period, or
(y) on or before the Position Diminishment Termination Date (as defined in Section 2.5(b)),
other than by (i) a termination by the Company for Cause, (ii) the
Executive’s resignation other than for Position Diminishment, or (iii) the Executive’s death
or Disability, the Executive shall be entitled to payment of the Executive’s then current base
salary through the Date of Employment Termination and all other unpaid amounts, if any, to which
the Executive is entitled as of the Date of Employment Termination, plus the following amounts and
benefits:
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(i) Severance Amount. The
Executive shall receive a severance payment equal to the
sum of (i) 24 times the Executive’s Reference Compensation and (ii) the product of (x) [0.40][0.45]
[0.50][0.55] times the Executive’s Annual Salary divided by twelve and (y) the number of full
months elapsed in the calendar year before the Executive’s Date of Employment Termination. This
payment shall be paid in a lump sum within 90 days following the Executive’s Date of Employment
Termination in accordance with Section 7.2; provided, however, that the severance payment
amount shall not be paid prior to the Company’s receipt of a duly executed Waiver and Release
Agreement that is not revoked during the applicable regulatory revocation period and, if the
90th day is in the calendar year following the Date of Employment Termination, not
before the first day of that subsequent calendar year.
(ii) Health and Welfare Benefits
Continuation; Outplacement. The Executive shall have
the benefits specified in Sections 2.4(b) and (c), extended where permissible under
the terms of the plans or applicable law, for the longer Benefit Continuation Period applicable
under Section 2.5.
(iii) Special Vesting Rules for
New Stock Incentives. Notwithstanding any contrary
provision of the Arbitron Inc. 1999 Stock Incentive Plan (the “1999 Plan”) or the Arbitron 2008
Equity Compensation Plan (the “2008 Plan,” and, with the 1999 Plan, the “Plans”) and
notwithstanding any contrary provision in an award agreement under the Plans, the Executive’s
awards under the Plans granted on or after June 1, 2008 and before the Agreement Expiration Date
(including, but not limited to, the Executive’s stock option and restricted stock awards, if any)
shall fully and immediately vest upon a cessation of employment described in Section
2.5(a), provided that the Board shall have the right to suspend exercises or sales with respect
to such equity compensation pending satisfaction of the release requirement in Section 4.
This Section 2.5(a)(iii) shall not be changed or otherwise modified without the written
consent of the Executive.
(b) The Executive may only resign as a result of a Position
Diminishment under this
Section 2.5 if (i) the Date of Position Diminishment occurs during the Window Period; and
(ii) he or she (x) provides notice to the Company within 90 days following the Date of Position
Diminishment that he or she considers the Position Diminishment to be grounds to resign; (y)
provides the Company a period of 30 days to cure the Position Diminishment, and (z) actually ceases
employment, if the Position Diminishment is not cured, by the later to occur of: (1) six months
following the Date of Position Diminishment and (2) the end of the Window Period (the “Position
Diminishment Termination Date”).
3. Vesting Rule for Prior Stock Incentives. Notwithstanding any contrary provision of
the Plans and notwithstanding any contrary provision in an award agreement under the Plans, the
Executive’s awards under the Plans received before May 31, 2008 (including, but not limited to, the
Executive’s stock option and restricted stock awards, if any) shall fully and immediately vest if a
Change of Control occurs, without regard to whether the Executive’s employment ends (unless the
equity incentive cannot be so accelerated under Section 409A because the event that falls within
the definition of Change of Control is not within Section
409A’s definition of “change in control,” in which case acceleration will occur only in
accordance with Section 2.5(a)), provided that the Board shall have the right to suspend
exercises or sales with respect to such equity compensation pending satisfaction of the release
requirement in Section 4. This Section 3 shall not be changed or otherwise
modified without the written consent of the Executive.
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4. Waiver and Release Agreement. In consideration of the severance payments described
in Section 2.4 or Section 2.5 and the acceleration provided in Section 3,
to which severance payments and acceleration the Executive would otherwise not be entitled, and as
a pre-condition to the Executive becoming entitled to such severance payments or accelerations
under this Agreement, the Executive agrees to execute at the time of Executive’s termination
(and/or acceleration event under Section 3) a Waiver and Release Agreement in exactly the
form provided to the Executive by the Company without alteration or addition (the “Waiver and
Release Agreement”), attached hereto as Exhibit A , the terms and conditions of which are
specifically incorporated herein by reference (with such modifications as the Company determines
appropriate if Section 3 applies but Section 2.5 does not).
