def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
ARBITRON INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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previous filing by registration statement number, or the Form or Schedule and the date of its
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Dear Stockholder:
On behalf of the Board of Directors of Arbitron Inc., I am
pleased to invite you to attend the annual meeting of
stockholders. The meeting will be held at the Mandarin Oriental
Hotel, 80 Columbus Circle at 60th Street, Time Warner
Center, New York, New York 10023, on Tuesday, May 15, 2007,
at 9:00 AM local time.
The Notice of Annual Meeting of Stockholders and the proxy
statement that follow include information about the proposals
recommended by Arbitrons Board of Directors to
(i) elect seven (7) individuals to serve as directors
of Arbitron and (ii) approve an amendment to the
Companys 1999 Stock Incentive Plan.
Our Board of Directors believes that a favorable vote for each
of these proposals at the annual meeting is in the best
interests of Arbitron and its stockholders, and unanimously
recommends a vote FOR each of the proposals. Accordingly,
we urge you to review the accompanying materials carefully and
to promptly vote your shares.
It is important that your shares be represented at the meeting.
Please promptly vote your shares by following the instructions
on the enclosed proxy card to ensure that your vote is counted
at the meeting.
We look forward to seeing you at the meeting.
Sincerely,
Stephen B. Morris
President and Chief Executive Officer
May 15, 2007
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Date:
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Tuesday, May 15, 2007
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Time:
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9:00 AM local time
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Place:
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Mandarin Oriental Hotel, 80
Columbus Circle at 60th Street, Time Warner Center, New
York, New York 10023
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Purposes:
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1. To elect seven (7) members
of the Board of Directors to serve until the next annual meeting
and until their successors have been elected and qualified.
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2. To approve an amendment to
the Companys 1999 Stock Incentive Plan.
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3. To transact such other
business as may properly come before the meeting or any
adjournment or postponement thereof.
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Record Date:
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April 2, 2007
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Stockholders are entitled to one vote for each share of common
stock held of record on the record date listed above. The proxy
statement and the accompanying proxy card will be first mailed
to stockholders on or about April 18, 2007.
It is important that your shares be represented and voted at the
meeting. You can vote your shares by completing and returning
the enclosed proxy card. Most stockholders can also vote their
shares over the Internet or by telephone. If Internet or
telephone voting is available to you, voting instructions are
printed on the enclosed proxy card. You can revoke a proxy at
any time prior to its exercise at the meeting by following the
instructions in the accompanying proxy statement. We appreciate
your cooperation.
By Order of the Board of Directors
Timothy T. Smith
Executive Vice President and Chief Legal Officer,
Legal and Business Affairs, and Secretary
April 18, 2007
TABLE OF
CONTENTS
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ii
ARBITRON
INC.
142 West 57th Street
New York, New York 10019
April 18, 2007
We will begin mailing this proxy statement to our
stockholders on or about April 18, 2007.
We are furnishing this proxy statement to our stockholders in
connection with a solicitation of proxies by our Board of
Directors for use at our 2007 annual meeting of stockholders to
be held on Tuesday, May 15, 2007, at 9:00 AM local time at
the Mandarin Oriental Hotel, 80 Columbus Circle at
60th Street, Time Warner Center, New York, New York 10023.
Who Can
Vote
If you held any of our common stock at the close of business on
April 2, 2007, the record date for the annual meeting, you
are entitled to receive notice of and to vote at our 2007 annual
meeting. On that date, there were 29,926,654 shares of
common stock outstanding. Our common stock constitutes the only
class of securities entitled to vote at the meeting.
Stockholders who have not exchanged their Ceridian Corporation
common stock certificates for Arbitron Inc. common stock
certificates in connection with the spin-off of Ceridian
Corporation by Arbitron Inc. on March 30, 2001, will not be
eligible to vote at the meeting.
Who Can
Attend the Annual Meeting
All holders of our common stock at the close of business on
April 2, 2007, the record date for the annual meeting, or
their duly appointed proxies, are authorized to attend the 2007
annual meeting. If you attend the meeting, you may be asked to
present valid picture identification, such as a drivers
license or passport, before being admitted. Cameras, recording
devices and other electronic devices will not be permitted at
the meeting.
Please also note that if you hold your shares in street
name (that is, through a bank, broker or other nominee),
you will need to bring a copy of the brokerage statement
reflecting your stock ownership as of April 2, 2007, the
record date for the annual meeting.
Quorum
The presence of a majority of the outstanding shares of our
common stock entitled to vote, in person or by proxy, is
necessary to constitute a quorum and conduct business at the
2007 annual meeting. Abstentions and broker nonvotes
will be considered present at the meeting for purposes of
determining a quorum. A broker nonvote occurs when a bank or
broker holding common stock for a beneficial owner does not vote
on a particular matter because the bank or broker does not have
discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
Voting
Rights
Each share of our common stock that you hold entitles you to one
vote on all matters that come before the annual meeting.
Inspectors of election will count votes cast at the annual
meeting.
The affirmative vote of a plurality of all the votes cast at the
annual meeting, assuming a quorum is present, is necessary for
the election of a director. Therefore, the seven individuals
with the highest number of affirmative votes will be elected to
the seven directorships. Stockholders who do not wish their
shares to be voted for a particular nominee may indicate that in
the space provided on the proxy card or by following the
telephone or Internet instructions. For purposes of the election
of directors, abstentions and other shares not voted (whether by
broker nonvote or otherwise) will not be counted as votes cast
and will have no effect on the result of the vote.
The affirmative vote of a majority of the shares of common stock
present in person or by proxy and entitled to vote on the
proposal is necessary to approve the Plan Amendment. In
addition, for the Plan Amendment to be approved, the New York
Stock Exchange listing standards require that (i) the total
votes cast must represent over 50% of all of the outstanding
shares of common stock entitled to vote and (ii) votes in
favor must constitute at least a majority of the votes cast. For
purposes of this proposal to approve the Plan Amendment,
abstentions will count as votes cast, but broker nonvotes will
not count as votes cast. Therefore, abstentions have the effect
of a vote against the proposal, and broker nonvotes could,
depending on the number of votes cast, have the effect of a vote
against the proposal.
Voting by
Participants in Arbitron Benefit Plans
If you own Arbitron common stock as a participant in one or more
of our employee benefit plans, you will receive a single proxy
card that covers both the shares credited to your name in your
plan account(s) and shares you own that are registered in your
name. If any of your plan accounts are not in the same name as
your shares of record, you will receive separate proxy cards for
your record and plan holdings. Proxies submitted by plan
participants in our 401(k) plan will serve as voting
instructions to the trustees for the plan whether provided by
mail, telephone or the Internet. In the absence of voting
instructions from participants in the 401(k) plan, the trustees
of the plan will vote the undirected shares in the same
proportion as the directed shares.
Granting
Your Proxy
If you hold your shares in your own name as a holder of record,
you can simplify your voting by voting via the Internet or
calling the toll-free number listed on the enclosed proxy card.
If you vote via the Internet or by telephone, please do not
return a signed proxy card. If, instead, you choose to vote by
mail, please mark the proxy card enclosed with the proxy
statement, date and sign it, and mail it in the postage-paid
envelope. The shares represented will be voted according to your
directions. You can specify how you want your shares voted on
the proposal by marking the appropriate boxes on the proxy card.
Please review the voting instructions on the proxy card and read
the entire text of the proposal and the position of the Board of
Directors on such proposal in the proxy statement prior to
making your vote. If you properly execute and return a proxy in
the enclosed form, your stock will be voted as you specify. If
your proxy card is signed and returned without specifying a vote
on the election of directors, the proxy representing your common
stock will be voted in favor of the proposed director nominees
and the amendment of the 1999 Stock Incentive Plan.
If you hold your shares through a broker, bank or other nominee,
you will receive separate instructions from the nominee
describing the procedure for voting your shares.
Other
Business
No other matters are to be presented for action at the annual
meeting other than the items described in this proxy statement.
The enclosed proxy will, however, confer discretionary authority
with respect to any other matter that may properly come before
the meeting. The persons named in the enclosed proxy intend to
vote as recommended by the Board of Directors or, if no
recommendation is given, in accordance with their judgment on
any matters that may properly come before the meeting.
Confidential
Voting
It is our policy that the individual stockholder votes are kept
confidential prior to the final tabulation of the vote at our
stockholders meeting if the stockholder requests confidential
treatment. The only exceptions to this policy involve applicable
legal requirements and proxy solicitations in opposition to the
Board. Access to proxies and individual stockholder voting
records is limited to the independent election inspectors (The
Bank of New York), who may inform us at any time whether or not
a particular stockholder has voted.
2
Revoking
Your Proxy
If you submit a proxy, you can revoke it at any time before it
is exercised by giving written notice to our Corporate Secretary
prior to the annual meeting or by timely delivery of a properly
exercised, later-dated proxy (including an Internet or telephone
vote). You may also attend the annual meeting in person and vote
by ballot, which would cancel any proxy that you previously
submitted.
You should rely only on the information provided in this
proxy statement. We have not authorized anyone to provide you
with different or additional information. You should not assume
that the information in this proxy statement is accurate as of
any date other than the date of this proxy statement or, where
information relates to another date set forth in this proxy
statement, then as of that date.
3
ELECTION
OF DIRECTORS
(Proposal 1)
Our business is managed under the direction of the Board of
Directors, which is currently composed of eight directors. On
July 18, 2006, Erica Farber, a director of Arbitron since
March 31, 2001, resigned from the Board of Directors. The
current terms of office of all of our directors expire at the
2007 annual meeting. Lawrence Perlman, the current Chairman of
the Board and a director of Arbitron since March 31, 2001,
informed the Board of Directors on September 20, 2006, that
he did not intend to stand for reelection when his term expired
in 2007. Alan W. Aldworth, a director of Arbitron since
May 14, 2004, informed the Board of Directors on
February 21, 2007, that he did not intend to stand for
reelection when his term expired in 2007. Neither
Ms. Farbers resignation nor Mr. Perlmans
or Mr. Aldworths decision not to stand for reelection
was the result of any disagreement with the Company related to
its operations, policies or practices. Our Board of Directors
has renominated each of the other six directors currently
serving on the Board to serve as directors for a one-year term
until the 2008 annual meeting of stockholders. The Board of
Directors has also nominated William T. Kerr for election to the
Board of Directors to serve for a one-year term until the 2008
annual meeting of stockholders. Each of the nominees has
consented to serve if elected.
The Board of Directors recommends a vote FOR and
solicits proxies in favor of each of the nominees named
below. Proxies cannot be voted for more than seven people.
Our Board has no reason to believe that any of the nominees for
director will be unable or unavailable to serve. However, if any
nominee should for any reason become unable or unavailable to
serve, proxies will be voted for another nominee selected by the
Board. Alternatively, proxies, at our Boards discretion,
may be voted for a fewer number of nominees as results from a
directors inability or unavailability to serve. Each
person elected will hold office until the 2008 annual meeting of
stockholders and until his or her successor is duly elected and
qualified, or until earlier resignation or removal.
The following is biographical information concerning the seven
nominees for election as directors of Arbitron:
Nominees
for Election of Directors
Shellye L. Archambeau, age 44
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Director of Arbitron since November 15, 2005
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Chief Executive Officer of MetricStream, Inc. (formerly Zaplet,
Inc.), a provider of enterprise software that allows
corporations in diverse industries to manage quality processes,
regulatory and industry-mandated compliance activities and
corporate governance initiatives, since 2002
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Chief Marketing Officer and Executive Vice President of Sales of
Loudcloud, Inc. (now Opsware Inc.), a leader in Internet
infrastructure services, from 2001 to 2002
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Chief Marketing Officer of NorthPoint Communications, which
provides local data network services and delivers affordable,
dedicated high-speed Internet access, streaming content and
other value-added services to consumers and businesses around
the world, from 2000 to 2001
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Member of the Information Technology Senior Management Forum;
the Forum of Women Entrepreneurs; and the Womens Council
to the Board of Trustees for the University of Pennsylvania
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Philip Guarascio, age 65
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Director of Arbitron since March 30, 2001
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Chairman and Chief Executive Officer of PG Ventures LLC, a
marketing consulting firm, since May 2000
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Vice President, General Manager of General Motors
Corporations North America Advertising and Corporate
Marketing, from July 1994 to May 2000
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A marketing adviser for the National Football League since
November 2000; a consultant to IPG since November 2000; and a
consultant to William Morris Talent Agency since January 2001
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A director of AdSpace, an Internet company that provides
advertising space for a variety of advertising venues; a
director of IAG Research, a provider of viewer engagement
measurements that measure the effectiveness of television
advertising, product placement and cinema advertising; a
director of Papa Johns International Inc., the
third-largest pizza company in America; and a director of the
American Film Institute, a nonprofit educational and archival
organization for advancing and preserving the moving image
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William T. Kerr, age 66
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Chairman of the Board of Directors of Meredith Corporation, a
New York Stock Exchange listed diversified media company that
publishes magazines, special interest publications and books,
since July 2006, and a member of the Meredith Corporation Board
of Directors, since 1994
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Chairman and Chief Executive Officer of Meredith Corporation
from January 1, 1997 until July 1, 2006
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President and Chief Executive Officer of Meredith Corporation,
from 1997 to 1998, President and Chief Operating Officer of
Meredith Corporation, from 1994 to 1996, President, Magazine
Group and Executive Vice President of Meredith, from 1991 to 1994
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President, Magazine Group and Vice President of the New York
Times Company, a media company, from 1984 to 1991
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A member of the Boards of Directors of The Interpublic Group of
Companies, Inc., a New York Stock Exchange listed marketing
communications and marketing services company, since November
2006; Whirlpool Corporation, a New York Stock Exchange listed
appliance manufacturer, since June 2006; The Principal Financial
Group, Inc., a New York Stock Exchange listed financial services
company, since 2001; and a member of the Executive Board of
MidOcean Partners, LLP, a private equity firm
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A Trustee of Oxford University Press, Inc., a member of the
Board of Harvard Business School Publishing, Immediate-past
Chairman and a Board member of The International Federation of
the Periodical Press, a member of the Board of The Business
Community for the Arts, Inc., and a past Chairman and Advisory
Board Member of the Magazine Publishers of America
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Larry E. Kittelberger, age 58
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Director of Arbitron since March 30, 2001
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Senior Vice President, Technology and Operations of Honeywell
International, Inc., a publicly traded diversified technology
and manufacturing company, since September 2006
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Senior Vice President, Administration, and Chief Information
Officer of Honeywell International Inc., from August 2001 to
September 2006
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Senior Vice President and Chief Information Officer of Lucent
Technologies Inc., a systems, services and software company,
from December 1999 to August 2001
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Senior Vice President and Chief Information Officer of Allied
Signal, Inc., an advanced technology and manufacturing firm,
from 1995 to December 1999
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Until its acquisition by affiliates of Texas Pacific Group on
December 19, 2006, a director and member of the Nominating
and Compensation Committees of Aleris International, Inc.
(formerly Commonwealth Industries, Inc.), a publicly traded
recycler of aluminum and zinc and manufacturer of aluminum sheet
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Stephen B. Morris, age 63
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Director of Arbitron, since March 30, 2001
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President and Chief Executive Officer of Arbitron since
March 30, 2001
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Executive Vice President of Ceridian Corporation and President
of Ceridian Corporations Arbitron division, from January
1996 to March 29, 2001
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Vice President of Ceridian Corporation and President of Ceridian
Corporations Arbitron division, from December 1992 to
January 1996
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A director of the John B. Stetson Company, a privately held
company and the licensor of the Stetson trademark; a director of
The Advertising Research Foundation, a
not-for-profit
professional organization for advertising, marketing and media
research; a director of the New York Theatre Workshop, a
not-for-profit
off-Broadway theatre; and a director of the Parsons Dance
Company, a
not-for-profit
dance company located in New York City
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Luis G. Nogales, age 63
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Director of Arbitron since March 30, 2001
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Managing Partner, Nogales Investors LLC, a private equity
investment firm, since 1989
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Chairman and Chief Executive Officer of Embarcadero Media, Inc.,
a private company that owned and operated radio stations
throughout California and Oregon, from 1992 to 1997
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A director and member of the Audit Committee of KB Home, one of
Americas largest homebuilders; a director and member of
the Audit Committee of Edison International, a publicly traded
international electric power generator, distributor and
structured finance provider; and a director of
Kaufman & Broad, SA, France, a private home and office
development company
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Richard A. Post, age 48
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Director of Arbitron since March 30, 2001
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Advisor to the Chief Executive Officer of Autobytel Inc., a
publicly traded Internet automotive marketing services company,
since March 2006
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President and Chief Executive Officer of Autobytel, from April
2005 to March 2006
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Private investor, from January 2003 to April 2005
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Managing Partner of LoneTree Capital Partners, a venture capital
firm, from July 2000 to December 2002
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Executive Vice President and Chief Financial Officer of MediaOne
Group, Inc., a broadband and wireless communications company,
and President of MediaOne Capital Corp., a subsidiary of
MediaOne Group, Inc., from June 1998 to July 2000
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Chief Financial Officer of U S WEST Media, a
communications company, from December 1996 to June 1998
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President, Corporate Development of U S WEST, Inc.,
from June 1996 to December 1996
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Vice President, Corporate Development of U S WEST
Media, from January 1996 to June 1996
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President, U S WEST Capital Assets, from July 1993 to
June 1998
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A director of Autobytel Inc., from 1999 to June 2006; a director
of Seeds of Hope Charitable Trust, a nonprofit organization from
2002 to September 2006; and a director of Financial Security
Assurance Holdings Ltd., from 1994 to 2000
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6
Recommendation
of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES SET FORTH ABOVE.
Independence
of Directors
Under the listing standards of the New York Stock Exchange, and
pursuant to our corporate governance policies and guidelines, we
are required to have a majority of independent
directors and a nominating/corporate governance committee,
compensation committee and audit committee, each composed solely
of independent directors. In determining director independence,
the Board broadly considers all relevant facts and
circumstances, including the rules of the New York Stock
Exchange. The Board considers the issue not merely from the
standpoint of a director, but also from that of persons or
organizations with which the director has an affiliation. An
independent director is free of any relationship with Arbitron
or its management that may impair the directors ability to
make independent judgments.
The Board of Directors has evaluated the status of each director
and affirmatively determined that Ms. Archambeau and
Messrs. Guarascio, Kittelberger, Nogales, Perlman, and Post
are independent. Mr. Morris is not independent because he
is an employee of the Company and Mr. Aldworth is not
independent because his son is employed by the Companys
registered public accounting firm. Each current member of the
Compensation and Human Resources Committee, the Nominating
Committee and the Audit Committee is independent. The Board of
Directors has also evaluated the status of Mr. Kerr, a
nominee for election as a director, and affirmatively determined
that Mr. Kerr is independent. Ms. Farber served on the
Board of Directors and its Compensation and Human Resources
Committee and Nominating Committee during 2006, prior to her
resignation from the Board of Directors in July. Prior to her
resignation, the Board had affirmatively determined that
Ms. Farber was independent.
In evaluating the independence of Mr. Nogales, the Board of
Directors considered the fact that Mr. Nogales is the
managing partner of a general partnership that has a 2%
ownership interest in an investment fund that has a 96%
ownership interest in two radio stations that have entered into
five-year radio ratings contracts with the Company substantially
in the form and upon substantially the terms and conditions of
the Companys standard radio ratings contract with third
parties. The average annual fees payable to the Company under
this agreement are equal to approximately $156,000. The Board of
Directors, with Mr. Nogales and Mr. Morris not
participating, had previously reviewed and approved the terms of
this transaction. Following its review of this relationship, the
Board of Directors affirmatively determined that
Mr. Nogales is independent.
Corporate
Governance Policies and Guidelines and Codes of Ethics
Corporate Governance Policies and
Guidelines. We have adopted corporate governance
policies and guidelines, which serve as principles for the
conduct of the Board of Directors. The corporate governance
policies and guidelines, which meet the requirements of the New
York Stock Exchange listing standards, address a number of
topics, including, among other things, director qualification
standards, director responsibilities, the responsibilities and
composition of the Board committees, director access to
management and independent advisers, director compensation,
management succession and evaluations of the performance of the
Board.
Codes of Ethics. We have adopted a Code of
Ethics and Conduct, which applies to all of our employees,
officers and directors, and meets the requirements for such code
as set forth in the New York Stock Exchange listing standards.
We have also adopted a Code of Ethics for the Chief Executive
Officer and Financial Managers, which applies to our Chief
Executive Officer, Chief Financial Officer and all managers in
the financial organization of Arbitron, and meets the
requirements of a code of ethics as defined by the
rules and regulations of the Securities and Exchange Commission
(the SEC).
Where You Can Find These Documents. Our
corporate governance policies and guidelines, Code of Ethics and
Conduct and Code of Ethics for the Chief Executive Officer and
Financial Managers are available
7
on our Web site at www.arbitron.com, and are also available in
print to any stockholder who sends a written request to the
Treasury Manager at Arbitron Inc., 9705 Patuxent Woods Drive,
Columbia, Maryland 21046.
Executive
Sessions of Nonmanagement Directors
Consistent with the New York Stock Exchange listing standards,
our corporate governance policies and guidelines provide that,
in order to promote open discussion among nonmanagement
directors, the Board of Directors will devote a portion of each
regularly scheduled Board meeting to executive sessions without
management participation. Lawrence Perlman, the Chairman of our
Board of Directors, presided at such executive sessions during
2006. Following the 2007 annual meeting, the Board of Directors
will elect a new chair from among its duly elected members. If
the person elected to serve as chair is not independent, as
defined in the New York Stock Exchange listing standards, the
Board of Directors will also elect a lead independent director
to preside at executive sessions of nonmanagement directors. Our
corporate governance policies and guidelines provide that if the
group of nonmanagement directors includes directors who are not
independent, as defined in the New York Stock Exchange listing
standards, it is the Companys policy that at least one
such executive session convened per year shall include only
independent directors.
Communicating
with the Board of Directors
Interested third parties may communicate with the Board of
Directors by communicating directly with the Chairman of the
Board of Directors or, if the person then serving as the chair
is not independent as defined in the New York Stock Exchange
listing standards, the lead independent director, by
e-mailing
correspondence directly to the Chairman or the lead independent
director, as applicable, at nonmanagementdirectors@arbitron.com.
The Chairman or the lead independent director, as applicable,
will decide what action should be taken with respect to the
communication, including whether such communication will be
reported to the Board of Directors.