5. Certain Additional Payments by the Company.
(a) Notwithstanding anything in this Agreement to the contrary and except as set forth in this
Section 5, in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 5 ) (a “Payment”) would be subject
to the excise tax imposed by Code Section 4999 or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall
be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after
payment by the Executive of all taxes, including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax (including
any interest or penalties imposed with respect to such taxes) imposed upon the Payments. The
Gross-Up Payment provided for in this Section 5 shall be made upon the earlier of (a) the
payment to the Executive of any Payment or (b) the imposition upon the Executive, or any payment by
the Executive, of any Excise Tax; provided that all such Gross-Up Payments shall be made prior to
the end of the Executive’s taxable year next following the taxable year in which the taxes are
remitted to the taxing authority.
(b) Subject to the provisions of Section 5(c), all determinations required to be
made
under this Section 5, including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company’s external auditors (the “Accounting Firm”), which
shall provide detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by the
Company to the Executive within five business days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the application of
Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive.
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(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which he or she gives such
notice to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such
claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by attorneys reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions of this Section 5(c), the Company shall control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and ▇▇▇ for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; further provided, that if the Company directs the Executive
to pay such claim and ▇▇▇ for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed income with respect to
such advance; and, further
provided, that any extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
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(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to
Section 5(c), the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company’s complying with the requirements of
Section 5(c) ) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 5(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
6. Non-Competition, Non-Recruitment, and Non-Disparagement.
6.1. General. The parties hereto recognize and agree that (a) the Executive is a
senior executive of the Company and is a key executive of the Company, (b) the Executive has
received, and will in the future receive, substantial amounts of the Company’s confidential
information, (c) the Company’s business is conducted on a worldwide basis, and (d) provision for
non-competition, non-recruitment and non-disparagement obligations by the Executive is critical to
the Company’s continued economic well-being and protection of the Company’s confidential
information. In light of these considerations, this Section 6 sets forth the terms and
conditions of the Executive’s obligations of non-competition, non-recruitment and non-disparagement
during and subsequent to the termination of this Agreement and/or the cessation of the Executive’s
employment for any reason.
6.2. Non-Competition.
(a) Unless the obligation is waived or limited by the Company in
accordance with subsection
(b) of this Section 6.2, the Executive agrees that during employment and for the longest of
12 months following the cessation of employment for any reason not covered by Section 2.4
or 2.5, 18 months if Section 2.4 applies, and 24 months if Section 2.5
applies (“Non-Compete Period”), the Executive will not directly or indirectly, alone or as a
partner, officer, director, shareholder or employee of any other firm or entity, engage in any
commercial activity in competition with any part of the Company’s business as conducted as of the
date of such termination of employment or with any part of the Company’s contemplated business with
respect to which the Executive has confidential information. For purposes of this subsection (a),
“shareholder” shall not include beneficial ownership of less than five percent (5%) of the combined
voting power of all issued and outstanding voting securities of a publicly held corporation whose
stock is traded on a major stock exchange. Also for purposes of this subsection (a), “the
Company’s business” shall include business conducted by the Company or its affiliates and any
partnership or joint venture in which the Company or its affiliates is a partner or joint venturer;
provided that, “affiliate” as used in this sentence shall not include any entity in which the
Company has ownership of less than one third (1/3) of the voting equity.
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(b) At its sole option the Company may, by written notice to the
Executive at any time within
the Non-Compete Period, waive or limit the time and/or geographic area in which the Executive
cannot engage in competitive activity.
(c) During the Non-Compete Period, prior to accepting employment
with or agreeing to provide
consulting services to, any firm or entity that offers competitive products or services, the
Executive shall give 30 days’ prior written notice to the Company. Such written notice shall
describe the firm and the employment or consulting services to be rendered to the firm or entity,
and shall include a copy of the written offer of employment or engagement of consulting services.
The Company’s failure to respond or object to such notice shall not in any way constitute
acquiescence or waiver of the Company’s rights under this Section 6.
(d) In the event the Executive fails to provide notice to the
Company pursuant to subsection
(c) of this Section 6.2 and/or in anyway violates its non-competition obligation pursuant
to Section 6.2, the Company may enforce all of its rights and remedies provided to it under
this Agreement, in law and in equity, without the requirement to post a bond, and the Executive
shall be deemed to have expressly waived any rights he or she may have had to payments under
Sections 2.4 or 2.5 or acceleration under Section 3.
6.3. Non-Recruitment. During employment and for a period of 12 months following
cessation of employment for any reason, the Executive will not initiate or actively participate in
any other employer’s recruitment or hiring of the Company’s employees.
6.4. Non-Disparagement. The Executive will not, during the term or after the
termination or expiration of this Agreement or the Executive’s employment, make disparaging
statements, in any form, about the Company, its officers, directors, agents, employees, products or
services that the Executive knows, or has reason to believe, are false or misleading.
6.5. Survival. The obligations of this Article VI shall survive the expiration or
termination of this Agreement and Executive’s employment.
7. Miscellaneous.
7.1. Notices. All notices, demands, requests or other communications required or
permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied or
mailed by first class registered or certified mail, postage prepaid, addressed as follows:
If to the Company:
|
Arbitron Inc. | |
| ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ | ||
| ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ | ||
| Attention: Office of Chief Legal Officer | ||
If to the Executive:
|
At his or her last address on file with the Company |
or to such other address as may be designated by either party in a notice to the other. Each
notice, demand, request or other communication that shall be given or made in the manner described
above shall be deemed sufficiently given or made for all purposes three days after it is deposited
in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being
deemed conclusive evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
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7.2. Tax Withholding; Section 409A Compliance. All payments under this
Agreement are
subject to any required tax or other withholdings. If and to the extent any portion of any
payment, compensation or other benefit provided to the Executive in connection with his or her
employment termination is determined to constitute “nonqualified deferred compensation” within the
meaning of Code Section 409A and the Executive is a specified employee as defined in Section
409A(a)(2)(B)(i), as determined by the Company in accordance with its procedures, by which
determination the Executive hereby agrees that he is bound, such portion of the payment,
compensation or other benefit shall not be paid before the day that is six months plus one day
after the date of “separation from service” (as determined under Section 409A) (the “New Payment
Date”), except as Section 409A may then permit. The aggregate of any payments that otherwise would
have been paid to the Executive during the period between the date of separation from service and
the New Payment Date shall be paid to the Executive in a lump sum on such New Payment Date, and any
remaining payments will be paid on their original schedule. For purposes of this Agreement, each
amount to be paid or benefit to be provided shall be construed as a separate identified payment for
purposes of Section 409A, and any payments that are due within the “short term deferral period” as
defined in Section 409A shall not be treated as deferred compensation unless applicable law
requires otherwise. Neither the Company nor the Executive shall have the right to accelerate or
defer the delivery of any such payments or benefits except to the extent specifically permitted or
required by Section 409A. This Agreement is intended to comply with the provisions of Section 409A
and the Agreement shall, to the extent practicable, be construed in accordance therewith. Terms
defined in the Agreement shall have the meanings given such terms under Section 409A if and to the
extent required to comply with Section 409A. In any event, the Company makes no representations or
warranty and shall have no liability to the Executive or any other person, other than with respect
to payments made by the Company in violation of the provisions of this Agreement, if any provisions
of or payments under this Agreement are determined to constitute deferred compensation subject to
Code Section 409A but not to satisfy the conditions of that section.
7.3. Representations. The Executive agrees to execute any proper oath or verify any
proper document required to carry out the terms of this Agreement. The Executive represents that
performance of all the terms of this Agreement and the Waiver and Release Agreement will not breach
any similar agreement. Executive has not entered into, and Executive agrees not to enter into, any
oral or written agreement in conflict herewith.
7.4. Severability. The invalidity or unenforceability of any one or more provisions
of this Agreement shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect.
7.5. Survival. It is the express intention and agreement of the parties hereto that
the provisions of Section 2 hereof shall survive the termination of employment of the
Executive. In addition, all obligations of the Company to make payments hereunder shall survive any
termination of this Agreement on the terms and conditions set forth herein.