Meetings
of the Board of Directors
The Board of Directors held seven meetings in 2006, including
meetings by telephone conference. Each director attended at
least 75% of the meetings of the Board of Directors and
applicable committees on which they served during the period
that they served on the Board of Directors or such committees.
In addition, pursuant to our corporate governance policies and
guidelines, directors are expected to attend the annual meetings
of stockholders. Last year, all of our then current directors
attended the annual meeting of stockholders.
Committees
of the Board of Directors
The Board of Directors maintains the following six standing
committees:
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Executive
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Audit
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Compensation and Human Resources
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Nominating
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Corporate Governance
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Technology Strategy
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Membership on the Audit Committee, the Compensation and Human
Resources Committee, the Nominating Committee and the Corporate
Governance Committee is limited to directors who are
independent of Arbitron, as that term is defined in
the New York Stock Exchange listing standards and as
affirmatively determined by the Board of Directors.
8
Executive
Committee
The following directors currently serve on the Executive
Committee:
Lawrence Perlman, Chair
Alan W. Aldworth
Stephen B. Morris
The Executive Committee acts on matters that arise between Board
meetings and require immediate action. All actions taken by this
committee will be reported to, and ratified by, the Board of
Directors. The Executive Committee did not meet in 2006.
Audit
Committee
The following directors currently serve on the Audit Committee:
Richard A. Post, Chair
Shellye L. Archambeau
Larry E. Kittelberger
As required by the charter of the Audit Committee, our corporate
governance guidelines, and the New York Stock Exchange
listing standards, all members of the Audit Committee qualify as
independent directors within the meaning of the New
York Stock Exchange listing standards and
Rule 10A-3
under the Securities and Exchange Act of 1934, as amended, are
financially literate within the meaning of the New York Stock
Exchange listing standards and meet the experience and financial
expertise requirements of the New York Stock Exchange
listing standards. The Board of Directors has determined that
Richard A. Post is an audit committee financial
expert as defined by the rules and regulations of the
Securities and Exchange Commission. The principal purposes of
the Audit Committee are to:
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assist the Board of Directors in the oversight of:
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the integrity of Arbitrons financial statements;
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Arbitrons compliance with legal and regulatory
requirements;
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the qualification and independence of Arbitrons
independent auditors; and
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the performance of Arbitrons internal audit function and
independent auditors; and
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prepare an audit committee report as required by the Securities
and Exchange Commission to be included in the annual proxy
statement.
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The Board of Directors has adopted an amended and restated
written charter for the Audit Committee effective as of
February 27, 2007. Nothing contained herein modifies the
Audit Committee charter. A copy of the Audit Committees
charter is available on our Web site at www.arbitron.com and is
available in print, free of charge, to any stockholder who
requests it. You can obtain such a copy in print by contacting
the Treasury Manager at Arbitron Inc., 9705 Patuxent Woods
Drive, Columbia, Maryland 21046. The Audit Committee held 15
meetings in 2006, including meetings by telephone conference.
Compensation
and Human Resources Committee
The following directors currently serve on the Compensation and
Human Resources Committee:
Philip Guarascio, Chair
Luis G. Nogales
Lawrence Perlman
9
Each member of the Compensation and Human Resources Committee
qualifies as an independent director under the New
York Stock Exchange listing standards. The principal
responsibilities of the Compensation and Human Resources
Committee are to:
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review and approve Arbitrons corporate goals and
objectives with respect to the compensation of the Board of
Directors, Chief Executive Officer, and executive officers other
than the Chief Executive Officer, evaluate the Chief Executive
Officers performance in light of those goals and
objectives, and, either as a committee or together with the
other independent directors (as directed by the Board of
Directors), determine and approve the appropriate level and
structure of the Chief Executive Officers compensation
based on this evaluation;
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determine and approve non-CEO executive compensation and
incentive and equity-based compensation plans;
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produce a compensation committee report for inclusion in the
Companys annual meeting proxy statement as required by the
Securities and Exchange Commission;
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review and approve for inclusion in the Companys annual
meeting proxy statement or Annual Report on
Form 10-K,
as the case may be, the Compensation Discussion and
Analysis section relating to executive compensation as
required by the Securities and Exchange Commission; and
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review and approve nonemployee director compensation.
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The Committee has retained the firm of Frederic W.
Cook & Co., Inc. as its compensation consultant to
assist in the continual development and evaluation of
compensation policies and the Compensation and Human Resources
Committees determinations of compensation awards. The role
of Frederic W. Cook & Co., Inc. is to provide
independent, third-party advice and expertise in executive
compensation issues.
The Board of Directors has adopted an amended and restated
charter for the Compensation and Human Resources Committee
effective as of February 20, 2007. Nothing contained herein
modifies the Compensation and Human Resources Committee charter.
A copy of the Compensation and Human Resources Committees
charter is available on our Web site at www.arbitron.com and is
available in print, free of charge, to any stockholder who
requests it. You can obtain such a copy in print by contacting
the Treasury Manager at Arbitron Inc., 9705 Patuxent Woods
Drive, Columbia, Maryland 21046. The Compensation and Human
Resources Committee held four meetings in 2006 including one
executive session without representatives of management.
Nominating
Committee
The following directors currently serve on the Nominating
Committee:
Philip Guarascio, Chair
Larry E. Kittelberger
Richard A. Post
Each member of the Nominating Committee qualifies as an
independent director under the New York Stock
Exchange listing standards. The principal purposes of the
Nominating Committee are to:
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identify, in accordance with policies and procedures adopted by
the Nominating Committee from time to time, individuals who are
qualified to serve as directors; and
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recommend such individuals to the Board of Directors, either to
fill vacancies that occur on the Board from time to time or in
connection with the selection of director nominees for each
annual meeting of stockholders.
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The Nominating Committee has approved, and the Board of
Directors has adopted, policies and procedures to be used for
considering potential director candidates to continue to ensure
that our Board of Directors consists of a diversified group of
qualified individuals who function effectively as a group. These
policies and procedures provide that qualifications and
credentials for consideration as a director nominee may vary
according to the particular areas of expertise being sought as a
complement to the existing composition
10
of the Board of Directors. However, at a minimum, candidates for
director must possess: (1) strength of character;
(2) an ability to exercise independent thought, practical
wisdom and mature judgment; (3) an ability to make
independent analytical inquiries; (4) a willingness and
ability to devote adequate time and resources to diligently
perform Board of Director duties; and (5) a reputation,
both personal and professional, consistent with the image and
reputation of Arbitron. In addition to the aforementioned
minimum qualifications, the Nominating Committee also believes
that there are other factors that, while not prerequisites for
nomination, should be taken into account when considering
whether to recommend a particular person. These factors include:
(1) whether the person possesses specific media and
marketing expertise and familiarity with general issues
affecting Arbitrons business; (2) whether the
persons nomination and election would enable the Board of
Directors to have a member that qualifies as an audit
committee financial expert as such term is defined by the
Securities and Exchange Commission; (3) whether the person
would qualify as an independent director under the
New York Stock Exchange listing standards and the Companys
corporate governance policies and guidelines; (4) the
importance of continuity of the existing composition of the
Board of Directors; and (5) the importance of a diversified
Board membership, in terms of both the individuals involved and
their various experiences and areas of expertise. The Nominating
Committee retains a third-party executive search firm to
identify and review candidates upon request of the Nominating
Committee from time to time.
The Nominating Committee seeks to identify director candidates
based on input provided by a number of sources, including
(i) Nominating Committee members, (ii) other directors
of the Company, and (iii) stockholders of the Company. The
Nominating Committee also has the authority to consult with or
retain advisers or search firms to assist in the identification
of qualified director candidates.
As part of the identification process, the Nominating Committee
takes into account the number of expected director vacancies and
whether existing directors have indicated a willingness to
continue to serve as directors if renominated. Once a director
candidate has been identified, the Nominating Committee then
evaluates this candidate in light of his or her qualifications
and credentials, and any additional factors that it deems
necessary or appropriate. Existing directors who are being
considered for renomination will be reevaluated as part of the
Nominating Committees process of recommending director
candidates.
The Nominating Committee considers candidates recommended by
stockholders in the same manner as all other director
candidates. Stockholders who wish to suggest qualified
candidates must comply with the advance notice provisions and
other requirements of Article II, Section 13 of our
bylaws. These notice provisions require that recommendations for
directors must be received not less than 90 days nor more
than 120 days prior to the date of the annual meeting of
stockholders for the preceding year. The notice must follow the
guidelines set forth in this proxy statement under the heading,
Other Matters Director
Nominations.
After completing the identification and evaluation process
described above, the Nominating Committee recommends to the
Board of Directors the nomination of a number of candidates
equal to the number of director vacancies that will exist at the
annual meeting of stockholders. The Board of Directors then
selects director nominees for stockholders to consider and vote
upon at the stockholders meeting.
The Board of Directors has adopted an amended and restated
written charter for the Nominating Committee, a copy of which is
available on our Web site at www.arbitron.com and is available
in print, free of charge, to any stockholder who requests it.
You can obtain a copy in print by contacting the Treasury
Manager at Arbitron Inc., 9705 Patuxent Woods Drive, Columbia,
Maryland 21046. The Nominating Committee met three times in 2006.
Corporate
Governance Committee
The following directors currently serve on the Corporate
Governance Committee:
Lawrence Perlman, Chair
Shellye L. Archambeau
Philip Guarascio
Larry E. Kittelberger
Luis G. Nogales
Richard A. Post
11
Each member of the Corporate Governance Committee qualifies as
an independent director under the New York Stock
Exchange listing standards. The principal purposes of the
Corporate Governance Committee are to:
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develop, recommend, implement and monitor a set of corporate
governance guidelines, a code of business conduct and ethics,
and a code of ethics for senior financial officers adopted by
the Board of Directors;
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oversee the evaluation of the Board of Directors and
management; and
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ensure that Arbitron is in compliance with all New York Stock
Exchange listing requirements.
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The Board of Directors has adopted an amended and restated
written charter for the Corporate Governance Committee, a copy
of which is available on our Web site at www.arbitron.com and is
available in print, free of charge, to any stockholder who
requests it. You can obtain a copy in print by contacting the
Treasury Manager at Arbitron Inc., 9705 Patuxent Woods Drive,
Columbia, Maryland 21046. The Corporate Governance Committee did
not meet in 2006.
Technology
Strategy Committee
The following directors serve on the Technology Strategy
Committee:
Larry E. Kittelberger, Chair
Shellye L. Archambeau
Stephen B. Morris
Luis G. Nogales
Richard A. Post
The principal purposes of the Technology Strategy Committee are
to:
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review risks, opportunities and priorities as they pertain to
Arbitrons existing technology and strategies for the
future;
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assess the Companys capabilities to execute against its
agreed priorities; and
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make recommendations, as appropriate, to the Chief Executive
Officer and the Board of Directors.
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The Technology Strategy Committee held four meetings in 2006.
2006 Director
Compensation
The table below provides information concerning the compensation
of the directors for our most recently completed fiscal year.
Except as noted below, all of our directors are paid at the same
rate. The differences among directors in the table below are a
function of additional compensation for chairing a committee,
varying numbers of meetings attended and corresponding payments
of meeting fees, and the form in which each director elects to
receive retainer fees. In accordance with SEC regulations,
share-based compensation is valued at the grant date fair value
computed in accordance with Statement of Financial Accounting
Standards No. 123 (Revised), Share-Based
Payment (SFAS No. 123(R)). We
disclose such expense ratably over the vesting period. We
include in the table below the ratable portion of grants made
both in the current and in prior years to the extent the vesting
period for those grants occurred in such year.
Each director who is not also an employee of Arbitron or its
subsidiaries is entitled to receive an annual retainer fee of
$30,000, which is paid in quarterly installments. The
nonemployee chair of the Audit Committee is entitled to receive
a supplemental annual cash payment of $10,000; nonemployee
chairs of the Compensation and Human Resources Committee, the
Nominating Committee and the Technology Strategy Committee are
entitled to receive a supplemental annual cash payment of
$7,500. For each Board meeting attended, in person or by
telephone, participating nonemployee directors are entitled to
receive $1,500. For each committee meeting attended in person,
participating nonemployee directors are entitled to receive
$1,500. For each committee meeting attended by telephone,
participating nonemployee directors are entitled to receive
12
$750. The nonemployee Chairman of the Board of Directors
receives an annual cash payment of $135,000 in addition to the
annual retainer fee.
Each newly elected nonemployee director receives a one-time
grant of an option to purchase 15,000 shares of Arbitron
common stock. These options will vest and become exercisable in
three equal installments of 5,000 shares over a three-year
period and expire 10 years from the date of grant.
Beginning the year after initial election to the Board of
Directors, each nonemployee director also receives an annual
grant of an option to purchase 7,000 shares of Arbitron
common stock on the date of the annual meeting of stockholders.
The exercise price per share of each option granted is equal to
100% of the fair market value of the underlying Arbitron common
stock on the date the option is granted, which is equal to the
closing price of the Companys common stock on such date.
The annual grant of options are fully vested on the date of
grant, become exercisable in full six months after their date of
grant and expire 10 years from the date of grant.
The Company previously adopted a Nonemployee Director Incentive
Program, as a component of its 1999 Stock Incentive Plan, which
permits nonemployee directors to receive, at their discretion,
either stock options or deferred stock units (DSUs)
in lieu of their annual cash retainers and meeting fees. A DSU
provides for the delivery of a share of Arbtirons common
stock at a future date elected by the participant. In the event
that a director elects to receive DSUs, such director will
receive dividend equivalent rights on such DSUs to the extent
dividends are issued on common stock. A director who elects to
receive options receives a number of options based on a
calculation approved by the Board of Directors. The formula for
determining the number of option shares is to divide the cash
fees earned in the quarter by the closing price of Arbitron
common stock on the date of the grant, which is the last trading
day of the quarter. This amount is then multiplied by four to
arrive at the number of option shares granted. A director who
elects to receive DSUs receives a number of units based on a
calculation approved by the Board of Directors. The formula for
determining the number of DSUs is to multiply the cash fees
earned in the quarter by 120% and divide the result by the
closing price of Arbitron common stock on the date of the grant,
which is the last trading day of the quarter. The amounts set
forth in the table below for each director in the column
Fees Earned or Paid in Cash represent the cash
payment of annual retainers and fees or, if the director elected
to receive equity-based compensation in lieu of all or a portion
of such retainers and fees, the amount of cash the director
would have received if the director had not elected to receive
such equity-based compensation. If the director elected to
receive equity-based compensation in lieu of annual cash
retainers and fees, we report in the columns Stock
Awards and Option Awards, as applicable, the
dollar amount recognized for financial statement reporting
purposes with respect to 2006 in accordance with
SFAS No. 123(R) of the aggregate incremental value of
(1) equity-based compensation received in lieu of annual
cash retainers and fees in excess of (2) the cash such
director would have received if the director had not elected to
receive equity-based compensation.
It is also the philosophy of the Company that directors have a
meaningful equity ownership in the Company. In 2004, the Board
established ownership guidelines concerning director stock
ownership. The guidelines are for each director to own shares
with a value of four times the annual retainer paid to that
director. These guidelines are expected to be achieved over five
years and include all owned shares, as well as DSUs owned by the
directors under the Companys Director Deferred
Compensation Plan, but outstanding and unexercised stock options
are not counted.
Mr. Morris is also an employee of Arbitron and is not
separately compensated for his service as a director.
13
2006
Director Compensation
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Fees Earned or
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Paid in
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Option
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All Other
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Cash
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Stock Awards
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Awards
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Compensation
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Total
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Name
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($)(1)
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($)(2)
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($)(3)(4)
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($)(5)
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($)
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Alan W. Aldworth
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52,500
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5,989
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126,754
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(6)
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506
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185,749
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Shellye L. Archambeau
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55,500
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211,863
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(6)
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267,363
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Erica Farber(7)
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26,605
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4,147
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92,420
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1,357
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124,529
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Philip Guarascio
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57,375
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11,495
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92,420
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1,451
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162,741
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Larry E. Kittelberger
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66,000
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13,206
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92,420
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1,833
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173,459
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Luis G. Nogales
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48,000
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5,989
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92,420
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506
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146,915
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Lawrence Perlman
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175,500
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92,420
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267,920
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Richard A. Post
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72,250
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3,994
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98,584
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338
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175,166
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(1) |
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We report in this column the cash value of board retainer fees,
committee chair fees, and board and committee meeting fees
earned by each director in 2006. Pursuant to the terms of our
Nonemployee Director Incentive Program described above, each
director may elect to receive either stock options or DSUs, or a
combination, in lieu of annual cash retainers and fees. If a
director elects to receive equity-based compensation in lieu of
annual cash retainers and fees, the aggregate incremental value
of such equity-based compensation in excess of the cash such
director would have received is reported in the Stock Awards or
Option Awards columns of this table, as applicable.
Mr. Aldworth elected to receive 951 DSUs in lieu of board
retainer fees and $22,500 in cash for board and committee
meeting fees. Ms. Archambeau elected to receive all
retainers and fees in cash. Ms. Farber elected to receive
549 DSUs in lieu of board retainer fees, 138 DSUs in lieu of
committee chair fees, and $6,000 in cash for board and committee
meeting fees. Mr. Guarascio elected to receive 951 DSUs in
lieu of board retainer fees, 291 DSUs in lieu of committee chair
fees, 280 DSUs in lieu of board meeting fees, and 280 DSUs in
lieu of committee meeting fees. Mr. Kittelberger elected to
receive 951 DSUs in lieu of board retainer fees, 239 DSUs in
lieu of committee chair fees, 232 DSUs in lieu of board meeting
fees, and 662 DSUs in lieu of committee meeting fees.
Mr. Nogales elected to receive 951 DSUs in lieu of board
retainer fees and $18,000 in cash as board and committee meeting
fees. Mr. Perlman received as Chairman of the Board a
$135,000 annual cash payment and elected to receive all board
retainer fees and board and committee meeting fees in cash.
Mr. Post elected to receive an aggregate of 476 DSUs and
options to purchase 1,584 shares of common stock in lieu of
board retainer fees, an aggregate of 158 DSUs and options to
purchase 529 shares of common stock in lieu of committee
chair fees, and $32,250 in cash as board and committee meeting
fees. |
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(2) |
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Pursuant to the terms of our Nonemployee Director Incentive
Program, directors may elect to receive DSUs in lieu of annual
cash board retainer fees, committee chair fees, and board and
committee meeting fees. We report in this column the dollar
amount recognized for financial statement reporting purposes
with respect to 2006 in accordance with
SFAS No. 123(R) of the aggregate incremental value of
(A) DSUs received by directors lieu of annual cash
retainers and fees in excess of (B) the cash such director
would have received if the director had not elected to receive
DSUs. |
|
(3) |
|
We report in this column the ratable portion of the value of
grants made in 2006 and prior years, calculated in accordance
with SFAS No. 123(R), to the extent the vesting period
occurred in 2006. Please refer to note 15 of our notes to
financial statements for a discussion of the assumptions related
to the calculation of such value. On May 24, 2006, each
director received an annual grant of options to purchase
7,000 shares of our common stock. These options have an
exercise price equal to $39.87 per share, are fully vested
on the date of grant, and become exercisable six months after
the date of grant. Pursuant to the terms of our Nonemployee
Director Incentive Program, directors may elect to receive stock
options in lieu of annual cash board retainer fees, committee
chair fees, and board and committee meeting fees. For
Mr. Post only, this amount includes the aggregate dollar
amount recognized for financial statement reporting purposes
with respect to 2006 in accordance with
SFAS No. 123(R) of the aggregate incremental value of
(A) stock |
14
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|
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options received by Mr. Post in lieu of annual cash
retainers and fees in excess of (B) the cash Mr. Post
would have received had he not elected to receive stock options. |
|
(4) |
|
As of December 31, 2006, the aggregate number of
unexercised options (vested and unvested) held by each director
was as follows: Mr. Aldworth 29,000,
Ms. Archambeau 22,000,
Ms. Farber 62,150,
Mr. Guarascio 51,386,
Mr. Kittelberger 61,366,
Mr. Nogales 66,891,
Mr. Perlman 73,699, and
Mr. Post 79,468. As of December 31, 2006,
the aggregate number of DSUs held by each director was as
follows: Mr. Aldworth 1,850,
Ms. Archambeau 0, Ms. Farber
3,696, Mr. Guarascio 4,813,
Mr. Kittelberger 5,906,
Mr. Nogales 1,850, Mr. Perlman
0, and Mr. Post 1,234. We provide complete
beneficial ownership information of Arbitron stock for each of
our directors in this proxy statement under the heading,
Stock Ownership Information
Stock Ownership of Arbitrons Directors and Executive
Officers. |
|
(5) |
|
Amounts reported in this column represent dividend equivalent
units received in respect of DSUs held by each director. In
2006, Mr. Aldworth received approximately 13 dividend
equivalent units, Ms. Farber received approximately 35
dividend equivalent units, Mr. Guarascio received
approximately 38 dividend equivalent units,
Mr. Kittelberger received approximately 47 dividend
equivalent units, Mr. Nogales received approximately 13
dividend equivalent units, and Mr. Post received
approximately 9 dividend equivalent units. |
|
(6) |
|
Pursuant to SFAS No. 123(R), expense is recognized
over a three-year vesting period for each directors
initial grant of options to purchase 15,000 shares of
common stock. Mr. Aldworth received his initial grant on
May 17, 2004, and Ms. Archambeau received her initial
grant on November 15, 2005. |
|
(7) |
|
Ms. Farber resigned from the Board of Directors on
July 18, 2006. |
EXECUTIVE
COMPENSATION AND OTHER INFORMATION
Unless the context requires otherwise, in this Executive
Compensation and Other Information section, including the
Compensation Discussion and Analysis and the tables which follow
it, references to we, us,
our, its or similar terms are to
Arbitron Inc. and its subsidiaries.
Executive
Officers
Information concerning the persons who currently serve as
Arbitrons executive officers is provided below. Each of
the named persons has been elected to the office indicated
opposite the persons name. The executive officers serve at
the discretion of the Board of Directors. Officers generally are
elected at the annual meeting of directors held immediately
following the annual meeting of stockholders. The Board of
Directors may elect additional executive officers from time to
time.