7.6. Assignment. The rights and obligations of the parties to this Agreement shall
not be assignable or delegable, except that (i) in the event of the Executive’s death, the personal
representative or legatees or distributees of the Executive’s estate, as the case may
be, shall have the right to receive any amount owing and unpaid to the Executive hereunder and
(ii) the rights and obligations of the Company hereunder shall be assignable and delegable in
connection with any subsequent merger, consolidation, sale of all or substantially all of the
assets of the Company or similar reorganization to a successor entity. In connection with a
transaction described in item (ii) of the preceding sentence under which the Executive’s employment
is transferred to a successor in the transaction, the Company’s failure to obtain the agreement of
its successor to perform the Company’s obligations under this Agreement shall be treated as a
termination by the Company without Cause and during the Window Period following a Change of Control
under Section 2.5 of this Agreement and under the Executive’s Company equity agreements
provided that the Executive’s employment ends in accordance with such nonassignment.
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7.7. Binding Effect. Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon the parties hereto and shall inure to the benefit of the parties
and their respective heirs, devisees, executors, administrators, legal representatives, successors
and assigns.
7.8. Amendment; Waiver. This Agreement shall not be amended, altered or modified
except by an instrument in writing duly executed by the parties hereto. Neither the waiver by
either of the parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter
be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of
any such provisions, rights or privileges hereunder.
7.9. Headings. Section and subsection headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for
any purpose, and shall not in any way define or affect the meaning, construction or scope of any of
the provisions hereof.
7.10. Governing Law. This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed in accordance with
the laws of the State of Maryland (but not including the choice of law rules thereof).
7.11 Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT
BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING
IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE RELEASE, WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, THE PARTIES AGREE THAT
ANY PARTY MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,
VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR RIGHTS TO TRIAL
BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS RELEASE OR TO ANY OF THE MATTERS
CONTEMPLATED UNDER THIS AGREEMENT, RELATING TO THE EXECUTIVE’S EMPLOYMENT, OR COVERED BY THE
ATTACHED RELEASE.
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7.12. Entire Agreement. This Agreement, the Waiver and Release Agreement, and any
agreements entered into in connection with the Executive’s equity participation in the Company (as
modified by Sections 2.5(a)(iii) and 3 of this Agreement) constitute the entire
agreement between the parties respecting the employment of Executive, there being no
representations, warranties or commitments except as set forth herein.
7.13. Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be an original and all of which shall be deemed to constitute one and the same
instrument.
7.14. No Right to Continued Employment. Nothing in this Agreement shall be deemed to
give the Executive the right to be retained in the employ of the Company, or to interfere with the
right of the Company to discharge the Executive at any time and for any lawful reason, subject in
all cases to the terms of this Agreement.
7.15 Further Effect of Termination on Board and Officer Positions. If Executive’s
employment ends for any reason, Executive agrees that he/she will cease immediately to hold any and
all officer or director positions he then has with the Company or any affiliate, absent a contrary
direction from the Board of Directors of the Company (which may include either a request to
continue such service or a direction to cease serving upon notice without regard to whether his
employment has ended), except to the extent that Executive reasonably and in good faith determines
that ceasing to serve as a director would breach his/her fiduciary duties to the Company.
Executive hereby irrevocably appoints the Company to be his/her attorney to execute any documents
and do anything in his name to effect his/her ceasing to serve as a director and officer of the
Company and any subsidiary, should he/she fail to resign following a request from the Company to do
so. A written notification signed by a director or duly authorized officer of the Company that any
instrument, document or act falls within the authority conferred by this clause will be conclusive
evidence that it does so. The Company will prepare any documents, pay any filing fees, and bear
any other expenses related to this section.
7.16. No Mitigation. The Executive is not required to mitigate the payments under this
Agreement by seeking other employment or otherwise, and the Company will not offset its obligations
under this Agreement to reflect compensation he/she receives from other employers or service
recipients.
7.17. Definitions.
“Annual Salary” means the greatest of the annual rate
of the Executive’s base salary from the
Company and its subsidiaries in effect as of the date of this Agreement, immediately prior to the
Date of Employment Termination, or, if applicable, immediately prior to the first day of the Window
Period..