Stephen
B. Morris, age 63, President and Chief Executive Officer
since March 30, 2001
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Director of Arbitron since March 30, 2001
|
|
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Executive Vice President of Ceridian Corporation and President
of Ceridian Corporations Arbitron division, from January
1996 to March 29, 2001
|
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Vice President of Ceridian Corporation and President of Ceridian
Corporations Arbitron division, from December 1992 to
January 1996
|
Pierre
C. Bouvard, age 45, President of Sales and Marketing since
December 21, 2005
|
|
|
|
|
President of Portable People Meter/International of Arbitron,
from January 2005 to December 21, 2005
|
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President of International/New Ventures of Arbitron, from July
2002 to December 2004
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President of Webcast Services and New Ventures of Arbitron, from
March 30, 2001, to June 2002
|
|
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|
Executive Vice President of Worldwide Media Information Services
of Ceridian Corporations Arbitron division, from September
1999 to March 29, 2001
|
15
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|
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Executive Vice President of Radio and Internet Services of
Ceridian Corporations Arbitron division, from February
1999 to September 1999
|
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Vice President and General Manager of Arbitron Radio of Ceridian
Corporations Arbitron division, from January 1995 to
February 1999
|
Owen
Charlebois, age 54, President of Operations, Technology,
and Research & Development since December 21,
2005
|
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President of U.S. Media Services of Arbitron, from
March 30, 2001, to December 21, 2005
|
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President of U.S. Media Services group of Ceridian
Corporations Arbitron division, from January 2001 to
March 29, 2001
|
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President and Chief Executive Officer of the BBM Bureau of
Measurement, a Canadian nonprofit, member-owned tripartite
industry organization, from 1990 to December 2000
|
Sean
R. Creamer, age 42, Executive Vice President of Finance and
Planning and Chief Financial Officer since November 4,
2005
|
|
|
|
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Senior Vice President and Chief Financial Officer of Laureate
Education, Inc. (formerly Sylvan Learning Systems, Inc.), a
publicly traded company focused on providing higher education
through a global network of accredited campus-based and online
universities, from April 2001 to September 2005
|
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Vice President, Corporate Finance of Laureate Education, Inc.,
from June 2000 to September 2001; became Laureates
Corporate Treasurer in February 2001; and joined Laureate as
Vice President, Corporate Tax in August 1996
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Tax Manager for Exxon Mobil Corporation (formerly Mobil
Corporation), a publicly traded company whose principal business
is energy, involving exploration for, and production of, crude
oil and natural gas, and manufacturing petroleum products, from
1990 to 1996
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Auditing and Tax work for PricewaterhouseCoopers, an
industry-focused company which provides assurance, tax and
advisory service for public and private clients in four key
areas: corporate accountability; risk management; structuring
and M&A; and performance and process improvement, from 1986
to 1990
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Certified Public Accountant since 1987
|
Linda
Dupree, age 48, Executive Vice President, Portable People
Meter New Product Development since February, 2007
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Senior Vice President of Portable People Meter New Product
Development, from March 1, 2003 to January, 2007
|
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Senior Vice President of Advertiser/Agency Services of Arbitron,
from March 30, 2001 to February 2003
|
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Senior Vice President of Advertiser/Agency Services of Ceridian
Corporations Arbitron division, from November 2000 to
March 29, 2001
|
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Vice President, Sales, of Advertiser/Agency Services of Ceridian
Corporations Arbitron division, from November 1996 to
November 2000
|
Vaughan
Scott Henry, age 45, Executive Vice President and Chief
Information Officer since February 9, 2005
|
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|
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Regional Vice President of Delivery Operations of E5 Systems, a
private IT services company, from July 2003 to January 2005
|
16
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Chief Customer Officer of Vitria Technology, Inc., a publicly
traded provider of business process integration solutions, from
October 2001 to April 2003
|
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Chief Information Officer of Talkingnets, a voice and data
communications provider that offers softswitch-based voice and
high-speed data services to businesses, from September 2000 to
September 2001
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Vice President, Information Technology, at Verizon
Communications, Inc. (formerly Bell Atlantic Corporation), from
August 1996 to September 2000; and Executive Director, Strategic
Billing, from November 1994 to August 1996
|
Claire
L. Kummer, age 60, Executive Vice President of Operations,
Integration and Manufacturing since December 21,
2005
|
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Executive Vice President of Operations, from March 30,
2001, to December 20, 2005
|
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Vice President of Operations of Ceridian Corporations
Arbitron division, from November 1997 to March 29, 2001
|
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Vice President of Strategy and Project Manager of Ceridian
Corporations Arbitron division, from November 1993 to
November 1997
|
Kathleen
T. Ross, age 54, Executive Vice President and Chief
Administrative Officer since September 13,
2005
|
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Executive Vice President, Organization Effectiveness and Public
Relations of Arbitron, from March 30, 2001 to
September 12, 2005
|
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Vice President of Organization Effectiveness and Public
Relations of Ceridian Corporations Arbitron division, from
November 1998 to March 29, 2001
|
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Vice President of Organization Effectiveness of Ceridian
Corporations Arbitron division, from July 1994 to November
1998
|
Timothy
T. Smith, 43, Executive Vice President and Chief Legal Officer,
Legal and Business Affairs since August 1,
2006
|
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Senior Vice President, General Counsel and Corporate Secretary
of Manugistics, Inc., a public software company, from January
2000 to July 2006
|
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Vice President, General Counsel of Land Rover North America,
from May 1998 to December 2000
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Senior Associate Counsel to Dart Group Corporation, from March
1995 to May 1998
|
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
In this section, we discuss certain aspects of our compensation
program as it pertains to our principal executive officer, our
principal financial officer and our three other most highly
compensated executive officers in 2006. We refer to these five
persons throughout this proxy statement as the named
executive officers. Our discussion focuses on compensation
and practices relating to our most recently completed fiscal
year.
We believe that the performance of each of the named executive
officers has the potential to impact both our short-term and
long-term profitability. Therefore, the Compensation and Human
Resources Committee (referred to as the Committee in
the remainder of this section) and management place considerable
importance on the design and administration of the executive
compensation program.
17
Objectives
Our executive compensation program is designed to attract,
motivate and retain high-quality executives by providing total
compensation that is performance-based and competitive with the
various labor markets and industries in which we compete for
talent. We provide incentives to advance the interests of
stockholders and deliver levels of compensation that are
commensurate with performance. Overall, we design our
compensation program to:
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support the corporate business strategy and business plan by
clearly communicating what is expected of executives with
respect to goals and results and by rewarding superior
achievement;
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recruit and retain executive talent; and
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create a strong performance alignment with stockholders.
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We are in the process of executing a multi-year strategic plan
that management and the Board believe will result in the
following:
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transformation of the Company from diary-based audience
measurement methodology to electronic measurement;
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diversification of revenue streams beyond the radio
industry; and
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increased international initiatives.
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This strategic transformation has required and will require new
executive skill sets. Indeed, we have revamped our executive
team over the past 24 months, reducing the size from 10 to
nine, three of whom are new to the Company.
Components
We seek to achieve the objectives of our compensation program
through the following three key compensation elements:
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base pay;
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annual performance-based, non-equity incentive plan
payments; and
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periodic grants of long-term, equity-based compensation, such as
stock options, restricted stock units
and/or
restricted stock, which will be subject to either
performance-based
and/or
time-based vesting requirements.
|
Setting
2006 Executive Compensation
In making compensation decisions with respect to each element of
total compensation, the Committee considers the competitive
market for executives and compensation levels provided by
comparable companies, including businesses engaged in activities
similar to us as well as large, diversified, publicly traded and
privately held businesses with a scope and complexity similar to
Arbitron (collectively, the Compensation Peer
Group). The Compensation Peer Group, which is periodically
reviewed and updated by the Committee, consists of companies
operating in similar sectors and of similar market
capitalization, including companies against which the Committee
believes Arbitron competes for executive talent and stockholder
investment. The companies constituting the Compensation Peer
Group are:
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IMS Health Incorporated
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Total Systems Services, Inc.
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ACXIOM Corporation
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TeleTech Holdings, Inc.
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Harte-Hanks,
Inc.
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SITEL Corporation
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Gartner, Inc.
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Fair Isaac Corporation
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The Corporate Executive Board
Company
|
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infoUSA Inc.
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APAC Customer Services, Inc.
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Opinion Research Corporation
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Forrester Research, Inc.
|
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|
18
The Committee generally does not attempt to set each
compensation element for each executive within a particular
range related to levels provided by the Compensation Peer Group.
Instead, the Committee uses market comparisons as one factor in
making compensation decisions. Other factors considered when
making individual executive compensation decisions include
individual contribution and performance, reporting structure,
internal pay relationship, complexity and importance of role and
responsibilities, leadership, and growth potential. Occasionally
other considerations influence pay levels, such as recruiting a
new executive. All executive compensation decisions are made by
the Committee after review with the Committees independent
compensation consultant.
Base
Salary
The purpose of base salary is to reflect job responsibility,
experience, value to the Company and individual performance with
respect to market competitiveness. Minimum salary for
Mr. Morris is determined by his employment agreement. The
amount of any increase over this minimum salary and salaries for
named executive officers whose salaries are not specified in an
agreement are determined by the Committee based on a variety of
factors, including:
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the nature and responsibility of the position and, to the extent
available, salary norms for persons in comparable positions at
comparable companies;
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the expertise of the individual executive;
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the competitiveness of the market for the executives
services; and
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the recommendations of the CEO (except in the case of his own
compensation).
|
We compete with many larger companies for top executive talent.
As such, the base salary component is generally targeted to be
between the 50th and 60th percentile of the
Compensation Peer Group. However, recruiting and retaining
specific executives may result in some variation from this
target. Where not specified by contract, salaries are generally
reviewed annually. These objectives recognize the
Committees expectation that, over the long term, Arbitron
will generate stockholder returns in excess of the average of
the Compensation Peer Group.
Base salary is the foundation of our executive compensation
program and is designed to compensate executives for services
rendered during the year. In setting base salaries, the
Committee considers the importance of linking a high proportion
of executive officers compensation to performance in the
form of the annual non-equity incentive plan payment, which is
tied to both Company performance measures and individual
performance as well as long-term stock-based compensation, which
is tied to Company stock price performance and performance
compared to the Compensation Peer Group.
Non-equity
Incentive Plan Compensation
Our compensation program provides for an annual cash payment
that is performance linked. The objective of the program is to
compensate executives based on the achievement of specific goals
that are intended to correlate closely with growth of long-term
stockholder value.
The annual non-equity incentive plan is designed to reward
executives for achieving corporate goals, providing significant
upside for exceeding such goals. Early in the fiscal year, the
Committee, working with senior management and the
Committees independent compensation consultant, sets
performance goals for the Company and for individual executives.
The annual non-equity incentive plan compensation for which
executives other than the CEO are eligible is equal to between
40% and 55% of salary at target; and 80% and 110% of salary at
superior. Pursuant to the terms of his employment agreement, the
target annual non-equity incentive plan payment for
Mr. Morris is equal to 75% of his base salary at target and
150% of his base salary at superior during the term of the
agreement. The CEOs and the CFOs annual non-equity
incentive payments are based entirely on the achievement of
corporate goals. Mr. Henrys annual non-equity
incentive payments are based 70% on achievement of corporate
goals and 30% on the achievement of individual goals. The other
named executive officers annual non-equity incentive
payments are based 50% on the achievement of
19
corporate goals and 50% on the achievement of individual goals,
based on the evaluation and recommendation of the CEO. Targets
for annual non-equity incentive payments for named executive
officers other than the CEO and CFO are allocated between
corporate goals and individual goals in order to focus
executives on the areas for which they are responsible, while
also recognizing their role as leaders of the Company as a whole.
In determining the extent to which the performance goals are met
or exceeded for a given period, the Committee exercises its
judgment whether to reflect or exclude the impact of changes in
accounting principles and extraordinary, unusual or infrequently
occurring events. As a result, the Committee considered the
effect of the early retirement of certain long-term debt on EPS
in evaluating 2006 performance goals.
As a part of the annual financial and strategic planning
process, the Committee (typically in January) reviews and
assesses the Companys performance against each of the
performance goals established at the outset of the prior year.
The Committee also considers the recommendation of the CEO (for
executive officers other than himself) in exercising its
judgment.
At the beginning of 2006, the Committee established performance
goals for fiscal 2006 annual non-equity incentive payments based
on the following five corporate financial and performance
measures: earnings per share, revenue, Portable People Meter
(PPM), Project Apollo and IT. The two financial
targets, earnings per share and revenue, are selected by the
Committee in order to reward executives for improving the
Companys overall financial performance. The two financial
targets are, in the aggregate, weighted at 60% of the total
corporate goals to reflect the importance the Committee places
on the Companys financial performance. Between the two
financial targets, earnings per share is emphasized in order to
focus executives attention on a financial measure that the
Committee believes aligns the interests of management with those
of long-term stockholders and rewards management for creating
value for such long-term stockholders.
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Earnings per share (50% of
total non-equity incentive plan payment)
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Threshold
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$
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1.60
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Target
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$
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1.63
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Superior
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$
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1.66
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Revenue (10% of total
non-equity incentive plan payment)
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Threshold
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$
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328.5M
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Target
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$
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333.5M
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Superior
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$
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338.5M
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The Board and management have identified the shift away from
diary-based radio audience measurement methodology and toward
electronic measurement as a crucial component of the
Companys future success. The three non-financial
performance targets, PPM, Project Apollo and IT, are three key
areas the Committee believes require significant company-wide
effort in order to achieve the Companys strategic goals.
Accordingly, the Committee has selected the three non-financial
targets in order to reward executives for significant progress
toward achieving long-term strategic goals that the Board
believes are necessary to position the Company for future growth.
Portable
People Meter (20% of total non-equity incentive plan
payment)
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Threshold |
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Committee discretion whether to award any non-equity incentive
plan payment for performance falling below the Target. |
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Target |
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Commercialization of PPM in the Houston market. For the purposes
of this target, commercialization is defined as a
critical mass of customers under contract to receive PPM data
and the discontinuation of diary service. |
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Superior |
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Target, plus customer commitments for three additional markets. |
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Project Apollo (10% of total non-equity incentive plan
payment) |
|
Threshold, Target and Superior are all based on degrees of
progress toward a national launch. |
20
IT (10%
of total non-equity incentive plan payment)
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Threshold |
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Committee discretion whether to award any non-equity incentive
plan payment for performance falling below the Target. |
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Target |
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Software development work on new platforms for use by both radio
and advertising agency customers, complete with sufficient
functionality to begin customer conversions by December 31. |
|
Superior |
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One of the two platforms has 100% of the desired functionality
complete. |
The Committee approved the following assessment of 2006
performance:
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Component
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Actual Performance
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Score
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EPS
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$
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1.68
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Superior
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Revenue
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$
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328.6M
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Threshold
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Portable People Meter
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Target
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Project Apollo
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Target
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IT
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Target
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The payout for the corporate performance component of each
executives non-equity incentive plan payment was equal to
approximately 144.5% of the target corporate performance
non-equity incentive plan payment for which such executive was
eligible. The Committee determines whether, and the extent to
which, personal goals have been met based, in part, upon the
recommendation of the CEO. As a result of these determinations,
the Committee awarded the non-equity incentive plan payment
amounts set forth in the Summary Compensation Table.
Long-term
Incentive Equity
The long-term incentive program provides a periodic award
(typically annual) that is performance based. The objective of
the program is to align compensation for named executive
officers over a multiyear period directly with the interests of
stockholders of the Company by motivating and rewarding creation
and preservation of long-term stockholder value. The level of
long-term incentive compensation is determined based on an
evaluation of competitive factors in conjunction with total
compensation provided to named executive officers and the goals
of the compensation program described above.
The Companys long-term incentive compensation plan
generally takes the form of a mix of stock option awards and
restricted stock grants. These two vehicles reward stockholder
value creation in slightly different ways. Stock options (which
have exercise prices equal to the market price on the date of
grant) reward executives only if the stock price increases.
Restricted stock is impacted by all stock price changes and,
therefore, the value to named executive officers is affected by
both increases and decreases in stock price. On
February 22, 2006, the Committee approved grants of stock
options and restricted stock to executives with an effective
date of March 1, 2006, as set forth in
2006 Grants of Plan-Based Awards below.
During 2006, the Committees practice was to make all
grants effective as of the first business day of the month
following the date of Committee action on the grant. This policy
was intended to ensure that all grants would vest at the
beginning of a month for purposes of bookkeeping and
administrative convenience. The Committee has discontinued this
practice and during 2007 and going forward, all grants will be
effective as of the date the Committee approves the grant, and
all option grants will have an exercise price equal to the
closing price of our common stock on the date the Committee
approves the grant. During 2006, for named executive officers
other than Mr. Morris, approximately 50% of the total value
of long-term compensation awards took the form of stock options,
with restricted stock providing for the remaining value. During
2006, the Committee granted restricted stock to executives
because it believed that this was an efficient way to reward
them for, and motivate them toward, superior performance.
21
The long-term incentive program calls for stock options to be
granted with exercise prices of not less than the fair market
value of the Companys stock on the effective date of grant
and to vest ratably over three years, based on continued
employment. Fair market value is equal to the closing price of
the Companys common stock on the date the Committee
approves the grant, or for the grants made in 2006, the first
business day of the month following the date the Committee
approved the grant. The Committee will not grant stock options
with exercise prices below the fair market value of the
Companys stock on the effective date of grant (determined
as described above), and will not reduce the exercise price of
stock options (except in connection with adjustments to reflect
recapitalizations, stock or extraordinary dividends, stock
splits, mergers, spin-offs and similar events permitted by the
relevant plan) without stockholder approval. New option grants
to named executive officers vest ratably over three years and
have a term of 10 years. Restricted stock granted to named
executive officers, except for Mr. Morriss 2007 grant
of restricted stock units, vests ratably over four years, based
on continued employment and any unvested shares are forfeitable
to the Company upon termination.
In addition to the long-term incentive equity awards paid to
named executive officers in 2006
and/or set
forth in the tables below, in February 2007, the Committee
awarded restricted stock units to named executive officers in
the following amounts: Mr. Morris: 43,333 units,
Mr. Creamer: 13,667 units, Mr. Charlebois:
16,400 units, Mr. Bouvard: 16,400 units, and
Mr. Henry: 10,933 units. Mr. Morriss
restricted stock units vest in three equal annual installments
beginning on December 31, 2007, subject to continued
employment. Each of the other named executive officers
restricted stock units vest ratably over four years beginning on
the first anniversary of grant, subject to continued employment.
All unvested restricted stock units are forfeitable upon
termination of employment. The restricted stock units granted in
2007 do not provide voting or dividend rights until the units
are vested and converted into common stock.
In determining the annual grants of stock options and restricted
stock, the Committee considers any contractual requirements,
individual performance, market data on total compensation
packages, the value of long-term incentive grants at targeted
external companies within the Compensation Peer Group, total
stockholder return, share usage and stockholder dilution and,
except in the case of the award to the CEO, the recommendations
of the CEO.
Benefits
and Perquisites
With limited exceptions, the Committee supports providing
benefits and perquisites to named executive officers that are
substantially the same as those offered to other officers of the
Company at or above the level of vice president. Exceptions
include the relocation assistance offered to Mr. Henry.
Post
Termination Compensation
Retirement
Plans
Mr. Morris participates in a defined benefit pension plan
and two supplemental retirement plans, the Arbitron Benefit
Equalization Plan (BEP) and the Supplemental
Executive Retirement Plan (SERP). The amount payable
under such retirement plans to Mr. Morris is determined by
the plans benefit formula, which we describe in the
section Pension Benefits Table below. The amount of
benefits varies based upon the plan, the executives years
of service with us and the executives compensation. We
generally target total compensation (including retirement
benefits) at peer median.
We offer a qualified 401(k) Plan to provide our employees
tax-advantaged savings vehicles. We make matching contributions
to the 401(k) Plan to encourage employees to save money for
their retirement. This plan and our contributions to it enhance
the range of benefits we offer to executives and further our
ability to attract and retain employees.
Under the terms of the 401(k) Plan, employees may defer from 1%
to 17% of their eligible earnings, and we contribute a matching
contribution of 50% of before tax employee contributions up to a
maximum of 3% to 6% of eligible employee earnings. We may also
make an additional discretionary matching contribution of 0% to
30% of before tax employee contributions up to a maximum of 3%
to 6% of eligible employee earnings (depending on the
Companys profitability). The 3% maximums referred to in
the previous sentences relate to
22
employees who are pension participants and the 6% maximums
relate to employees who are not pension participants.
Our matching contributions to the 401(k) Plan for each named
executive officer are set forth in the Summary Compensation
Table below. See also 2006 Nonqualified
Deferred Compensation 401(k) Plan.
Morris
Employment Agreement
Mr. Morris is party to an employment agreement with the
Company that provides for continued employment until
December 31, 2009. The agreement also provides for the
Company to retain Mr. Morris to provide consulting services
to the Company for three years commencing January 1, 2010.
During the consulting term, the Company will pay Mr. Morris
a quarterly consulting fee of $83,333, as well as reasonable
costs and expenses incurred in providing the consulting
services. Pursuant to the agreement, Mr. Morris waived any
rights to accelerate the vesting of restricted stock awards or
stock options upon his retirement.
The agreement also provides for the payment of a lump sum to
Mr. Morris or his estate upon his death or disability or a
change of control of the Company during the term of the
agreement. The terms of the change of control provision during
the term of the agreement are described in the section
Potential Payments Upon Termination or Change
in Control below.
Executive
Retention Agreements
We have entered into Retention Agreements with members of senior
management, including each of our named executive officers other
than Mr. Morris. Except for these Retention Agreements,
none of our named executive officers other than Mr. Morris
has an employment agreement which requires us to pay their
salary for any period of time. We entered into the Retention
Agreements because we do not want our executives distracted by a
rumored or actual change in control of the Company. Further, if
a change in control should occur, we want our executives to be
focused on the business of the organization and the interests of
stockholders. In addition, we think it is important that our
executives can react neutrally to a potential change in control
and not be influenced by personal financial concerns. We believe
our Retention Agreements are consistent with market practice and
assist us in retaining our executive talent. The material terms
of the retention agreements are described in the section
Potential Payments Upon Termination or Change
in Control below.
Stock
Ownership Guidelines
During 2004, the Committee recommended and the Board established
stock ownership requirements for our executive officers. These
officers are expected, over time, to acquire and hold Company
stock (including restricted stock units) equal in value to at
least the following:
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CEO three times annual salary;
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CFO and Presidents two times annual salary; and
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Other executive officers one time annual salary.
|
These guidelines are expected to be achieved within three years
of becoming an executive officer, and include owned shares of
common stock, restricted shares, and restricted or DSUs that
only can be settled in common stock. However, outstanding
unexercised stock options are not taken into account for
purposes of satisfying these guidelines. The Committee believes
that this ownership policy further enhances the alignment of
named executive officer and stockholder interests and thereby
promotes the objective of increasing stockholder value.
23
Role of
Management
The role of Arbitron management is to provide reviews and
recommendations for the Committees consideration, and to
manage the Companys executive compensation programs,
policies and governance. Direct responsibilities include, but
are not limited to the following:
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Providing an ongoing review of the effectiveness of the
compensation programs, including competitiveness and alignment
with the Companys objectives;
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Providing an assessment of the Companys performance
relative to individual business unit performance targets;
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Recommending changes, if necessary to ensure achievement of all
program objectives; and
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Recommending pay levels, payout
and/or
awards for key executive officers other than the CEO.
|
Compliance
with Section 162(m)
Section 162(m) (the Section) of the Internal
Revenue Code of 1986, as amended, disallows any tax deductions
for compensation exceeding $1 million and paid in a taxable
year to any named executive officer, all of whom are
covered employees under the Section. However,
certain performance-based compensation, determined under
pre-established objective performance goals, can be deducted
even in excess of the $1 million limit. The Committee
considers the potential impact of the Section as one factor to
be taken into account in setting total compensation and its
component elements. However, the Committee believes that it must
retain flexibility, in observing its overall compensation
philosophy and objectives, to structure total compensation to
include components, such as service-vesting restricted stock,
that would not be treated as performance-based compensation
under the Section, both in order to attract and retain top
talent and to appropriately gauge the performance of executives.
Achieving the desired flexibility in the design and delivery of
total compensation, therefore, may result in some compensation
not being deductible for federal income tax purposes.
Role of
Total Compensation
In making decisions with respect to any element of a named
executive officers compensation, the Committee considers
the total compensation that may be awarded to the officer,
including base salary, annual non-equity compensation plan
payment, long-term incentive compensation, and post-termination
compensation. The Committees goal is to award compensation
that is reasonable when all elements of potential compensation
are considered.
REPORT OF
THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
The Compensation and Human Resources Committee reviewed and
discussed the Compensation Discussion and Analysis included in
this Proxy Statement with management. Based on such review and
discussion, the Compensation Committee recommended to the Board
of Directors that the Compensation Discussion and Analysis be
included in this Proxy Statement for filing with the Securities
and Exchange Commission.
Submitted by the Compensation and
Human Resources Committee of the
Board of Directors
Philip Guarascio, Chair
Luis G. Nogales
Lawrence Perlman
24
Summary
of Cash and Certain Other Compensation and Other Payments to the
Named Executive Officers
The following sections provide a summary of cash and certain
other amounts we paid for the year ended December 31, 2006
to the named executive officers. Except where noted, the
information in the Summary Compensation Table generally pertains
to compensation to the named executive officers for the year
ended December 31, 2006. The compensation we disclose below
is presented in accordance with SEC regulations. According to
those regulations we are required in some cases to include:
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amounts that may be paid in future years, including amounts that
will be paid only upon the occurrence of certain events, such as
a change in control of Arbitron;
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an assumed value for share-based compensation equal to the fair
value of the grant as presumed under accounting regulations,
even though such value presumes the option will not be forfeited
and will be exercised before the end of its
10-year
life, and even though the actual realization of cash from the
award depends on whether our stock price appreciates above its
price on the date of grant, whether the executive will continue
his or her employment with us, and when the executive chooses to
exercise the option; and
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the increase in present value of future pension payments, even
though such increase is not cash compensation paid this year and
even though the actual pension benefits will depend upon a
number of factors, including when the executive retires, his or
her compensation at retirement and, in some cases, the number of
years the executive lives following his or her retirement.
|
Therefore, we encourage you to read the following tables
closely. The narratives preceding the tables and the footnotes
accompanying each table are important parts of each table. Also,
we encourage you to read this section in conjunction with the
Compensation Discussion and Analysis above.
2006
Summary Compensation Table
The following table provides information concerning the
compensation of the named executive officers for our most
recently completed fiscal year.
In the column salary, we disclose the amount of base
salary paid to the named executive officer during the fiscal
year.
In the columns Stock Awards and Option
Awards, SEC regulations require us to disclose the award
of stock or options measured in dollars and calculated in
accordance with SFAS No. 123(R). For restricted stock,
the SFAS No. 123(R) fair value per share is equal to
the closing price of our stock on the date of grant. Restricted
stock awards typically vest in four equal annual installments
beginning on the first anniversary of the date of grant. Awards
are conditioned on the participants continued employment
with Arbitron, but may have additional restrictions. We
recognize such expense ratably over the vesting period. For
stock options, the SFAS No. 123(R) fair value per
share is based on certain assumptions, which we explain in
note 15 to our notes to financial statements that are
included in our annual report on
Form 10-K.
We recognize such expense ratably over the vesting period. The
amounts shown in the 2006 Summary Compensation Table also
include a ratable portion of each grant we made in prior years
to the extent the vesting period occurred in 2006. Please also
refer to the second table in this Proxy Statement,
Summary of Cash and Certain Other Compensation
and Other Payments to the Named Executive Officers
Grants of Plan-Based Awards.
In the column Non-equity Incentive Plan
Compensation, we disclose the dollar value of all earnings
for services performed during the fiscal year pursuant to awards
under non-equity incentive plans.
In the column Change in Pension Value and Nonqualified
Deferred Compensation Earnings, we disclose the sum of the
dollar value of (1) the aggregate change in the actuarial
present value of the named executive officers accumulated
benefit under all defined benefit and actuarial pension plans
(including supplemental plans) in 2006; and (2) any
above-market or preferential earnings on nonqualified deferred
compensation, including on nonqualified defined contribution
plans.
25
Retirement benefits for one of our named executive officers,
Mr. Morris, constitute a significant percentage of his
total compensation.
In the column All other compensation, we disclose
the sum of the dollar value of:
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perquisites and other personal benefits, or property, unless the
aggregate amount of such compensation is less than $10,000;
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profit sharing;
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all
gross-ups
or other amounts reimbursed during the fiscal year for the
payment of taxes;
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our contributions to vested and unvested defined contribution
plans; and
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an annual cash adder to cover expense reimbursement.
|
2006
Summary Compensation Table
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Change in
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Pension
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Value and
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Nonqualified
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Non-equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Salary
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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($)
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($)(1)
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($)(2)
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($)
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($)
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($)(3)
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($)
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Stephen B. Morris
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593,208
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471,420
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972,226
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642,889
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371,768
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35,657
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3,087,168
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President and Chief
Executive Officer
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Sean R. Creamer
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350,000
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163,216
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51,615
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252,875
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27,721
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845,427
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Executive Vice President and
Chief Financial Officer
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Owen Charlebois
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350,633
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94,697
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660,832
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274,242
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25,250
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1,405,654
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President of Operations,
Technology, and Research &
Development
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Pierre C. Bouvard
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326,968
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94,697
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506,435
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208,585
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29,978
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1,166,663
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President of Sales and
Marketing
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Vaughan Scott Henry
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264,119
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40,583
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189,085
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166,267
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53,756
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713,810
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Executive Vice President and
Chief Information
Officer
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(1) |
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Includes amounts for awards of restricted stock made to each
named executive officer in 2006, and only with respect to
Mr. Creamer, in 2005. Please refer to note 15 to our
notes to financial statements for the year ended
December 31, 2006, for a discussion of the assumptions
related to the calculation of such value. |
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(2) |
|
Includes amounts for awards of stock options granted in 2003,
2004, 2005 and 2006 to the extent the vesting period for such
grants fell in 2006. Please refer to note 15 to our notes
to financial statements for the year ended December 31,
2006, for a discussion of the assumptions related to the
calculation of such value. |
26
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(3) |
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The amounts shown as all other compensation include the
following: |
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Relocation
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401(k) Match
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Expense Adder
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Tax
Gross-up
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Profit Sharing
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Assistance
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($)
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($)(A)
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($)
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($)
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($)
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Stephen B. Morris
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4,700
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25,000
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5,107
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850
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Sean R. Creamer
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6,600
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15,000
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5,696
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425
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Owen Charlebois
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9,400
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15,000
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850
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Pierre C. Bouvard
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8,724
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15,000
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5,404
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850
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Vaughan Scott Henry
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7,906
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15,000
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850
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30,000
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(A) |
Represents an annual cash amount paid to each named executive
officer to cover business-related expenses.
|
2006
Grants of Plan-Based Awards
In this table, we provide information concerning each grant of
an award made to a named executive officer in the most recently
completed fiscal year under any plan. This includes stock option
and restricted stock awards under the Arbitron Inc. 1999 Stock
Incentive Plan, each of which is discussed in greater detail in
this proxy statement under the caption, Compensation
Discussion and Analysis. In the fifth column, we report
the number of shares of restricted stock granted in the fiscal
year. In the sixth and seventh columns, we report the number of
shares of common stock underlying options granted in the fiscal
year and corresponding per-share exercise prices, respectively.
In the eighth column, we report the aggregate
SFAS No. 123(R) value of all awards made in 2006; in
contrast to how we present amounts in the Summary Compensation
Table, we report such figures here without apportioning such
amount over the service or vesting period. In all cases, the
exercise price was equal to the closing market price of our
common stock on the grant date, which in 2006 was the first
business day of the month following the date on which the
Compensation and Human Resources Committee approved the grant,
which we report in the ninth column.
2006
Grants of Plan-Based Awards
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All Other
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All Other
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Option
|
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Grant Date
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Stock
|
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Awards:
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Fair Value
|
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Closing
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Awards:
|
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Number of
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Exercise
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of Stock
|
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Market
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Number of
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Securities
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or Base
|
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and
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Price on
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Date of
|
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Shares of
|
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Underlying
|
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Price of
|
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Option
|
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Date of
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Grant
|
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Corporate
|
|
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Stock or
|
|
|
Options
|
|
|
Option
|
|
|
Awards
|
|
|
Grant
|
|
Name
|
|
Award Type
|
|
|
Date
|
|
|
Action
|
|
|
Units (#)
|
|
|
(#)
|
|
|
Awards ($/Sh)
|
|
|
($)
|
|
|
($)(4)
|
|
|
Stephen B. Morris
|
|
|
Restricted Stock (1
|
)
|
|
|
3/1/2006
|
|
|
|
2/22/2006
|
|
|
|
48,500
|
|
|
|
|
|
|
|
|
|
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1,885,680
|
|
|
|
38.88
|
|
Sean R. Creamer
|
|
|
Restricted Stock (2
|
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|
|
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3/1/2006
|
|
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2/22/2006
|
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5,000
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|
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|
|
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|
|
|
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|
194,400
|
|
|
|
38.88
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|
|
|
|
Options (3
|
)
|
|
|
3/1/2006
|
|
|
|
2/22/2006
|
|
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15,000
|
|
|
|
38.88
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185,475
|
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|
|
38.88
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Owen Charlebois
|
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Restricted Stock (2
|
)
|
|
|
3/1/2006
|
|
|
|
2/22/2006
|
|
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11,667
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|
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|
|
|
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|
|
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453,613
|
|
|
|
38.88
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|
Options (3
|
)
|
|
|
3/1/2006
|
|
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|
2/22/2006
|
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|
|
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35,000
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|
|
38.88
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432,775
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|
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38.88
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Pierre C. Bouvard
|
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Restricted Stock (2
|
)
|
|
|
3/1/2006
|
|
|
|
2/22/2006
|
|
|
|
11,667
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|
|
|
|
|
|
|
|
|
|
|
453,613
|
|
|
|
38.88
|
|
|
|
|
Options (3
|
)
|
|
|
3/1/2006
|
|
|
|
2/22/2006
|
|
|
|
|
|
|
|
35,000
|
|
|
|
38.88
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432,775
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|
|
|
38.88
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Vaughan Scott Henry
|
|
|
Restricted Stock (2
|
)
|
|
|
3/1/2006
|
|
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|
2/22/2006
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
194,400
|
|
|
|
38.88
|
|
|
|
|
Options (3
|
)
|
|
|
3/1/2006
|
|
|
|
2/22/2006
|
|
|
|
|
|
|
|
15,000
|
|
|
|
38.88
|
|
|
|
185,475
|
|
|
|
38.88
|
|
|
|
|
(1) |
|
Granted under the Arbitron 1999 Stock Incentive Plan. The
restricted stock granted in 2006 to Mr. Morris vests in
four equal annual installments beginning on December 31,
2006, and thereafter on December 31 of each year through
December 31, 2009, subject to continued employment (with
limited exceptions for termination of employment due to death,
disability and change in control). |
|
(2) |
|
Granted under the Arbitron 1999 Stock Incentive Plan. The
restricted stock granted in 2006 to named executive officers
other than Mr. Morris vests ratably over four years
beginning on the first anniversary of the date of grant, subject
to continued employment (with limited exceptions for termination
of employment due to death, disability and change in control). |
27
|
|
|
(3) |
|
Granted under the Arbitron 1999 Stock Incentive Plan. The stock
options granted in 2006 to named executive officers have a
10-year term
and vest ratably over three years, subject to continued
employment (with limited exceptions for termination of
employment due to death, disability and change in control). |
|
(4) |
|
Before 2007, our option plans defined fair market value on the
date of grant as the closing market price of our common stock on
the first day of the next calendar month after the date the
option is granted. The SECs executive compensation
disclosure rules adopted in 2006 define fair market value on the
date of grant as the closing market price of the companys
common stock on the date the option is granted, and require
supplemental disclosure if the option price differs from the
price that would have been established if that definition had
been used. We revised our plans in 2007 to change the definition
of fair market value on the date of grant to conform to the
SECs new definition. |
Outstanding
Equity Awards at Fiscal Year-End
The following table provides information concerning unexercised
options and stock that has not vested for each named executive
officer outstanding as of the end of our most recently completed
fiscal year. Each outstanding award is represented by a separate
row which indicates the number of securities underlying the
award, including awards that have been transferred other than
for value (if any).
For option awards, the table discloses the number of shares
underlying both exercisable and unexercisable options, as well
as the exercise price and the expiration date. For stock awards,
the table provides the total number of shares of stock that have
not vested and the aggregate market value of shares of stock
that have not vested.
We computed the market value of stock awards by multiplying the
closing market price of our stock at the end of the most
recently completed fiscal year by the number of shares or units
of stock.
Outstanding
Equity Awards at Fiscal Year-End 2006
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Option Awards
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Stock Awards
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Number
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|
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Market
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of
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Number of
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Number of
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Value of
|
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Securities
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Securities
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Shares or
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Shares or
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Underlying
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Underlying
|
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Units of
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Units of
|
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Unexercised
|
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Unexercised
|
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Option
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Stock That
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Stock That
|
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Options
|
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Options
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Exercise
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Option
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Have Not
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Have Not
|
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(#)
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(#)
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Price
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Expiration
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Vested
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Vested
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Name
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Exercisable
|
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Unexercisable(1)
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($)
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Date
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(#)
|
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($)
|
|
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Stephen B. Morris
|
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20,923
|
|
|
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23.98
|
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|
10/22/2007
|
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|
|
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|
|
|
|
|
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50,042
|
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|
|
|
|
|
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32.86
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|
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10/21/2008
|
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|
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|
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|
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58,382
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23.91
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|
|
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10/20/2009
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|
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80,000
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|
|
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40,000
|
|
|
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38.26
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|
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8/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
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43,334
|
|
|
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86,666
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|
|
|
41.05
|
|
|
|
2/23/2015
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|
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|
|
|
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|
|
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|
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|
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36,375
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(2)
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1,580,130
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Sean R. Creamer
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20,000
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40.90
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9/15/2015
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|
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15,000
|
|
|
|
38.88
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|
|
|
3/1/2016
|
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|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
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16,250
|
(3)
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705,900
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Owen Charlebois
|
|
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46,667
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|
|
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23,333
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38.26
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|
|
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8/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
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23,334
|
|
|
|
46,666
|
|
|
|
41.05
|
|
|
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2/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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35,000
|
|
|
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38.88
|
|
|
|
3/1/2016
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|
|
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|
|
|
|
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11,667
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(4)
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|
506,814
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|
|
|
|
|
|
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|
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|
|
|
|
|
|
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|
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Pierre C. Bouvard
|
|
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13,334
|
|
|
|
16,666
|
|
|
|
38.26
|
|
|
|
8/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
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16,667
|
|
|
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33,333
|
|
|
|
41.05
|
|
|
|
2/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
38.88
|
|
|
|
3/1/2016
|
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|
|
|
|
|
|
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|
|
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11,667
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(4)
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506,814
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|
|
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|
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Vaughan Scott Henry
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10,000
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20,000
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|
|
41.05
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|
|
|
2/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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15,000
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|
|
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38.88
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|
|
|
3/1/2016
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|
|
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|
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|
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5,000
|
(4)
|
|
|
217,200
|
|
28
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|
|
(1) |
|
Vesting dates of unvested option awards are as follows:
Mr. Morris 43,333 on
2/23/07,
40,000 on
8/19/07, and
43,333 on
2/23/08;
Mr. Creamer 5,000 on
3/1/07,
5,000 on
3/1/08, and
5,000 on
3/1/09;
Mr. Charlebois 23,333 on
2/23/07,
11,667 on
3/1/07,
23,333 on
8/19/07,
23,333 on
2/23/08,
11,667 on
3/1/08,
11,666 on
3/1/09;
Mr. Bouvard 16,667 on
2/23/07,
11,667 on
3/1/07,
16,666 on
8/19/07,
16,666 on
2/23/08,
11,667 on
3/1/08, and
11,666 on
3/1/09; and
Mr. Henry 10,000 on
2/23/07,
5,000 on
3/1/07,
10,000 on
2/23/08,
5,000 on
3/1/08, and
5,000 on
3/1/09. |
|
(2) |
|
Pursuant to his employment agreement, Mr. Morris was
granted 48,500 shares of restricted stock on
3/1/06,
which vests in four equal annual installments beginning on
12/31/06,
subject to continued employment. On
3/31/06,
Mr. Morris elected to receive 50% of the shares that will
vest on each of
12/31/07,
12/31/08 and
12/31/09 in
the form of DSUs. On
12/31/06,
12,125 shares out of the original grant of 48,500 became
vested and on each of
12/31/07,
12/31/08 and
12/31/09
(i) 6,062 shares will become vested and
(ii) Mr. Morris will receive 6,062 DSUs. |
|
(3) |
|
Vesting dates of unvested shares of restricted stock for
Mr. Creamer are as follows: 250 shares on the
15th of each month through
9/15/10,
1,250 on
3/1/07,
1,250 on
3/1/08,
1,250 on
3/1/09, and
1,250 on
3/1/10. |
|
(4) |
|
Vesting dates of unvested shares of restricted stock are as
follows: Mr. Charlebois and Mr. Bouvard
2,917 on
3/1/07,
2,917 on
3/1/08,
2,917 on
3/1/09, and
2,916 on
3/1/10; and
Mr. Henry 1,250 on
3/1/07,
1,250 on
3/1/08,
1,250 on
3/1/09, and
1,250 on
3/1/10. |
Option
Exercises and Stock Vested
The following table provides information concerning exercises of
stock options and similar instruments, and vesting of restricted
stock and similar instruments, during the most recently
completed fiscal year for each of the named executive officers
on an aggregated basis. The table reports the number of
securities for which the options were exercised; the aggregate
dollar value realized upon exercise of options; the number of
shares of restricted stock that have vested; and the aggregate
dollar value realized upon vesting of stock.
2006
Option Exercises and Stock Vested
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired
|
|
|
Realized
|
|
|
Acquired
|
|
|
Realized
|
|
|
|
on Exercise
|
|
|
on Exercise
|
|
|
on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Stephen B. Morris
|
|
|
61,924
|
|
|
|
815,596
|
|
|
|
12,125
|
|
|
|
526,710
|
|
Sean R. Creamer
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
115,455
|
|
Owen Charlebois
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pierre C. Bouvard
|
|
|
27,506
|
|
|
|
199,227
|
|
|
|
|
|
|
|
|
|
Vaughan Scott Henry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Pension Benefits Table
Arbitron has established a voluntary, tax-qualified, defined
benefit pension plan funded by employee and employer
contributions. The plan covers Arbitron employees who, as of
December 31, 2000, were eligible to participate in the
Ceridian pension plan. The Ceridian plan was closed to new
participants effective January 2, 1995. Benefits earned
under the Ceridian plan prior to December 31, 2000, are
payable from the Arbitron plan for participants employed by
Arbitron on December 31, 2000. The amount of the annual
benefit under Arbitrons plan is based upon an
employees average annual compensation during the
employees highest consecutive five-year earnings period
while participating in the Ceridian plan or the Arbitron plan.
Because the Internal Revenue Code of 1986, as amended, limits
the annual benefit that may be paid from tax-qualified plans
such as Arbitrons retirement plan, Arbitron also
established a benefit equalization plan (BEP) to
provide retirees with supplemental benefits so that they will
receive, in the aggregate, the benefits they would
29
have been entitled to receive under the retirement plan had
these limits not been in effect. Benefits earned under the
Ceridian BEP plan prior to December 31, 2000, are payable
from the Arbitron plan for participants employed by Arbitron on
December 31, 2000. Arbitron also established and funded a
benefit protection trust to pay BEP benefits. Normal retirement
age under the pension plan and the BEP is 65.
Annual compensation for purposes of the pension plan and the
Arbitron BEP consists of salary and any annual non-equity
incentive plan payments paid during the year, less the amount
contributed by the employee to the pension plan that year on a
pretax basis. Mr. Morris is the only named executive
officer eligible to participate in these plans. Compensation for
2006 for the pension plan was $220,000 and compensation for the
Arbitron BEP was $1,119,097. For purposes of the pension plan
and the Arbitron BEP, an annual non-equity incentive plan
payment is considered part of annual compensation in the year in
which it is paid, rather than the year in which it was earned
(the latter formulation being the basis on which amounts are
reported in the Summary Compensation Table).
The Arbitron Supplemental Executive Retirement Plan
(SERP) is designed to provide a targeted level of
postretirement income to Mr. Morris in consideration of his
significant impact on the long-term growth and profitability of
the Company. The SERP benefit supplements the retirement
benefits provided under the pension plan and the Arbitron BEP.
Covered compensation for 2006 for the SERP was $1,119,097.
Normal retirement age under the SERP is 63.
Benefit amounts in the Pension Benefits Table below are computed
assuming payments are made on the normal life annuity basis and
not under any of the various survivor options. Benefits listed
in the table are not subject to deduction for Social Security or
other offset amounts.