“Benefit Continuation Period” means the applicable 18
or 24 month period upon which the
Executive’s severance payment under Section 2.4 or 2.5 is based, treating the
period as though it runs from the Date of Employment Termination.
“Cause” means (i) fraud;
(ii) misrepresentation; (iii) theft or embezzlement of assets of the
Company; (iv) intentional violations of law involving moral turpitude; (v) material failure to
follow the Company’s conduct and ethics policies; and/or (vi) the continued failure by the
Executive to attempt in good faith to perform his or her duties as reasonably assigned by the
Chief Executive Officer to the Executive for a period of 60 days after a written demand for
such performance which specifically identifies the manner in which it is alleged the Executive has
not attempted in good faith to perform such duties.
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“Code” means the Internal Revenue Code of 1986, as
amended from time to time.
“Change of Control” means any of the following
events:
(i) a merger or consolidation to which the Company is a party if
the individuals and entities
who were stockholders of the Company immediately prior to 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;
(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 shall not constitute a Change of Control;
(iii) 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 25% 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 if such acquisition is not approved by
the Board of Directors of the Company prior to any such acquisition; 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 shall not constitute a
Change of Control;
(iv) the sale of the properties and assets of the Company,
substantially as an entirety, to
any person or entity which is not a wholly-owned subsidiary of the Company;
(v) the liquidation of the Company; or
(vi) a change in the composition of the Board at any time during
any consecutive 24-month
period such that the “Continuity Directors” cease for any reason to constitute at least a 70%
majority of the Board. For purposes of this clause, “Continuity Directors” means those members of
the Board who either (A) were directors at the beginning of such consecutive 24-month period, or
(B) were elected by, or on the nomination or recommendation of, at least a two-thirds majority of
the then-existing Board of Directors.
“Date of Employment Termination” means (i) if
the Executive’s employment is terminated by the
Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is
terminated because of the Executive’s Disability, 30 days after Notice of Termination, provided
that the Executive shall not have returned to the performance of the Executive’s duties on a
full-time basis during such 30-day period; (iii) if the Executive’s
employment is terminated by the Company for Cause, the date immediately following the Notice
of Termination; (iv) if the Executive’s employment is terminated by the Company, 30 days after the
Notice of Termination; or (v) if the Executive voluntarily terminates his or her employment, the
date 21 days after the Notice of Termination. Nothing in this provision shall prevent the Company
from immediately removing the Executive from his or her position.
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“Date of Position Diminishment” means the effective
date of the Executive’s Position
Diminishment.
“Disability” means the Executive’s inability to
perform all of the Executive’s duties
hereunder by reason of illness, physical or mental disability or other similar incapacity, as
determined by the Chief Executive Officer in his or her sole discretion, which inability shall
continue for more than three consecutive months; provided, however, that the Executive does not
hereby waive any rights under the Americans with Disabilities Act or other applicable law.
“Leadership Change” means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to
be Chief Executive Officer of the
Company.
“Position Diminishment” means (i) a change in
the Executive’s reporting responsibilities,
titles, duties, or offices as in effect immediately prior to a Leadership Change or a Change of
Control (or, for purposes of Section 2.4, as in effect as of the date of this Agreement),
or any removal of Executive from, or any failure to re-elect Executive to, any of such positions,
that has the effect of materially diminishing Executive’s responsibility, duties, or authority,
(ii) a relocation of the Executive’s principal place of employment to a location more than 25 miles
from its then current location and that increases the distance from Executive’s primary residence
by more than 25 miles, or (iii) a material reduction in the Executive’s Annual Salary.
“Reference Compensation” means
[1.40][1.45][1.50][1.55] times the Executive’s Annual Salary
divided by twelve.
“Window Period” means the one-year period commencing
on the date of a Leadership Change or a
Change of Control. Furthermore, only the first Change of Control shall be counted in determining
whether there is a Window Period, and, as a result, while there could be more than one Window
Period (given the occurrence of a Leadership Change), there will not be multiple Window Periods
under this Agreement triggered by Changes of Control.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this
Agreement to be duly executed on their behalf, as of the day and year first herein above written.
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