2006
Pension Benefits Table
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
Value of
|
|
|
Payments During
|
|
|
|
|
|
Credited Service
|
|
|
Accumulated Benefit
|
|
|
Last Fiscal Year
|
|
Name
|
|
Plan Name
|
|
(#)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Stephen B. Morris
|
|
Pension
|
|
|
11.78
|
|
|
|
319,511
|
|
|
|
0
|
|
|
|
BEP
|
|
|
11.78
|
|
|
|
1,139,482
|
|
|
|
0
|
|
|
|
SERP
|
|
|
13.00
|
|
|
|
729,884
|
|
|
|
0
|
|
|
|
|
(1) |
|
Mr. Morris has been employed by the Company and its
predecessor since December 1992. Pursuant to the terms of the
Pension Plan and the BEP Mr. Morris had 11.78 years of
credited service as of December 31, 2006. Pursuant to the
terms of the SERP Mr. Morris had 13 years of credited
service as of December 31, 2006. Because
Mr. Morriss years of credited service are fewer than
his actual years of service under each plan, no benefit
augmentation results from the difference. |
2006
Nonqualified Deferred Compensation
No named executive officer participated in any nonqualified
deferred compensation plan during 2006.
401(k)
Plan
Arbitron has established a 401(k) plan that permits
participating employees to contribute a portion of their
compensation to the plan on a pretax basis. Arbitron makes
matching contributions in amounts determined by Arbitron.
The 401(k) plan accounts are invested among a number of
available investment options, including shares of Arbitron
common stock, according to the directions of the participating
employees. Voting and tender rights with respect to shares of
Arbitron common stock credited to participants accounts
will be passed through to the participants.
While employed, participating employees may access their
accounts through loans and, in some cases, in-service
withdrawals. Following termination of employment, benefits are
either distributed in a lump-sum payment or, if minimum
requirements are met, can be kept in the plan. To the extent a
participants account is invested in
30
full shares of Arbitrons common stock, the shares may be
distributed to the participant when the account is distributable.
Arbitron retains the right to amend or terminate the 401(k) plan
at any time.
Potential
Payments Upon Termination or Change in Control
The following table summarizes the estimated payments to be made
under each contract, agreement, plan or arrangement that
provides for payments to a named executive officer at,
following, or in connection with any termination of employment
including by resignation, retirement, disability or a
constructive termination of a named executive officer, or our
change in control or a change in the named executive
officers responsibilities. However, in accordance with SEC
regulations, we do not report any amount to be provided to a
named executive officer under any arrangement that does not
discriminate in scope, terms, or operation in favor of our
executive officers and which is available generally to all
salaried employees. Also, the following table does not repeat
information disclosed above under the pension benefits table,
the deferred compensation table, or the outstanding equity
awards at fiscal year-end table, except to the extent that the
amount payable to the named executive officer would be enhanced
by the termination event.
For the purpose of the quantitative disclosure in the following
table, and in accordance with SEC regulations, we have assumed
that the termination took place on the last business day of our
most recently completed fiscal year, and that the price per
share of our common stock is the closing market price as of that
date $43.44.
Mr. Morris currently has an employment agreement with the
Company, the terms of which are described below.
Mr. Morriss employment agreement contains provisions
regarding protection of confidential information, rights in any
intellectual property created by him, restrictions on
competition and change of control compensation. None of our
other named executive officers has an employment agreement with
the Company, but each of the other named executive officers has
retention agreements as described below.
The agreement with Mr. Morris incents him to remain with
the Company until December 31, 2009, as well as to manage a
strategic business/succession plan, including assisting the
Board with the selection of his successor. Components of this
agreement are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Annual base salary(1)
|
|
$
|
622,868
|
|
|
$
|
654,011
|
|
|
$
|
686,712
|
|
Non-equity incentive(2)
|
|
$
|
467,151
|
|
|
$
|
490,509
|
|
|
$
|
515,034
|
|
Equity incentive(3)
|
|
$
|
1,882,386
|
|
|
$
|
1,882,386
|
|
|
$
|
1,882,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,972,405
|
|
|
$
|
3,026,906
|
|
|
$
|
3,084,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of restricted stock(4)
|
|
|
43,333
|
|
|
|
43,333
|
|
|
|
43,333
|
|
|
|
|
(1) |
|
Annual base salary, as specified in Mr. Morriss
employment agreement. |
|
(2) |
|
Amounts based on target annual non-equity incentive payout
valued at 75% of annual base salary, as specified in
Mr. Morriss employment agreement. Actual payouts
could exceed these amounts if Company performance exceeds target
performance goals. |
|
(3) |
|
Value based upon the closing price of our common stock on
December 31, 2006, $43.44 per share multiplied by the
43,333 annual shares, to be granted pursuant to
Mr. Morriss employment agreement. |
|
(4) |
|
Represents the number of shares of restricted stock or
restricted stock units to be granted to Mr. Morris pursuant
to the terms of his employment agreement. |
The agreement also provides for the Company to retain
Mr. Morris as a consultant for three years beginning on
January 1, 2010. Mr. Morris has also agreed to serve
as a member of the Board of Directors during the consulting term
if he is nominated and elected. During the consulting term, the
Company will pay Mr. Morris a quarterly consulting fee of
$83,333, as well as reasonable costs and expenses incurred by
Mr. Morris in providing the consulting services.
31
Mr. Morris has waived any right to accelerate the vesting
of restricted stock awards or stock options upon his retirement.
Additionally, Mr. Morris has agreed not to dispose of
shares of common stock during any
12-month
period that exceeds an amount equal to 25% of the aggregate
number of shares of common stock he is entitled to receive under
the agreement, provided that this restriction will terminate
upon Mr. Morriss death, or a change in control of the
Company. In the event that the agreement is terminated as a
result of the death or disability of Mr. Morris or a change
in control of the Company, all restricted stock awards granted
under the agreement prior to termination will vest in full, but
no further grants will be made.
The current agreement also provides certain separation payments.
If Arbitron terminates the agreement with Mr. Morris
without cause and the termination is not a change of control
termination, Mr. Morris will be entitled to receive payment
equal to two years base salary and two times the
non-equity incentive plan payment, if any, that Mr. Morris
would have received for the year in which the termination
occurs, at the higher of the target award applicable to the year
in which the termination occurs or the average of the actual
non-equity incentive plan payments paid for the last three
fiscal years. In addition, in the event of the death or
disability of Mr. Morris prior to January 1, 2010, or
a change in control of the Company after December 31, 2008,
but prior to January 1, 2010, the Company will pay
Mr. Morris or his estate $1,000,000. In the event of the
death or disability of Mr. Morris or a change in control of
the Company during the consulting term, the consulting term will
terminate and the Company will pay Mr. Morris or his estate
a lump sum equal to the remaining quarterly consulting payments
scheduled to be paid to Mr. Morris for the balance of the
consulting term as if the consulting term had not ended.
If Mr. Morris experiences a change of control termination,
he will be entitled to receive a lump-sum payment that is equal
to the sum of three times each of the following:
|
|
|
|
|
12 months of base salary at the rate in effect at the time
of termination;
|
|
|
|
the non-equity incentive plan payment that Mr. Morris would
have received under all applicable Arbitron bonus plans for the
year in which the termination occurs at the target award level
applicable for the year in which the termination occurs; and
|
|
|
|
the annual cash expense allowance.
|
Beginning February 1, 2007, the multiplier reduces ratably
on a monthly basis (for example, on July 1, 2007, the
multiplier will become 2.5 and on January 1, 2008, the
multiplier will become 2.0) through January 1, 2010, at
which time the change of control provisions of the agreement
will terminate.
For two years following a termination without cause, or for
three years or until reemployment with benefits following a
change of control termination, Mr. Morris shall be provided
with the same or equivalent health, dental, accidental death and
dismemberment, short-term and long-term disability, life
insurance coverages, and all other insurance policies and other
health and welfare benefits programs he was entitled to
immediately prior to his termination. For purposes of the table
below, we have assumed that Arbitron will provide equivalent
benefits at Arbitrons current average cost per participant
for each of the benefit plans in which Mr. Morris currently
participates.
The agreement with Mr. Morris provides him with the
opportunity to receive additional supplemental retirement
benefits as described under Summary of Cash
and Certain Other Compensation and Other Payments to the Named
Executive Officers Pension Benefits Table
above. If Mr. Morris experiences a change of control
termination, Mr. Morris will receive credit adding three
years to age and service for purposes of determining the
supplemental pension payable under the SERP.
The term change of control termination means the
termination of Mr. Morriss employment with Arbitron,
by Arbitron or the executive, within two years after a change of
control, for any reason other than conduct that constitutes
fraud, misrepresentation, theft or embezzlement of Arbitron
assets, an intentional violation of law involving moral
turpitude or failure to follow Arbitrons conduct and
ethics policies. A change of control termination includes
termination of employment by reason of death or disability
within two years after a change of control.
32
For the purposes described above, a change of
control is generally defined as any of the following:
|
|
|
|
|
a merger or consolidation involving Arbitron, if less than 50%
of its voting stock after the merger or consolidation is held by
persons who were stockholders before the merger or consolidation;
|
|
|
|
a sale of the assets of Arbitron substantially as an entirety;
|
|
|
|
ownership by a person or group acting in concert of at least 25%
of Arbitrons voting securities;
|
|
|
|
approval by Arbitrons stockholders of a plan for the
liquidation of Arbitron;
|
|
|
|
specified changes in the composition of Arbitrons Board of
Directors; or
|
|
|
|
any other events or transactions that Arbitrons Board of
Directors determines constitute a change of control.
|
If payments to Mr. Morris under the employment agreement
would result in imposition of an excise tax under
section 4999 of the Internal Revenue Code of 1986, as
amended, Mr. Morris would receive an additional payment to
compensate for the imposition of the tax. The payment shall be
in an amount such that after the payment of all taxes, income
and excise, Mr. Morris will be in the same after-tax
position as if no excise taxes under the Internal Revenue Code
had been imposed.
Retention
Agreements
Messrs. Creamer, Charlebois, Bouvard and Henry have entered
into retention agreements with us that provide for severance
payments under some circumstances and for payments with respect
to stock options and restricted stock grants upon a change of
control.
The agreements provide that if the named executive officer is
terminated other than for cause, and the termination is not a
change of control termination, the executive will receive a
lump-sum cash payment in the amount of 12 months of base
salary and non-equity incentive, if the executive has fewer than
15 years of service, or 15 months of base salary and
non-equity incentive if the executive has 15 or more years of
service. The agreements provide that following a change of
control termination, the executive will be entitled to receive a
lump-sum payment that is equal to 18 months of base salary
and non-equity incentive if the executive has fewer than
15 years of service, or 21 months of base salary and
non-equity incentive if the executive has 15 or more years of
service. For purposes of the retention agreements, payouts for
non-equity incentive plan payments are based on the higher of
the target non-equity incentive award applicable to the
executive for the year in which termination occurs or the
average of the actual non-equity incentive plan payments paid to
the executive for the last three fiscal years. For purposes of
the retention agreements, change of control termination excludes
the executives failure to perform the duties reasonably
assigned by the Chief Executive Officer. Receipt of any
severance payments under the retention agreements is subject to
the executive executing a waiver and release agreement releasing
any claims against the Company.
In addition, the executive shall be provided, for a period of
between 12 and 21 months following termination without
cause or a change of control termination or, if sooner, until
reemployment with equivalent benefit, with the same or
equivalent health, dental, accidental death and dismemberment,
short-term and long-term disability, life insurance coverage,
and all other insurance and other health and welfare benefits
programs he or she was entitled to on the day before the
termination. For purposes of the table below, we have assumed
that Arbitron will provide equivalent benefits at
Arbitrons current average cost per participant for each of
the benefit plans in which the executive currently participates.
Upon a change of control, the vesting and exercisability of
stock options and the vesting of other awards under
Arbitrons stock-based compensation plans will accelerate,
and any unvested awards would become fully and immediately
vested.
For purposes of these retention agreements, a change of
control is generally defined as any of the following:
|
|
|
|
|
a merger or consolidation involving Arbitron, if less than 50%
of its voting stock after the merger or consolidation is held by
persons who were stockholders before the merger or consolidation;
|
33
|
|
|
|
|
a sale of the assets of Arbitron substantially as an entirety;
|
|
|
|
ownership by a person or group acting in concert of at least 51%
of Arbitrons voting securities;
|
|
|
|
ownership by a person or group acting in concert of between 25%
and 50% of Arbitrons voting securities, if such ownership
was not approved by Arbitrons Board of Directors;
|
|
|
|
approval by Arbitrons stockholders of a plan for the
liquidation of Arbitron;
|
|
|
|
specified changes in the composition of Arbitrons Board of
Directors; or
|
|
|
|
any other events or transactions that Arbitrons Board of
Directors determines constitute a change of control.
|
If payments to an executive under such a retention agreement
would result in imposition of an excise tax under
section 4999 of the Internal Revenue Code of 1986, as
amended, the executive will also be entitled to be paid an
amount to compensate for the imposition of the tax. The payment
shall be in an amount such that after payment of all taxes,
income and excise, the executive will be in the same after-tax
position as if no excise tax under the Internal Revenue Code of
1986, as amended, had been imposed.
2006
Potential Payments Upon Termination or Change in
Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause
|
|
|
Change in
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Control
|
|
|
Termination
|
|
|
Death
|
|
|
Disability
|
|
Name
|
|
Benefit
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Stephen B. Morris
|
|
Severance
|
|
|
1,186,416
|
|
|
|
1,854,624
|
|
|
|
0
|
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
|
Non-equity incentive
|
|
|
1,075,332
|
|
|
|
1,334,718
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of Vesting(1)
|
|
|
1,994,462
|
|
|
|
1,994,462
|
|
|
|
0
|
|
|
|
1,994,462
|
|
|
|
1,994,462
|
|
|
|
Benefits continuation
|
|
|
18,853
|
|
|
|
28,279
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Pension Enhancement
|
|
|
0
|
|
|
|
618,834
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Tax-gross-ups
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Sean R. Creamer
|
|
Severance
|
|
|
350,000
|
|
|
|
525,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,167
|
|
|
|
Non-equity incentive
|
|
|
175,000
|
|
|
|
262,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of Vesting(1)
|
|
|
774,300
|
|
|
|
774,300
|
|
|
|
0
|
|
|
|
774,300
|
|
|
|
774,300
|
|
|
|
Benefits continuation
|
|
|
13,906
|
|
|
|
20,859
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Tax-gross-ups
|
|
|
|
|
|
|
24,925
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Owen Charlebois
|
|
Severance
|
|
|
350,633
|
|
|
|
525,950
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,219
|
|
|
|
Non-equity incentive
|
|
|
225,241
|
|
|
|
337,862
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of Vesting(1)
|
|
|
898,811
|
|
|
|
898,811
|
|
|
|
0
|
|
|
|
898,811
|
|
|
|
898,811
|
|
|
|
Benefits continuation
|
|
|
13,906
|
|
|
|
20,859
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Tax-gross-ups
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Pierre C. Bouvard(2)
|
|
Severance
|
|
|
408,710
|
|
|
|
572,194
|
|
|
|
0
|
|
|
|
0
|
|
|
|
27,247
|
|
|
|
Non-equity incentive
|
|
|
212,529
|
|
|
|
297,541
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of Vesting(1)
|
|
|
832,410
|
|
|
|
832,410
|
|
|
|
0
|
|
|
|
832,410
|
|
|
|
832,410
|
|
|
|
Benefits continuation
|
|
|
17,382
|
|
|
|
24,335
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Tax-gross-ups
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Vaughan Scott Henry
|
|
Severance
|
|
|
264,119
|
|
|
|
396,179
|
|
|
|
0
|
|
|
|
0
|
|
|
|
22,010
|
|
|
|
Non-equity incentive
|
|
|
105,648
|
|
|
|
158,471
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of Vesting(1)
|
|
|
333,400
|
|
|
|
333,400
|
|
|
|
0
|
|
|
|
333,400
|
|
|
|
333,400
|
|
|
|
Benefits continuation
|
|
|
13,906
|
|
|
|
20,859
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Tax-gross-ups
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
34
|
|
|
(1) |
|
Represents the amount of compensation that would have been
received on December 31, 2006, upon the acceleration of
vesting of all outstanding unvested share-based awards by each
named executive officer. For stock options, the value was
determined based upon each options intrinsic value (i.e.,
difference between the shares market price on
December 31, 2006, and the related options exercise
price). For restricted stock, the value was determined based
upon the share market price as of December 31, 2006,
$43.44. These compensation amounts are not necessarily equal to
the Companys unvested share-based compensation calculated
pursuant to SFAS No. 123(R). |
|
(2) |
|
Mr. Bouvard has more than 15 years of service with the
Company. |
Compensation
Committee Interlocks and Insider Participation
Erica Farber, Philip Guarascio, Luis G. Nogales and Lawrence
Perlman served on the Compensation and Human Resources Committee
of the Board of Directors during 2006. No member of the
Compensation and Human Resources Committee was at any time
during 2006, or formerly, an officer or employee of Arbitron or
any of its subsidiaries, and no member of the Compensation and
Human Resources Committee had any relationship with Arbitron
during 2006 requiring disclosure under Item 404 of
Regulation S-K
under the Exchange Act. None of Arbitrons executive
officers serves as a member of the board of directors or
executive compensation committee of any entity that has one or
more executive officers serving as a member of the
Arbitrons Board.
35
REPORT OF
THE AUDIT COMMITTEE
The role of the Audit Committee is to assist the Board of
Directors in its oversight of the Companys financial
reporting process. Management has the primary responsibility for
the financial statements and the reporting process, including
the systems of internal controls. The Companys independent
registered public accounting firm is responsible for auditing
the Companys financial statements and expressing an
opinion as to their conformity to U.S. generally accepted
accounting principles.
The Audit Committee has reviewed and discussed the
Companys audited consolidated financial statements for
fiscal year 2006 with Companys management and has
discussed these financial statements with KPMG LLP, the
Companys independent registered public accounting firm.
The Audit Committee has also discussed with KPMG LLP the matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). KPMG LLP also
provided the Audit Committee with both the written disclosures
and the letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and
has discussed with KPMG LLP the independence of KPMG LLP from
the Company. In addition, the Audit Committee has considered
whether the provision of nonaudit services, and the fees charged
for such nonaudit services, by KPMG LLP are compatible with
maintaining the independence of KPMG LLP from the Company, and
determined that they are compatible with independence.
The Audit Committee discussed with the Companys internal
and independent accountants the overall scope and plans for
their respective audits. The Audit Committee meets with the
internal auditors and independent accountants, with and without
management present, to discuss the results of their
examinations, their evaluations of the Companys internal
controls and the overall quality of the Companys financial
reporting. In addition, the Audit Committee met with the Chief
Executive Officer, Chief Financial Officer and Vice President,
Accounting Services and Treasury of the Company to discuss the
processes they have undertaken to evaluate the accuracy and fair
presentation of the Companys financial statements and the
effectiveness of the Companys system of disclosure
controls and procedures.
In reliance on the reviews and discussions referred to above and
based on the foregoing, the Audit Committee recommended to the
Companys Board of Directors that the audited consolidated
financial statements for fiscal year 2006 be included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2006.
Submitted by the Audit Committee of the
Board of Directors
Richard A. Post, Chair
Shellye L. Archambeau
Larry E. Kittelberger
36
STOCK
OWNERSHIP INFORMATION
Stock
Ownership of Arbitrons Directors and Executive
Officers
The following table sets forth the number of shares of Arbitron
common stock beneficially owned, directly or indirectly, as of
April 2, 2007, by (i) each nominee for election as a
director, (ii) each person who served as a director during
2006, (iii) the named executive officers, and (iv) our
directors, nominees, and executive officers as a group. Each
person has sole voting and investment power with respect to the
shares beneficially owned by that person, except as otherwise
indicated. The percentages below are based on the number of
shares of Arbitron common stock issued and outstanding as of
April 2, 2007.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
|
Percent of Shares
|
|
|
|
Common Stock
|
|
|
of Common Stock
|
|
Name of Individual or Identity of Group
|
|
Beneficially Owned(1)
|
|
|
Owned(2)
|
|
|
Director Nominees
|
|
|
|
|
|
|
|
|
William T. Kerr
|
|
|
0
|
|
|
|
*
|
|
Directors:
|
|
|
|
|
|
|
|
|
Stephen B. Morris(3)
|
|
|
624,732
|
|
|
|
2.05
|
%
|
Alan Aldworth(3)(4)
|
|
|
31,046
|
|
|
|
*
|
|
Shellye L. Archambeau(3)(4)
|
|
|
12,096
|
|
|
|
*
|
|
Erica Farber(3)(4)
|
|
|
68,350
|
|
|
|
*
|
|
Philip Guarascio(3)(4)
|
|
|
57,209
|
|
|
|
*
|
|
Larry E. Kittelberger(3)(4)
|
|
|
67,774
|
|
|
|
*
|
|
Luis G. Nogales(3)(4)
|
|
|
68,937
|
|
|
|
*
|
|
Lawrence Perlman(3)
|
|
|
80,522
|
|
|
|
*
|
|
Richard A. Post(3)(4)
|
|
|
81,960
|
|
|
|
*
|
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
Sean R. Creamer(3)
|
|
|
44,120
|
|
|
|
*
|
|
Owen Charlebois(3)
|
|
|
122,765
|
|
|
|
*
|
|
Pierre C. Bouvard(3)
|
|
|
72,710
|
|
|
|
*
|
|
Vaughan Scott Henry(3)
|
|
|
9,365
|
|
|
|
*
|
|
All Executive Officers and
Directors as a Group (17 persons)(3)(4)
|
|
|
1,457,089
|
|
|
|
4.65
|
%
|
|
|
|
* |
|
Represents less than 1%. |
|
(1) |
|
In accordance with
Rule 13d-3
under the Exchange Act, a person is deemed to be a
beneficial owner of a security if he or she has or
shares the power to vote or direct the voting of such security
or the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of
any securities of which that person has the right to acquire
beneficial ownership within 60 days after April 2,
2007. More than one person may be deemed to be a beneficial
owner of the same securities. |
|
(2) |
|
For the purpose of computing the percentage ownership of each
beneficial owner, any securities that were not outstanding but
that were subject to options, warrants, rights or conversion
privileges held by such beneficial owner exercisable within
60 days after April 2, 2007, were deemed to be
outstanding in determining the percentage owned by such person,
but were deemed not to be outstanding in determining the
percentage owned by any other person. |
|
(3) |
|
Includes options for Mr. Morris to purchase
557,684 shares of common stock exercisable within
60 days from April 2, 2007; includes options for
Mr. Aldworth to purchase 29,000 shares of common stock
exercisable within 60 days from April 2, 2007;
includes options for Ms. Archambeau to purchase
12,000 shares of common stock exercisable within
60 days from April 2, 2007; includes options for
Ms. Farber to purchase 62,150 shares of common stock
exercisable within 60 days from April 2, 2007;
includes options for Mr. Guarascio to purchase
51,386 shares of common stock exercisable within
60 days from April 2, 2007; |
37
|
|
|
|
|
includes options for Mr. Kittelberger to purchase
61,366 shares of common stock exercisable within
60 days from April 2, 2007; includes options for
Mr. Nogales to purchase 66,891 shares of common stock
exercisable within 60 days from April 2, 2007;
includes options for Mr. Perlman to purchase
73,699 shares of common stock exercisable within
60 days from April 2, 2007; includes options for
Mr. Post to purchase 79,468 shares of common stock
exercisable within 60 days from April 2, 2007;
includes options for Mr. Creamer to purchase
25,000 shares of common stock exercisable within
60 days from April 2, 2007; includes options for
Mr. Charlebois to purchase 105,001 shares of common
stock exercisable within 60 days from April 2, 2007;
includes options for Mr. Bouvard to purchase
58,335 shares of common stock exercisable within
60 days from April 2, 2007; includes options for
Mr. Henry to purchase 5,000 shares of common stock
exercisable within 60 days from April 2, 2007; and
includes options for all executive officers and directors as a
group to purchase 1,263,651 shares of common stock
exercisable within 60 days from April 2, 2007. |
|
(4) |
|
Includes 2,046 DSUs for Mr. Aldworth, which vest within
60 days of April 2, 2007, and convert to shares of
common stock on a
one-for-one
basis; includes 96 DSUs for Ms. Archambeau, which vest
within 60 days of April 2, 2007, and convert to shares
of common stock on a
one-for-one
basis; includes 3,700 DSUs for Ms. Farber, which vest
within 60 days of April 2, 2007, and convert to shares
of common stock on a
one-for-one
basis; includes 4,823 DSUs for Mr. Guarascio, which vest
within 60 days of April 2, 2007, and convert to shares
of common stock on a
one-for-one
basis; includes 6,408 DSUs for Mr. Kittelberger, which vest
within 60 days of April 2, 2007, and convert to shares
of common stock on a
one-for-one
basis; includes 2,046 DSUs for Mr. Nogales, which vest
within 60 days of April 2, 2007, and convert to shares
of common stock on a
one-for-one
basis; and includes 1,492 DSUs for Mr. Post, which vest
within 60 days of April 2, 2007, and convert to shares
of common stock on a
one-for-one
basis. |
38
Stock
Ownership of Arbitrons Principal Stockholders
The following table sets forth the number of shares of Arbitron
common stock beneficially owned, directly or indirectly, by each
person known to Arbitron to beneficially own more than 5% of
Arbitrons outstanding common stock. This information is
based solely upon the beneficial ownership of these persons as
reported to Arbitron as of the date of the most recent
Schedule 13D or 13G filed with the Securities and Exchange
Commission on behalf of such persons. Each person or entity has
sole voting and investment power with respect to the shares
beneficially owned by that person or entity, except as otherwise
indicated. The percentages below are based on the number of
shares of Arbitron common stock issued and outstanding as of
April 2, 2007.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
Percent of Common
|
|
Name and Address of Beneficial Owner
|
|
Beneficial Ownership
|
|
|
Stock Owned
|
|
|
Eminence Capital, LLC
|
|
|
|
|
|
|
|
|
Ricky C. Sandler
|
|
|
3,345,600
|
(1)
|
|
|
11.19
|
%
|
65 East 55th Street,
25th Floor
New York, New York 10022
|
|
|
|
|
|
|
|
|
Neuberger Berman Inc.
|
|
|
2,716,550
|
(2)
|
|
|
9.08
|
%
|
605 Third Avenue
New York, New York 10158
|
|
|
|
|
|
|
|
|
H.A. Schupf & Co., LLC
|
|
|
2,361,466
|
(3)
|
|
|
7.90
|
%
|
590 Madison Avenue
New York, New York 10022
|
|
|
|
|
|
|
|
|
Capital Research and Management
Company
SMALLCAP World Fund, Inc.
|
|
|
2,167,280
|
(4)
|
|
|
7.25
|
%
|
333 South Hope Street
Los Angeles, California 90071-1406
|
|
|
|
|
|
|
|
|
Abrams Capital, LLC
Pamet Capital Management, LLC
Pamet Capital Management, L.P.
David Abrams
|
|
|
1,984,598
|
(5)
|
|
|
6.64
|
%
|
c/o Pamet Capital Management,
L.P.
222 Berkeley Street, 22nd Floor
Boston, Massachusetts 02116
|
|
|
|
|
|
|
|
|
Ahmet H. Okumus
|
|
|
1,504,765
|
(6)
|
|
|
5.03
|
%
|
800 Third Avenue,
10th Floor
New York, New York 10022
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As reported on Schedule 13G/A filed on February 14,
2007. The Schedule 13G/A was filed by: (a) Eminence
Capital, LLC, a New York limited liability company
(Eminence Capital); (b) Eminence GP, LLC, a New
York limited liability company (Eminence GP); and
(c) Ricky C. Sandler, a U.S. Citizen. Eminence
Partners, LP, a New York limited partnership (Eminence
I); Eminence Partners II, LP, a New York limited
partnership (Eminence II); Eminence Long Alpha,
LP, a Delaware limited partnership (ELA); Eminence
Leveraged Long Alpha, LP, a Delaware limited partnership
(ELLA and together with Eminence I,
Eminence II, and ELA, the Partnerships); as
well as Eminence Long Alpha Master Fund, Ltd. and Eminence
Leveraged Long Alpha Master Fund, Ltd. (the Offshore
Master Funds); and Eminence Fund, Ltd.(Eminence
Offshore), each a Cayman Islands company, and collectively
referred to as the Offshore Funds). The Partnerships
and the Offshore Funds are collectively referred to as the
Eminence Funds. According to the
Schedule 13G/A, (a) Eminence Capital is the beneficial
owner of, and has shared voting and dispositive power with
respect to, 3,345,600 common shares, (b) Eminence GP is the
beneficial owner of, and has shared voting and dispositive power
with respect to, 2,078,660 common shares, and (c) Ricky C.
Sandler is the beneficial owner of, and has shared voting and
dispositive power with respect to, 3,345,600 common shares and
sole voting power with respect to 500 common shares. The
Schedule 13G/A indicates that (i) Eminence Capital
serves as the investment manager to the Eminence Funds with
respect to the shares of Common Stock directly owned by the
Eminence Funds and may be deemed |
39
|
|
|
|
|
to have voting and dispositive power over the shares held for
the accounts of the Eminence Funds; (ii) Eminence GP serves
as general partner or manager with respect to the shares of
Common Stock directly owned by the Partnerships and the Offshore
Master Funds, respectively, and may be deemed to have the voting
and dispositive power over the shares held for the accounts of
the Partnerships and the Offshore Master Funds, and
(ii) Mr. Sandler is the Managing Member of each
Eminence Capital and Eminence GP and may be deemed to have
voting and dispositive power with respect to the shares of
Common Stock directly owned by the Eminence Funds, and
individually with respect to certain family accounts over which
Mr. Sandler has investment discretion. |
|
(2) |
|
As reported on Schedule 13G/A filed on February 13,
2007. According to the Schedule 13G/A, (a) Neuberger
Berman Inc. and Neuberger Berman, LLC each has sole voting power
with respect to 9,670 common shares, shared voting power with
respect to 2,223,380 common shares and shared dispositive power
with respect to 2,716,550 common shares, (b) Neuberger
Berman Management Inc. has shared voting power and shared
dispositive power with respect to 2,223,380 common shares and
(c) Neuberger Berman Equity Funds has shared voting power
and shared dispositive power with respect to 2,187,700 common
shares. The Schedule 13G/A indicates that:
(a) Neuberger Berman, LLC is deemed to be a beneficial
owner of certain shares since it has shared power to make
decisions whether to retain or dispose, and in some cases the
sole power to vote the securities of many unrelated clients;
however, Neuberger Berman, LLC does not have any economic
interest in the securities of those clients and the clients have
the sole right to receive and the power to direct the receipt of
dividends from or proceeds from the sale of such securities;
(b) with regard to 2,223,380 of the common shares for which
shared power to direct voting is reported, Neuberger Berman, LLC
and Neuberger Berman Management Inc. are deemed to be the
beneficial owners of these shares since they both have shared
power to make decisions whether to retain or dispose of such
securities; (c) Neuberger Berman, LLC and Neuberger Berman
Management Inc. serve as
sub-advisor
and investment manager, respectively, of Neuberger Bermans
various Mutual Funds. The Schedule 13G/A further indicates
that Neuberger Berman Inc. is making the filing pursuant to
Rule 13d-1(b)(ii)(G)
of the Exchange Act since it owns 100% of both Neuberger Berman,
LLC and Neuberger Management Inc. |
|
(3) |
|
As reported on Schedule 13G/A filed on January 29,
2007. According to the Schedule 13G/A, H.A.
Schupf & Co., LLC was deemed to beneficially own the
2,361,466 common shares as a result of acting as investment
adviser in accordance with
Rule 13d-1(b)(1)(ii)(E)
of the Exchange Act, and H.A. Schupf & Co., LLC has
sole voting and dispositive power with respect to these shares. |
|
(4) |
|
As reported on Schedule 13G filed on February 12,
2007. According to the Schedule 13G/A, Capital Research and
Management Company represents 2,167,280 common shares which was
deemed to beneficially own as a result of acting as investment
adviser in accordance with
Rule 13d-1(b)(1)(ii)(E)
of the Exchange Act, and Capital Research and Management Company
has sole voting and dispositive power with respect to these
shares. According to the Schedule 13G/A, SMALLCAP World
Fund, Inc., which is advised by Capital Research and Management
Company, is the beneficial owner of 1,496,760 common shares as a
result of acting as investment adviser in accordance with
Rule 13d-1(b)(1)(ii)(E)
of the Exchange Act, and SMALLCAP World Fund, Inc. and Capital
Research and Management Company both agreed to file a joint
statement on Schedule 13G. |
|
(5) |
|
As reported on Schedule 13G/A filed on February 13,
2007. According to the Schedule 13G/A, (a) Abrams
Capital, LLC has shared voting and dispositive power with
respect to 1,850,398 common shares, and (b) Pamet Capital
Management, LLC, Pamet Capital Management, L.P. and David Abrams
each have shared voting and dispositive power with respect to
1,984,598 common shares. The Schedule 13G/A indicates that
shares reported herein for Abrams Capital, LLC (Abrams
LLC) reflect shares beneficially owned by private
investment funds of which Abrams LLC is the general partner;
shares reported herein for Pamet Capital Management, LLC
(Pamet LLC), Pamet Capital Management, L.P.
(Pamet LP) and David Abrams reflect the shares
reported for Abrams LLC and shares held by an additional private
investment fund for which Pamet LP is the investment manager;
Pamet LLC is the general partner of Pamet LP; David Abrams is
the managing member of both Pamet LLC and Abrams LLC. |
|
(6) |
|
As reported on Schedule 13G/A filed on February 1,
2007. According to the Schedule 13G/A, Ahmet H. Okumus
represents 1,504,765 common shares which was deemed to
beneficially own as a result of acting |
40
|
|
|
|
|
as investment adviser in accordance with
Rule 13d-1(b)(1)(ii)(E)
of the Exchange Act, and has sole voting and dispositive power
with respect to those shares. The Schedule 13G/A indicates
that the shares of Common Stock are also beneficially owned by
(a) (i) Okumus Opportunity Fund, Ltd.,
(ii) Okumus Technology Value Fund, Ltd., (iii) Okumus
Market Neutral Fund, Ltd., (iv) Okumus Leveraged
Opportunity Fund, Ltd. (v) Okumus Long Only Fund, Ltd. and
(vi) Okumus Diversified Value Fund, Ltd., all of which are
international business companies incorporated in the British
Virgin Islands, for which Okumus Capital, LLC, a Delaware
limited liability company (OC) of which Ahmet H.
Okumus (Okumus) is the managing member, serves as
the investment manager; (b) Okumus Opportunity Partners,
L.P. and Okumus Long Only Partners, L.P., each a Delaware
limited partnership, for which Okumus Advisors, LLC, a Delaware
limited liability company of which Okumus is the managing
member, serves as general partner and investment advisor;
(c) Okumus Technology Value Partners, L.P., a Delaware
limited partnership, for which Okumus Technology Advisors, LLC,
a Delaware limited liability company of which Okumus is the
managing member, serves as general partner and investment
advisor; and (d) Okumus Diversified Value Partners, L.P., a
Delaware limited partnership, for which Okumus Diversified
Advisors, LLC, a Delaware limited liability company of which
Okumus is the managing member, serves as general partner and
investment advisor. In addition, OC manages, on a discretionary
basis, separate accounts. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Review and Approval of Related Person
Transactions. The Board of Directors has adopted
a written Policy and Procedures with Respect to Related Person
Transactions (the Policy), which is administered by
the Corporate Governance Committee. The Corporate Governance
Committee reviews all relationships and transactions in which
the Company and our directors and executive officers or their
immediate family members are participants to determine whether
such persons have a direct or indirect material interest. The
Companys legal staff is primarily responsible for the
implementation of processes and controls to obtain information
from the directors and executive officers with respect to
related person transactions and for then determining, based on
the facts and circumstances, whether the Company or a related
person has a direct or indirect material interest in the
transaction. As required under SEC rules, transactions that are
determined to be directly or indirectly material to the Company
or a related person are disclosed in the Companys proxy
statement. In addition, the Corporate Governance Committee
reviews and approves or ratifies any related person transaction
that is required to be disclosed. It is the Companys
policy to enter into or ratify disclosable related person
transactions only when the Corporate Governance Committee
determines that the related person transaction in question is
in, or is not inconsistent with, the best interests of the
Company and its stockholders. In the course of its review and
approval or ratification of a disclosable related party
transaction, the Corporate Governance Committee considers:
|
|
|
|
|
the benefits to the Company;
|
|
|
|
the impact on a directors independence in the event the
related person is a director, an immediate family member of a
director or an entity in which a director is a partner,
stockholder or executive officer;
|
|
|
|
the availability of other sources for comparable products or
services;
|
|
|
|
the terms of the transaction;
|
|
|
|
the terms available to unrelated third parties or to employees
generally; and
|
|
|
|
any other matters the Corporate Governance Committee deems
appropriate.
|
Any member of the Corporate Governance Committee who is a
related person with respect to a transaction under review may
not participate in the deliberations or vote to approve or
ratify the transaction; provided, however, that such director
may be counted in determining the presence of a quorum at a
meeting of the Corporate Governance Committee at which the
transaction is considered.
41
INDEPENDENT
AUDITORS AND AUDIT FEES
The Audit Committee of the Board of Directors has selected KPMG
LLP, our current independent registered public accounting firm,
to serve as our independent registered public accounting firm
for the year ending December 31, 2007.
The Board of Directors has requested that representatives of
KPMG LLP attend the annual meeting, and they are expected to
attend. These representatives will have an opportunity to make a
statement if they desire to do so, and will be available to
respond to stockholder questions.
The following table sets forth the aggregate fees billed to
Arbitron for services rendered during, or in connection with,
the fiscal years ended December 31, 2006, and 2005, by KPMG
LLP:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Audit Fees(1)
|
|
$
|
485,000
|
|
|
$
|
460,000
|
|
|
|
|
|
|
|
|
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Benefit Plan Audits
|
|
|
28,000
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
Total Audit-Related Fees
|
|
|
28,000
|
|
|
|
24,000
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
Continuing Education Seminars
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
Total All Other Fees
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
Total Fees to Independent Auditors
|
|
$
|
513,000
|
|
|
$
|
487,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees include costs associated with the audit of internal
control over financial reporting. |
The Audit Committee, in accordance with the preapproval policies
and procedures described below, approved all of the services
described in the table above.
Preapproval
Policies and Procedures
The Audit Committees policy is to specifically review and
preapprove any engagement of the independent registered public
accounting firm to provide any audit or permissible nonaudit
service to Arbitron. In the event that preapproval is required
prior to a scheduled meeting, the Audit Committee has delegated
authority to its Chairman to specifically preapprove engagements
for the performance of nonaudit services, provided that the
estimated cost for such services is less than $10,000. If the
Chairman is not available, another member of the Audit Committee
may preapprove such nonaudit service engagement. All decisions
made under this delegation of authority are required to be
reported to the full Audit Committee for ratification at its
next scheduled meeting.
AMENDMENT
TO THE 1999 STOCK INCENTIVE PLAN
(Proposal 2)
Upon the recommendation of the Compensation and Human Resources
Committee, the Board of Directors approved an amendment (the
Plan Amendment) to the Companys 1999 Stock
Incentive Plan, as amended (the Plan), to increase
the number of shares of common stock with respect to which
awards may be granted under the Plan by 400,000 shares to a
total of 4,604,009 shares, subject to approval by the
stockholders at the annual meeting. The Board of Directors
unanimously recommends that the stockholders approve all of the
terms of the Plan Amendment, including the performance goals and
payment limits, in order to permit the Company to continue to
compensate employees, directors and consultants, in part, with
stock-based awards.
The Plan was originally approved by stockholders on May 20,
1999, and was subsequently amended on November 28, 2000,
March 30, 2001, and May 17, 2004. As of the record
date, an aggregate of
42
3,940,217 shares of common stock have been issued or
reserved for either the issuance upon exercise of outstanding
options or settlement of DSUs or settlement of restricted stock
units under the Plan. Therefore, a total of only
263,792 shares remain available for future issuance under
the Plan, subject to the adjustment provisions set forth in the
Plan in the event of reorganizations, mergers, consolidations,
recapitalizations, liquidation, stock dividends, splits,
combinations of shares, rights offerings, divestitures or
extraordinary dividends, or other similar changes in the
corporate structure or shares of Arbitron. If this proposal is
approved, we will have a total of 663,792 shares of common
stock remaining available for issuance under the Plan.
The Board of Directors believes that the number of shares of
common stock currently available for issuance under the Plan is
not sufficient in view of our compensation structure and
strategy. The Board of Directors has concluded that our ability
to attract and retain exceptional employees, directors,
consultants and independent contractors is important to our
success and would be enhanced by our continued ability to grant
equity compensation. In addition, the Board of Directors
believes that the availability of the additional
400,000 shares of common stock for issuance under the Plan
would ensure that we continue to have a sufficient number of
shares of common stock authorized for issuance under the Plan.
The material features of the Plan are summarized below, which
summary is qualified in its entirety by the text of the Plan. A
copy of the Plan Amendment is attached as Appendix A to
this proxy statement.
Purpose
The purpose of the Plan is to advance Arbitrons interests
and the interests of our stockholders by enabling us to attract
and retain talented employees, directors, consultants and
independent contractors by:
|
|
|
|
|
providing them with an incentive through equity
participation; and
|
|
|
|
rewarding such individuals who contribute to the achievement of
Arbitrons economic objectives.
|
Administration
The Plan is to be administered by a committee of the Board of
Directors consisting of at least two nonemployee directors who
are independent for purposes of the rules and
regulations of the New York Stock Exchange and, if the Board so
determines in its sole discretion, who are outside
directors within the meaning of the Code. Subject to the
provisions of the Plan, the committee has the authority to
determine all provisions of incentive awards granted under the
Plan, including the following:
|
|
|
|
|
the recipients of incentive awards;
|
|
|
|
the nature and extent of the incentive awards, including:
|
|
|
|
|
|
the number of shares of common stock to be subject to each
incentive award;
|
|
|
|
any exercise price;
|
|
|
|
the manner in which incentive awards will vest or become
exercisable and whether incentive awards will be granted in
tandem with other incentive awards; and
|
|
|
|
the form of written agreement, if any, evidencing such incentive
award;
|
|
|
|
|
|
the time or times when incentive awards will be granted;
|
|
|
|
the duration of each incentive award; and
|
|
|
|
the restrictions and other conditions to which the payment or
vesting of incentive awards may be subject.
|
Calculation
of Shares Available
Shares of common stock that are issued under the Plan or that
are subject to outstanding awards will be applied to reduce the
maximum number of shares of common stock remaining available for
issuance under the
43
Plan. To the extent that any shares of common stock that are
subject to an award under the Plan, or certain delineated prior
plans, (a) are not issued to a participant due to the fact
that such award lapses, expires, is forfeited or for any reason
is terminated unexercised or unvested or is settled or paid in
cash or (b) are used to satisfy any exercise price or
withholding obligations, such shares will automatically again
become available for issuance under the Plan. In addition, to
the extent that a participant uses shares of common stock
already owned by such participant to pay any exercise price or
withholding tax obligations, such shares will automatically
again become available for issuance under the Plan.
Eligibility
for Participation
All employees, nonemployee directors, consultants and
independent contractors of Arbitron or any of our subsidiaries
who, in the judgment of the committee, have contributed, are
contributing or are expected to contribute to the achievement of
Arbitrons economic objectives are eligible to participate
in the Plan.
The granting of awards under the Plan is discretionary, and the
Company cannot now determine the number or type of awards to be
granted in the future to any particular person or group, except
as set forth below. Pursuant to his employment agreement,
Mr. Morris will receive 43,333 shares of restricted
stock or restricted stock units in 2008. Under the 1999, Plan
the Companys nonemployee directors will receive automatic
annual grants of options to purchase 7,000 shares of common
stock on the date of each annual meeting with an exercise price
equal to the closing sale price of the common stock on the grant
date. If Mr. Kerr is elected as a director at the annual
meeting, he will receive options to purchase 15,000 shares
of common stock. Set forth in the table below is the number of
options the Company anticipates will be awarded on May 15,
2007, under the Plan to the nonemployee directors,
and/or
restricted stock units to be awarded to Mr. Morris in 2008.
It is not possible to determine other specific amounts that may
be awarded under the Plan.
New Plan
Benefits
|
|
|
|
|
Name and Position
|
|
Number of Units
|
|
Stephen B. Morris, CEO
|
|
|
43,333
|
|
Nonemployee Director Group
|
|
|
50,000
|
|
Options
The Plan permits the granting of options to purchase common
stock intended to qualify as incentive stock options within the
meaning of Section 422 of the Code, and nonstatutory stock
options that do not qualify as incentive stock options.
The committee determines the per-share exercise price of each
stock option at the time of the stock option grant, provided,
however, that such price may not be less than the fair market
value of Arbitrons common stock on the grant date. The
current measure of fair market value on a particular date is the
closing market price per share of common stock on such date, or
if such date is not a trading day, the trading day immediately
preceding the grant date as reported on the New York Stock
Exchange Composite Tape on that date. If the grantee of an
incentive stock option is a person who owns, directly or
indirectly, more than 10% of the total combined voting power of
all classes of stock of Arbitron or any parent or subsidiary of
Arbitron, the exercise price may not be less than 110% of the
fair market value of Arbitrons common stock on the grant
date. To the extent that the aggregate fair market value of
shares of common stock, as determined on the date of grant, with
respect to which incentive stock options become exercisable for
the first time by a grantee during any calendar year, exceeds
$100,000, such excess options will be treated as nonstatutory
stock options.
The committee determines the term of each option, provided,
however, that the exercise period for options may not exceed
10 years from the date of grant and, if the grantee of an
incentive stock option is a person who owns, directly or
indirectly, more than 10% of the total combined voting power of
all classes of stock of Arbitron or any parent or subsidiary of
Arbitron, the term of the incentive stock option may not exceed
five years from the date of grant. The committee determines at
what time or times each option may be exercised. Options may be
made exercisable in installments. The exercisability of options
may be accelerated by the committee.
44
In general, an optionee must pay the exercise price of an option
entirely in cash (including check, bank draft or money order);
however, the committee may, in its sole and absolute discretion,
allow such payments to be made, in whole or in part, by:
engaging in a broker-assisted, cashless exercise; tendering
previously acquired shares; or any combination of such methods.
Stock options granted under the Plan may not be sold,
transferred, pledged or assigned other than by will or under
applicable laws of descent and distribution. However, the
committee may, in its discretion and subject to certain
limitations, permit limited transfers of the options for the
benefit of family members (as such term is defined
in the Plan) of grantees.
Stock
Appreciation Rights
As part of the amended and restated Plan, the Board of Directors
provided that stock appreciation rights (SARs) may
be granted under the Plan. The committee may grant SARs to
anyone eligible to participate in the Plan. SARs may be granted
in conjunction with, or independently of, any option or other
incentive award granted under the Plan. Upon exercise of a SAR,
the grantee will receive an amount equal to the excess of the
fair market value of Arbitrons common stock on the date of
exercise over the grant price of the right on the date of grant,
or in the case of a tandem SAR granted on the date of grant of
the related option, as specified by the committee in its sole
and absolute discretion, which, except in the case of substitute
awards or certain adjustments, shall not be less than the fair
market value of Arbitrons common stock on such date of
grant of the right or the related option, as the case may be.
Such payment to the grantee upon exercise will be in cash, in
shares of common stock or other property, or any combination
thereof, as determined by the committee. Subject to the
foregoing, the committee will determine the period when SARs
vest and become exercisable, the exercise price of the SARs and
whether SARs will be granted in connection with, or
independently of, any options or other incentive award.
Restricted
Stock, Restricted Stock Unit and Deferred Stock Unit
Awards
The committee may grant awards of restricted stock, restricted
stock units or deferred stock units to anyone eligible to
participate in the Plan. The committee may impose such
restrictions or conditions to the vesting of such awards as it
deems appropriate, including, without limitation, that the
grantee remain in the continuous employ or service of Arbitron
or a subsidiary for a certain period or that the grantee or
Arbitron (or any subsidiary or division thereof) satisfy certain
performance criteria. The awards of restricted stock, restricted
stock units or deferred stock units that provide for
(a) vesting upon the satisfaction of certain performance
criteria shall vest over a period of not less than one year from
date of grant and (b) time-based vesting shall vest over a
period of not less than three years from date of grant;
provided, however, that such awards granted in lieu of some
other form of compensation are permitted without such vesting
restrictions, and grants may accelerate as provided under the
Plan or agreements for changes in control or as provided for in
employment or change in control agreements. Unless the committee
determines otherwise, the grantee will have all voting,
dividend, liquidation and other rights with respect to the
shares of Arbitron common stock issued as a restricted stock
award, but not with respect to a restricted stock unit or
deferred stock unit until the award vests. Deferred stock units
are effectively restricted stock units under which the recipient
makes an election as to what compensation is covered by the
award and when compensation is paid.
Performance
Units
The committee may grant performance units to anyone eligible to
participate in the Plan. Each performance unit provides the
grantee with the right to receive cash, common stock, stock
units or any combination of the foregoing, upon the achievement
of certain performance criteria established by the committee.
The committee determines all of the provisions of the
performance units, including the number of performance units
that will be granted, the requirements applicable to the
performance units, the vesting restrictions of such performance
units, the performance goals applicable to such units and such
other conditions as the committee determines appropriate.
Performance units that provide for vesting upon the satisfaction
of certain performance criteria shall vest over a period of not
less than three years from the date of grant, provided, however,
that performance units granted in lieu of some other form of
compensation are
45
permitted without such vesting restrictions, and units may
accelerate as provided under the Plan or agreements for changes
in control or as provided for in employment or change in control
agreements.
Dividend
Equivalents
As part of the amended and restated Plan, the Board of Directors
provided that the committee may grant dividend equivalents in
connection with incentive awards granted under the Plan. The
committee may grant dividend equivalents to anyone eligible to
participate in the Plan. Dividend equivalent rights entitle the
recipient to receive, currently or on a deferred basis, cash,
stock or other property dividends or cash payments in amounts
equivalent to cash, stock or other property dividends on shares
of common stock with respect to the number of shares of common
stock covered by the incentive award. The committee determines
the terms and conditions of dividend equivalents.
Effect
of Certain Corporate Transactions (Change of
Control)
The committee has the authority to determine, in its sole
discretion, the effect that certain change of control
transactions involving Arbitron, such as a sale of substantially
all of our assets or a merger transaction, will have on
outstanding incentive awards.
Amendment
and Termination of Plan
The Board of Directors may suspend or terminate the Plan or any
portion thereof, at any time, and may amend the Plan from time
to time in such respects as it deems advisable to conform to any
change in applicable laws or regulations or in any other
respects the Board deems to be in Arbitrons best
interests. However, the Board may not amend the Plan without
stockholder approval if stockholder approval is required under
the federal securities laws, Section 422 of the Code or the
rules of the New York Stock Exchange. In addition, the Board may
not, without stockholder approval, make an amendment to the Plan
that is material for purposes of the rules of the
New York Stock Exchange, such as an amendment that increases the
number of authorized shares or the benefits to participants, or
expands the class of persons eligible to receive awards under
the Plan. The Board may not, without the consent of the affected
participant, modify the Plan in such a manner that would
adversely affect any outstanding incentive awards. Unless
terminated earlier by the Board in its sole discretion, the Plan
will terminate at midnight on February 2, 2009.
Federal
Income Tax Consequences
The following is a summary of the United States federal income
tax consequences that generally will arise with respect to
incentive stock options, nonstatutory options, restricted stock,
restricted stock units, stock appreciation rights and dividend
equivalents (collectively, Awards) granted under the
Plan. This summary is based on the federal tax laws in effect as
of the date of this proxy statement. In addition, this summary
assumes that all Awards are exempt from, or comply with, the
rules under Section 409A of the Internal Revenue Code
regarding nonstatutory deferred compensation. Changes to these
laws could alter the tax consequences described below.
Incentive Stock Options. The grant of an
option will not be a taxable event for the grantee or for
Arbitron. A grantee will not recognize taxable income upon
exercise of an incentive stock option (except that the
alternative minimum tax may apply), and any gain realized upon a
disposition of Arbitron common stock received pursuant to the
exercise of an incentive stock option will be taxed as long-term
capital gain if the grantee holds the shares of Arbitron common
stock for at least two years after the date of grant and for one
year after the date of exercise (the holding period
requirement). Arbitron will not be entitled to any
business expense deduction with respect to the exercise of an
incentive stock option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the grantee generally must be an Arbitron employee or
an employee of an Arbitron corporate subsidiary from the date
the option is granted through a date within three months before
the date of exercise of the option.
46
If all of the foregoing requirements are met, except the holding
period requirement mentioned above, the grantee will recognize
ordinary income upon the disposition of the Arbitron common
stock in an amount generally equal to the excess of the fair
market value of the Arbitron common stock at the time the option
was exercised over the option exercise price (but not in excess
of the gain realized on the sale). The balance of the realized
gain, if any, will be capital gain. Arbitron will be allowed a
business expense deduction to the extent the grantee recognizes
ordinary income, subject to Arbitrons compliance with
Section 162(m) of the Internal Revenue Code and to certain
reporting requirements.
Nonstatutory Options. The grant of an option
will not be a taxable event for the grantee or Arbitron. Upon
exercising a nonstatutory option, a grantee will recognize
ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the Arbitron common
stock on the date of exercise. Upon a subsequent sale or
exchange of shares acquired pursuant to the exercise of a
nonstatutory option, the grantee will have taxable capital gain
or loss, measured by the difference between the amount realized
on the disposition and the tax basis of the shares of Arbitron
common stock (generally, the amount paid for the shares plus the
amount treated as ordinary income at the time the option was
exercised).
If Arbitron complies with applicable reporting requirements and
with the restrictions of Section 162(m) of the Internal
Revenue Code, it will be entitled to a business expense
deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
A grantee that has transferred a nonstatutory stock option to a
family member by gift will realize taxable income at the time
the nonstatutory stock option is exercised by the family member.
The grantee will be subject to withholding of income and
employment taxes at that time. The family members tax
basis in the shares of Arbitron common stock will be the fair
market value of the shares of Arbitron common stock on the date
the option is exercised. The transfer of vested nonstatutory
stock options will be treated as a completed gift for gift and
estate tax purposes. Once the gift is completed, neither the
transferred options nor the shares acquired on exercise of the
transferred options will be includable in the grantees
estate for estate tax purposes.
In the event a grantee transfers a nonstatutory stock option to
his or her ex-spouse incident to the grantees divorce,
neither the grantee nor the ex-spouse will recognize any taxable
income at the time of the transfer. In general, a transfer is
made incident to divorce if the transfer occurs
within one year after the marriage ends or if it is related to
the end of the marriage (for example, if the transfer is made
pursuant to a divorce order or settlement agreement). Upon the
subsequent exercise of such option by the ex-spouse, the
ex-spouse will recognize taxable income in an amount equal to
the difference between the exercise price and the fair market
value of the shares of Arbitron common stock at the time of
exercise. Any distribution to the ex-spouse as a result of the
exercise of the option will be subject to employment and income
tax withholding at this time.
Restricted Stock. A grantee that is awarded
restricted stock will not recognize any taxable income for
federal income tax purposes in the year of the award, provided
that the shares of Arbitron common stock are subject to
restrictions (that is, the restricted stock is nontransferable
and subject to a substantial risk of forfeiture). However, the
grantee may elect under Section 83(b) of the Internal
Revenue Code to recognize compensation income in the year of the
award in an amount equal to the fair market value of the
Arbitron common stock on the date of the award (less the
purchase price, if any), determined without regard to the
restrictions. If the grantee does not make such a
Section 83(b) election, the fair market value of the
Arbitron common stock on the date the restrictions lapse (less
the purchase price, if any) will be treated as compensation
income to the grantee and will be taxable in the year the
restrictions lapse and dividends paid, while the Arbitron common
stock is subject to restrictions will be subject to withholding
taxes. If Arbitron complies with applicable reporting
requirements and with the restrictions of Section 162(m) of
the Internal Revenue Code, Arbitron will be entitled to a
business expense deduction in the same amount and generally at
the same time as the grantee recognizes ordinary income.
Restricted Stock Units. There are no immediate
tax consequences of receiving an award of restricted stock units
under the Plan. A grantee who is awarded restricted stock units
will be required to recognize ordinary income in an amount equal
to the cash awarded or the fair market value of the shares of
stock issued
47
to such grantee at the end of the restriction period or, if
later, the payment date. If Arbitron complies with applicable
reporting requirements and with the restrictions of
Section 162(m) of the Internal Revenue Code, Arbitron will
be entitled to a business expense deduction in the same amount
and generally at the same time as the grantee recognizes
ordinary income.
Stock Appreciation Rights. There are no
immediate tax consequences of receiving SARs under the Plan.
Upon exercising a SAR, a grantee will recognize ordinary income
in an amount equal to the difference between the exercise price
and the fair market value of Arbitrons common stock on the
date of exercise. If Arbitron complies with applicable reporting
requirements and with the restrictions of Section 162(m) of
the Code, Arbitron will be entitled to a business expense
deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
Dividend Equivalents. Individuals who receive
dividend equivalents will be required to recognize ordinary
income in an amount distributed to the grantee pursuant to the
award. If Arbitron complies with the applicable reporting
requirements and with the restrictions of Section 162(m) of
the Code, Arbitron will be entitled to a business expense
deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
Performance
Goals
Arbitron intends to comply, where practicable, with the
compensation deduction limits of Code Section 162(m). To
that end, it will limit grants of stock subject to Incentive
Awards (i.e., options, restricted stock awards, and performance
units) to any individual to no more than 150,000 shares of
common stock in the aggregate during any three consecutive
Arbitron fiscal years. In addition, it will limit the maximum
payments to an individual under Incentive Awards that are not
valued by reference to common stock to $5 million during
any three consecutive fiscal years. In making grants exempt from
the 162(m) limits (other than for options and stock appreciation
rights), Arbitron will use one or more performance goals drawn
from the following categories, either individually or in
combination, applied on a corporate, subsidiary, or business
unit basis: cash flow, earnings (including one or more of gross
profit, earnings before interest and taxes, earnings before
interest, taxes, depreciation and amortization and net
earnings), earnings per share, individually, margins (including
one or more of gross, operating and net income margins), returns
(including one or more of return on assets, equity, investment,
capital and revenue and total stockholder return), stock price,
economic value added, working capital, market share, cost
reductions and strategic plan development and implementation.
Such goals may reflect absolute entity or business unit
performance or a relative comparison to the performance of a
peer group of entities or other external measure of the selected
performance criteria. The Committee may appropriately adjust any
evaluation of performance under such goals to exclude any of the
following events: asset write-downs, litigation or claim
judgments or settlements, the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results, accruals for reorganization and restructuring
programs, uninsured catastrophic losses, and any extraordinary
non-recurring items as described in Accounting Principles Board
Opinion No. 30 or in managements discussion and
analysis of financial performance appearing in the
Companys annual report to stockholders for the applicable
year.
Recommendation
of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
PROPOSAL TO APPROVE THE AMENDMENT TO THE 1999 STOCK
INCENTIVE PLAN.
OTHER
MATTERS
Arbitron
Mailing Address
Our current mailing address is 142 West 57th Street,
New York, New York 10019.
48
Multiple
Stockholders Sharing the Same Address
We are sending only one annual report and proxy statement to
stockholders that share a single address unless we received
contrary instructions from any stockholder at that address. This
practice, known as householding, is designed to
reduce our printing and postage costs. However, if any
stockholder residing at such an address wishes to receive a
separate annual report or proxy statement in the future, they
may telephone Arbitrons Treasury Manager at
(410) 312-8278
or write to him at 9705 Patuxent Woods Drive, Columbia, Maryland
21046. If you did not receive an individual copy of this proxy
statement or our annual report and you wish to do so, we will
send you a copy if you contact Arbitrons Treasury Manager
in the same manner. In addition, if you are receiving multiple
copies of our annual report and proxy statement, you can request
householding by contacting Arbitrons Treasury Manager in
the same manner.
Stockholder
Proposals for Next Years Annual Meeting
If you want us to consider including a stockholder proposal in
next years proxy statement, you must deliver such proposal
in writing to Timothy T. Smith, Executive Vice President
and Chief Legal Officer, Legal and Business Affairs and
Secretary, no later than December 21, 2007.
Any other matters proposed to be submitted for consideration at
next years annual meeting of stockholders (other than a
stockholder proposal included in our proxy materials pursuant to
Rule 14a-8
of the rules promulgated under the Securities Exchange Act of
1934, as amended) must be given in writing to our Corporate
Secretary and received at our principal executive offices not
less than 90 days nor more than 120 days prior to the
date of the 2008 annual meeting of stockholders. The proposal
must contain specific information required by our bylaws, which
are on file with the Securities and Exchange Commission and may
be obtained from our Corporate Secretary upon written request.
If a stockholder proposal is received before or after the range
of dates specified above, our proxy materials for the next
annual meeting of stockholders may confer discretionary
authority to vote on such matter without any discussion of the
matter in the proxy materials.
Director
Nominations
In accordance with procedures and requirements set forth in
Article II, Section 13 of our bylaws, stockholders may
propose nominees for election to the Board of Directors only
after providing timely written notice to the Corporate
Secretary, as set forth in the immediately preceding paragraph
above. The notice must set forth:
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The nominees name, age, business address and residence
address;
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The nominees principal occupation or employment;
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Number of shares of Arbitron common stock beneficially owned by
the nominee;
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Any other information concerning the nominee that would be
required, under rules of the Securities and Exchange Commission,
in a proxy statement soliciting proxies for the election of
directors; and
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Name and record address of, and number of shares of Arbitron
common stock beneficially owned by, the stockholder making the
nomination.
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Proxy
Solicitation
We have retained Georgeson Shareholder Communications Inc. to
assist with the solicitation of proxies for a fee not to exceed
$7,500, plus reimbursement of
out-of-pocket
expenses. We will pay all expenses of soliciting proxies for the
2007 annual meeting. In addition to solicitations by mail, we
have made arrangements for brokers, custodians, nominees and
other fiduciaries to send proxy materials to their principals
and we will reimburse them for their reasonable
out-of-pocket
expenses in doing so. Certain of our employees, who will receive
no additional compensation for their services, may also solicit
proxies by telephone, telecopy, personal interview or other
means.
49
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors, executive officers, and persons
who own more than 10% of a registered class of our equity
securities, to file initial reports of ownership and reports of
changes in ownership of common stock and other equity securities
of Arbitron with the Securities and Exchange Commission and the
New York Stock Exchange. Such reporting persons are required by
the Securities and Exchange Commission to furnish us with copies
of all Section 16(a) reports they file. To our knowledge,
based solely upon a review of Section 16(a) reports
furnished to us for 2006,
and/or on
written representations from certain reporting persons that no
reports were required, we believe that, other than as described
below, our directors, executive officers and greater than 10%
stockholders complied with all Section 16(a) filing
requirements applicable to them with respect to transactions
during 2006.
Upon being granted restricted stock in March 2006 and February
2007, Sean R. Creamer, our Executive Vice President and Chief
Financial Officer, filed Forms 4 with the Securities and
Exchange Commission on a timely basis that inadvertently failed
to include certain unvested shares of restricted stock out of a
grant of 15,000 shares of restricted stock that
Mr. Creamer received in September 2005 and timely reported
on Form 4 at the time of grant. Promptly after discovering
the omission, Mr. Creamer filed amendments to the
Forms 4 reporting all vested and unvested shares of
restricted stock beneficially owned by him.
Mr. Vaughn Scott Henry, an Executive Vice President of
Arbitron, inadvertently failed to timely file a Form 4
disclosing the purchase of 1,500 shares of Arbitron common
stock in March 2006. A report was filed promptly upon the
discovery of this oversight.
Annual
Report
Copies of our annual report for the year ended December 31,
2006, are being distributed to our stockholders simultaneously
with the delivery of this proxy statement.
50
Appendix A
ARBITRON
INC.
1999 STOCK INCENTIVE PLAN
(Amended as
of ,
2007 [Stockholder Approval Date])
1. Purpose
of Plan.
The purpose of the Arbitron Inc. 1999 Stock Incentive Plan (the
Plan) is to advance the interests of Arbitron Inc.
(the Company) and its stockholders by enabling the
Company and its Subsidiaries to attract and retain persons of
ability to perform services for the Company and its Subsidiaries
by providing an incentive to such individuals through equity
participation in the Company and by rewarding such individuals
who contribute to the achievement by the Company of its economic
objectives.
2. Definitions.
The following terms will have the meanings set forth below,
unless the context clearly otherwise requires:
2.1 Board means the Board
of Directors of the Company.
2.2 Broker Exercise Notice
means a written notice pursuant to which a Participant, upon
exercise of an Option, irrevocably instructs a broker or dealer
to sell a sufficient number of shares or loan a sufficient
amount of money to pay all or a portion of the exercise price of
the Option
and/or any
related withholding tax obligations and remit such sums to the
Company and directs the Company to deliver stock certificates to
be issued upon such exercise directly to such broker or dealer.
2.3 Change of Control means
an event described in Section 13.1 of the Plan or such
other definition as may be adopted by the Committee from time to
time in its sole discretion.
2.4 Code means the Internal
Revenue Code of 1986, as amended.
2.5 Committee means the
group of individuals administering the Plan, as provided in
Section 3 of the Plan.
2.6 Common Stock means the
common stock of the Company, par value $0.50 per share, or
the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with
Section 4.4 of the Plan.
2.7 Disability means the
disability of the Participant such as would entitle the
Participant to receive disability income benefits pursuant to
the long-term disability plan of the Company or Subsidiary then
covering the Participant or, if no such plan exists or is
applicable to the Participant, the permanent and total
disability of the Participant within the meaning of
Section 22(e)(3) of the Code.
2.8 Dividend Equivalents
shall have the meaning set forth in Section 14.3.
2.9 Eligible Recipients
means all employees (including, without limitation, officers and
directors who are also employees) of the Company or any
Subsidiary and any non-employee directors, consultants and
independent contractors of the Company or any Subsidiary.
2.10 Exchange Act means the
Securities Exchange Act of 1934, as amended.
2.11 Fair Market Value
means, with respect to the Common Stock as of any date, the
closing market price per share of the Common Stock at the end of
the regular way trading session, which as of the effective date
of this Plan is 4:00 p.m., New York City time, as reported
on the New York Stock Exchange Composite Tape on that date (or,
if no shares were traded or quoted on such date, as of the next
preceding date on which there was such a trade or quote).
A-1
2.12 Freestanding Stock Appreciation
Right shall have the meaning set forth in
Section 7.1.
2.13 Incentive Award means
an Option, Stock Appreciation Right, Restricted Stock Award,
Performance Unit or Dividend Equivalent granted to an Eligible
Recipient pursuant to the Plan.
2.14 Incentive Stock Option
means a right to purchase Common Stock granted to an Eligible
Recipient pursuant to Section 6 of the Plan that qualifies
as an incentive stock option within the meaning of
Section 422 of the Code.
2.15 Non-Statutory Stock
Option means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of
the Plan that does not qualify as an Incentive Stock Option.
2.16 Option means an
Incentive Stock Option or a Non-Statutory Stock Option.
2.17 Participant means an
Eligible Recipient who receives one or more Incentive Awards
under the Plan.
2.18 Performance Goal means
one or more of the following performance goals, either
individually, alternatively or in any combination, applied on a
corporate, subsidiary or business unit basis: cash flow,
earnings (including one or more of gross profit, earnings before
interest and taxes, earnings before interest, taxes,
depreciation and amortization and net earnings), earnings per
share, individually, margins (including one or more of gross,
operating and net income margins), returns (including one or
more of return on assets, equity, investment, capital and
revenue and total stockholder return), stock price, economic
value added, working capital, market share, cost reductions and
strategic plan development and implementation. Such goals may
reflect absolute entity or business unit performance or a
relative comparison to the performance of a peer group of
entities or other external measure of the selected performance
criteria. The Committee may appropriately adjust any evaluation
of performance under such goals to exclude any of the following
events: asset write-downs, litigation or claim judgments or
settlements, the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported
results, accruals for reorganization and restructuring programs,
uninsured catastrophic losses, and any extraordinary
non-recurring items as described in Accounting Principles Board
Opinion No. 30 or in managements discussion and
analysis of financial performance appearing in the
Companys annual report to stockholders for the applicable
year.
2.19 Performance Unit means
a right granted to an Eligible Recipient pursuant to
Section 9 of the Plan to receive a payment from the
Company, in the form of Common Stock, cash, Stock Units or a
combination of the foregoing, upon the achievement of
established performance criteria.
2.20 Previously Acquired
Shares means shares of Common Stock that are
already owned by the Participant or, with respect to any
Incentive Award, that are to be issued upon the grant, exercise
or vesting of such Incentive Award.
2.21 Prior Plans mean the
Ceridian Corporation 1993 Long-Term Incentive Plan and the
Ceridian Corporation 1990 Long-Term Incentive Plan.
2.22 Restricted Stock Award
means an award of Common Stock or Stock Units granted to an
Eligible Recipient pursuant to Section 8 of the Plan that
is subject to the restrictions on transferability and the risk
of forfeiture imposed by the provisions of such Section 8.
2.23 Retirement means the
termination (other than for Cause or by reason of death or
Disability) of a Participants employment or other service
on or after the date on which the Participant has attained the
age of 55 and has completed 10 years of continuous service
to the Company or any Subsidiary (such period of service to be
determined in accordance with the retirement/pension plan or
practice of the Company or Subsidiary then covering the
Participant, provided that if the Participant is not covered by
any such plan or practice, the Participant will be deemed to be
covered by the Companys plan or practice for purposes of
this determination).
2.24 Section 162(m)
means Section 162(m) of the Code and the applicable
Treasury Regulations promulgated thereunder.
A-2
2.25 Securities Act means
the Securities Act of 1933, as amended.
2.26 Stock Appreciation
Right shall mean the right granted to a
Participant pursuant to Section 7.
2.27 Stock Unit means a
bookkeeping entry representing the equivalent of one share of
Common Stock that is payable in the form of Common Stock, cash
or any combination of the foregoing.
2.28 Subsidiary means any
entity that is directly or indirectly controlled by the Company
or any entity in which the Company has a significant equity
interest, as determined by the Committee.
2.29 Substitute Awards
shall mean Incentive Awards granted or shares of Common Stock
issued by the Company in assumption of, or in substitution or
exchange for, awards previously granted, or the right or
obligation to make future awards, by a company acquired by the
Company or any Subsidiary or with which the Company or any
Subsidiary combines.
2.30 Tandem Stock Appreciation
Right shall have the meaning set forth in
Section 7.1.
2.31 Tax Date means the
date any withholding tax obligation arises under the Code for a
Participant with respect to an Incentive Award.
3. Plan
Administration.
3.1 The Committee. So long
as the Company has a class of its equity securities registered
under Section 12 of the Exchange Act, the Plan will be
administered by a committee (the Committee)
consisting solely of not less than two members of the Board who
are Non-Employee Directors within the meaning of
Rule 16b-3
under the Exchange Act, who are independent
directors for purposes of the rules and regulations of the
New York Stock Exchange, and, if the Board so determines in its
sole discretion, who are outside directors within
the meaning of Section 162(m). To the extent consistent
with corporate law, the Committee may delegate to any directors
or officers of the Company the duties, power and authority of
the Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however,
that only the Committee may exercise such duties, power and
authority with respect to Eligible Recipients who are subject to
Section 16 of the Exchange Act and Section 162(m).
Each determination, interpretation or other action made or taken
by the Committee pursuant to the provisions of the Plan will be
conclusive and binding for all purposes and on all persons, and
no member of the Committee will be liable for any action or
determination made in good faith with respect to the Plan or any
Incentive Award granted under the Plan.
3.2 Authority of the Committee.
(a) In accordance with and subject to the provisions
of the Plan, the Committee will have the authority to determine
all provisions of Incentive Awards as the Committee may deem
necessary or desirable and as consistent with the terms of the
Plan, including, without limitation, the following: (i) the
Eligible Recipients to be selected as Participants;
(ii) the nature and extent of the Incentive Awards to be
made to each Participant (including the number of shares of
Common Stock to be subject to each Incentive Award, any exercise
price, the manner in which Incentive Awards will vest or become
exercisable and whether Incentive Awards will be granted in
tandem with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award;
(iii) the time or times when Incentive Awards will be
granted; (iv) the duration of each Incentive Award; and
(v) the restrictions and other conditions to which the
payment or vesting of Incentive Awards may be subject. In
addition, the Committee will have the authority under the Plan
in its sole discretion to pay the economic value of any
Incentive Award in the form of cash, Common Stock, Stock Units
or any combination of the foregoing.
(b) Except as otherwise provided in the remainder of
this Section 3.2(b), the Committee will have the authority
under the Plan to amend or modify the terms of any outstanding
Incentive Award in any manner, including, without limitation,
the authority to modify the number of shares or other terms and
conditions of an Incentive Award, extend the term of an
Incentive Award or accelerate the exercisability or vesting or
otherwise terminate any restrictions relating to an Incentive
Award; provided, however that the amended or modified terms are
permitted by the Plan as then in effect and that any Participant
adversely affected by such amended or modified terms has
consented to such amendment or modification. Without prior
approval of the Companys
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stockholders, the Committee shall not have the authority under
the Plan to (i) amend or modify the terms of any
pre-existing Option awards to lower the Option exercise price or
(ii) authorize the grant of replacement Option awards in
substitution for pre-existing Option awards that have been or
are to be surrendered and canceled at any time when the Fair
Market Value of the Common Stock is less than the exercise price
applicable to such surrendered and canceled Option awards.
(c) In the event of (i) any reorganization,
merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of
shares, rights offering, extraordinary dividend or divestiture
(including a spin-off) or any other similar change in corporate
structure or shares, (ii) any purchase, acquisition, sale
or disposition of a significant amount of assets or a
significant business, (iii) any change in accounting
principles or practices, or (iv) any other similar change,
in each case with respect to the Company (or any Subsidiary or
division thereof) or any other entity whose performance is
relevant to the grant or vesting of an Incentive Award, the
Committee (or, if the Company is not the surviving corporation
in any such transaction, the board of directors of the surviving
corporation) may, without the consent of any affected
Participant, amend or modify the grant or vesting criteria of
any outstanding Incentive Award that is based in whole or in
part on the financial performance of the Company (or any
Subsidiary or division thereof) or such other entity so as
equitably to reflect such event, with the desired result that
the criteria for evaluating such financial performance of the
Company or such other entity will be substantially the same (in
the sole discretion of the Committee or the board of directors
of the surviving corporation) following such event as prior to
such event; provided, however, that the amended or modified
terms are permitted by the Plan as then in effect.
(d) The Committee may permit or require the deferral
of any payment, issuance or other settlement of an Incentive
Award subject to such rules and procedures as the Committee may
establish, including the conversion of such payment, issuance or
other settlement into Options or Stock Units and the payment or
crediting of interest, dividends or dividend equivalents.
4. Shares Available
for Issuance.
4.1 Maximum Number of
Shares Available. Subject to adjustment
as provided in Section 4.4 of the Plan, the maximum number
of shares of Common Stock that will be available for issuance
under the Plan will be 4,604,009 shares. The Committee may
use shares available for issuance under the Plan as the form of
payment for compensation, awards or rights earned or due under
deferred or any other compensation plans or arrangements of the
Company or any Subsidiary. The shares available for issuance
under the Plan may, at the election of the Committee, be either
treasury shares or shares authorized but unissued, and, if
treasury shares are used, all references in the Plan to the
issuance of shares will, for corporate law purposes, be deemed
to mean the transfer of shares from treasury.
4.2 Calculation of
Shares Available. Shares of Common Stock
that are issued under the Plan or that are subject to
outstanding Incentive Awards will be applied to reduce the
maximum number of shares of Common Stock remaining available for
issuance under the Plan. To the extent that any shares of Common
Stock that are subject to an Incentive Award under the Plan or
the Prior Plan (a) are not issued to a Participant due to
the fact that such Incentive Award lapses, expires, is forfeited
or for any reason is terminated unexercised or unvested, or is
settled or paid in cash or (b) are used to satisfy any
exercise price or withholding obligations, such shares will
automatically again become available for issuance under the
Plan. In addition, to the extent that a Participant tenders
(either by actual delivery or by attestation) shares of Common
Stock already owned by the Participant to the Company in
satisfaction of any exercise price or withholding tax
obligations, such shares will automatically again become
available for issuance under the Plan.
4.3 Additional
Limitations. Notwithstanding any other
provisions of the Plan to the contrary and subject, in each
case, to adjustment as provided in Section 4.4 of the Plan,
(a) no more than 2,000,000 shares of Common Stock may
be issued under the Plan with respect to Incentive Stock
Options, (b) no more than 700,000 shares of Common
Stock may be issued under the Plan with respect to Restricted
Stock Awards that are not granted in lieu of cash compensation
that would otherwise be payable to Participants, and (c) no
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Participant in the Plan may be granted Incentive Awards relating
to more than 300,000 shares of Common Stock in the
aggregate during any period of three consecutive fiscal years of
the Company.
4.4 Adjustments to Shares and Incentive
Awards. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend
(including a spin-off) or any other similar change in the
corporate structure or shares of the Company, the Committee (or,
if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving
corporation) will make appropriate adjustments (which
determination will be conclusive) as to the number and kind of
securities or other property (including cash) available for
issuance or payment under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants,
(a) the number and kind of securities or other property
(including cash) subject to outstanding Options and Stock
Appreciation Rights, and (b) the exercise price of
outstanding Options and Stock Appreciation Rights.
5. Participation.
Participants in the Plan will be those Eligible Recipients who,
in the judgment of the Committee, have contributed, are
contributing or are expected to contribute to the achievement of
economic objectives of the Company or its Subsidiaries. Eligible
Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with
other Incentive Awards, as may be determined by the Committee in
its sole discretion. Incentive Awards will be deemed to be
granted as of the date specified in the grant resolution of the
Committee, which date will be the date of any related agreement
with the Participant.
6. Options.
6.1 Grant. An Eligible
Recipient may be granted one or more Options under the Plan, and
such Options will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion and reflected
in the award agreement evidencing such Option. The Committee may
designate whether an Option is to be considered an Incentive
Stock Option or a Non-Statutory Stock Option. To the extent that
any Incentive Stock Option granted under the Plan ceases for any
reason to qualify as an incentive stock option for
purposes of Section 422 of the Code, such Incentive Stock
Option will continue to be outstanding for purposes of the Plan
but will thereafter be deemed to be a Non-Statutory Stock Option.
6.2 Exercise Price. The per
share price to be paid by a Participant upon exercise of an
Option will be determined by the Committee in its discretion at
the time of the Option grant; provided, however, that such price
will not be less than 100% of the Fair Market Value of one share
of Common Stock on the date of grant or, with respect to an
Incentive Stock Option (110% of the Fair Market Value if, at the
time the Incentive Stock Option is granted, the Participant
owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation of the Company).
6.3 Exercisability and
Duration. An Option will become exercisable
at such times and in such installments as may be determined by
the Committee in its sole discretion at the time of grant;
provided, however, that no Option may be exercisable after
10 years from its date of grant (five years from its date
of grant if the Option is an Incentive Stock Option and if, at
the time the Incentive Stock Option is granted, the Participant
owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation of the Company).
6.4 Payment of Exercise
Price. The total purchase price of the shares
to be purchased upon exercise of an Option will be paid entirely
in cash (including check, bank draft or money order); provided,
however, that the Committee, in its sole discretion and upon
terms and conditions established by the Committee, may allow
such payments to be made, in whole or in part, by tender of a
Broker Exercise Notice, Previously Acquired Shares (including
through delivery of a written attestation of ownership of such
Previously Acquired Shares if permitted, and on terms
acceptable, to the Committee in its sole discretion) or by a
combination of such methods.
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6.5 Manner of Exercise. An
Option may be exercised by a Participant in whole or in part
from time to time, subject to the conditions contained in the
Plan and in the agreement evidencing such Option, by delivery in
person, by facsimile or electronic transmission or through the
mail of written notice of exercise to the Company, Attention:
Corporate Treasury, at its principal executive office in
Minneapolis, Minnesota and by paying in full the total exercise
price for the shares of Common Stock to be purchased in
accordance with Section 6.4 of the Plan.
6.6 Aggregate Limitation of Stock Subject to
Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock
with respect to which incentive stock options (within the
meaning of Section 422 of the Code) are exercisable for the
first time by a Participant during any calendar year (under the
Plan and any other incentive stock option plans of the Company
or any subsidiary or parent corporation of the Company (within
the meaning of the Code)) exceeds $100,000 (or such other amount
as may be prescribed by the Code from time to time), such excess
Options will be treated as Non-Statutory Stock Options. The
determination will be made by taking incentive stock options
into account in the order in which they were granted. If such
excess only applies to a portion of an Incentive Stock Option,
the Committee, in its discretion, will designate which shares
will be treated as shares to be acquired upon exercise of an
Incentive Stock Option.
7. Stock
Appreciation Rights.
7.1 Grant and Exercise. The
Committee may provide Stock Appreciation Rights (a) in
conjunction with all or part of any Option granted under the
Plan or at any subsequent time during the term of such Option
(Tandem Stock Appreciation Right), (b) in
conjunction with all or part of any Incentive Award (other than
an Option) granted under the Plan or at any subsequent time
during the term of such Incentive Award, or (c) without
regard to any Option or other Incentive Award (a
Freestanding Stock Appreciation Right), in each case
upon such terms and conditions as the Committee may establish in
its sole discretion.
7.2 Terms and
Conditions. Stock Appreciation Rights shall
be subject to such terms and conditions, not inconsistent with
the provisions of the Plan, as shall be determined from time to
time by the Committee, including the following:
(a) Upon the exercise of a Stock Appreciation Right,
the holder shall have the right to receive the excess of
(i) the Fair Market Value of one share of Common Stock on
the date of exercise or such other amount as the Committee shall
so determine at any time during a specified period before the
date of exercise over (ii) the grant price of the right on
the date of grant, or in the case of a Tandem Stock Appreciation
Right granted on the date of grant of the related Option, as
specified by the Committee in its sole discretion, which except
in the case of Substitute Awards or in connection with an
adjustment provided in Section 4.4, shall not be less than
the Fair Market Value of one share of Common Stock on such date
of grant of the right or the related Option, as the case may be.
(b) Upon the exercise of a Stock Appreciation Right,
the Committee shall determine in its sole discretion whether
payment shall be made in cash, in whole shares of Common Stock
or other property, or any combination thereof.
(c) Any Tandem Stock Appreciation Right may be
granted at the same time as the related Option is granted or at
any time thereafter before exercise or expiration of such Option.
(d) Any Tandem Stock Appreciation Right related to an
Option may be exercised only when the related Option would be
exercisable and the Fair Market Value of the shares of Common
Stock subject to the related Option exceeds the option price at
which shares of Common Stock can be acquired pursuant to the
Option. In addition, (i) if a Tandem Stock Appreciation
Right exists with respect to less than the full number of shares
of Common Stock covered by a related Option, then an exercise or
termination of such Option shall not reduce the number of shares
to which the Tandem Stock Appreciation Right applies until the
number of shares then exercisable under such Option equals the
number of shares of Common Stock to which the Tandem Stock
Appreciation Right applies, and (ii) no Tandem Stock
Appreciation
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Right granted under the Plan to a person then subject to
Section 16 of the Exchange Act shall be exercised during
the first six months of its term for cash.
(e) Any Option related to a Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the Tandem
Stock Appreciation Right has been exercised.
(f) The provisions of Stock Appreciation Rights need
not be the same with respect to each recipient.
(g) The Committee may impose such other conditions or
restrictions on the terms of exercise and the exercise price of
any Stock Appreciation Right, as it shall deem appropriate,
including providing that the exercise price of a Tandem Stock
Appreciation Right may be less than the Fair Market Value on the
date of grant if the Tandem Stock Appreciation Right is added to
an Option following the date of the grant of the Option. In
connection with the foregoing, the Committee shall consider the
applicability and effect of Section 162(m) of the Code.
Notwithstanding the foregoing provisions of this
Section 7.2(g), but subject to Section 4.4, a
Freestanding Stock Appreciation Right shall not have (i) an
exercise price less than Fair Market Value on the date of grant,
or (ii) a term of greater than ten years. In addition to
the foregoing, but subject to Section 4.4, the base amount
of any Stock Appreciation Right shall not be reduced after the
date of grant.
(h) The Committee may impose such terms and
conditions on Stock Appreciation Rights granted in connection
with any Award (other than an Option) as the Committee shall
determine in its sole discretion.
8. Restricted
Stock Awards.
8.1 Grant. An Eligible
Recipient may be granted one or more Restricted Stock Awards
under the Plan, and such Restricted Stock Awards will be subject
to such terms and conditions, consistent with the provisions of
the Plan, as may be determined by the Committee in its sole
discretion and reflected in the award agreement evidencing such
Restricted Stock Award. The Committee may impose such
restrictions or conditions, not inconsistent with the provisions
of the Plan, to the vesting of such Restricted Stock Awards as
it deems appropriate, including, without limitation, that the
Participant remain in the continuous employ or service of the
Company or a Subsidiary for a certain period or that the
Participant or the Company (or any Subsidiary or division
thereof) satisfy certain performance criteria. Notwithstanding
the foregoing and except as result of a Participants death
or Disability or in connection with a Change of Control of the
Company, Restricted Stock Awards that provide for
(a) vesting upon the satisfaction of certain performance
criteria shall vest over a period of not less than one year from
its date of grant and (b) time based vesting shall vest
over a period of not less than three years from its date of
grant; provided, however, that Restricted Stock Awards granted
in lieu of some other form of compensation to an Eligible
Recipient would be permitted without such vesting restrictions.
8.2 Rights as a Stockholder;
Transferability. Except as provided in
Sections 8.1, 8.3 and 14.3 of the Plan, a Participant will
have all voting, dividend, liquidation and other rights with
respect to shares of Common Stock issued to the Participant as a
Restricted Stock Award under this Section 8 upon the
Participant becoming the holder of record of such shares as if
such Participant were a holder of record of shares of
unrestricted Common Stock.
8.3 Dividends and
Distributions. Unless the Committee
determines otherwise in its sole discretion (either in the
agreement evidencing the Restricted Stock Award at the time of
grant or at any time after the grant of the Restricted Stock
Award), any dividends or distributions (including regular
quarterly cash dividends) paid with respect to shares of Common
Stock subject to the unvested portion of a Restricted Stock
Award will not be subject to the same restrictions as the shares
to which such dividends or distributions relate and will be paid
currently to the Participant. In the event the Committee
determines not to pay such dividends or distributions currently,
the Committee will determine in its sole discretion whether any
interest will be paid on such dividends or distributions. In
addition, the Committee, in its sole discretion, may require
such dividends and distributions to be reinvested (and in such
case the Participants consent to such reinvestment) in
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shares of Common Stock that will be subject to the same
restrictions as the shares to which such dividends or
distributions relate.
8.4 Enforcement of
Restrictions. To enforce the restrictions
referred to in this Section 8, the Committee may
(a) place a legend on the stock certificates referring to
such restrictions and may require Participants, until the
restrictions have lapsed, to keep the stock certificates,
together with duly endorsed stock powers, in the custody of the
Company or its transfer agent, or (b) maintain evidence of
stock ownership, together with duly endorsed stock powers, in a
certificateless book-entry stock account with the Companys
transfer agent for its Common Stock.
9. Performance
Units.
An Eligible Recipient may be granted one or more Performance
Units under the Plan, and such Performance Units will be subject
to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in
its sole discretion. The Committee may impose such restrictions
or conditions, not inconsistent with the provisions of the Plan,
to the vesting of such Performance Units as it deems
appropriate, including, without limitation, that the Participant
remain in the continuous employ or service of the Company or any
Subsidiary for a certain period or that the Participant or the
Company (or any Subsidiary or division thereof) satisfy certain
performance goals or criteria. The Committee will have the sole
discretion to determine the form in which payment of the
economic value of Performance Units will be made to a
Participant (i.e., cash, Common Stock, Stock Units or any
combination of the foregoing) or to consent to or disapprove the
election by a Participant of the form of such payment.
Notwithstanding the foregoing, Performance Units that provide
for vesting upon the satisfaction of certain performance
criteria shall vest over a period of not less than three years
from its date of grant; provided, however, that Performance
Units granted in lieu of some other form of compensation to an
Eligible Recipient would be permitted without such vesting
restrictions.
10. Performance-Based
Compensation Provisions.
The Committee, when it is comprised solely of two or more
outside directors meeting the requirements of
Section 162(m), in its sole discretion, may designate
whether any Incentive Awards are intended to be
performance-based compensation within the meaning of
Section 162(m). Any Incentive Awards so designated will, to
the extent required by Section 162(m), be conditioned on
the achievement of one or more Performance Goals, and such
Performance Goals will be established by the Committee within
the time period prescribed by, and will otherwise comply with
the requirements of, Section 162(m) giving due regard to
the disparate treatment under Section 162(m) of the stock
options and stock appreciation rights where compensation is
determined based solely on an increase in the value of the
underlying stock after the date of grant or award, as compared
to other forms of compensation, including restricted stock
awards. The maximum dollar value payable to any Participant with
respect to Incentive Awards that are designated as such
performance-based compensation and that are valued
with reference to property other than shares of Common Stock may
not exceed $5,000,000 in the aggregate during any period of
three consecutive fiscal years of the Company. Such Committee
shall also certify in writing that such performance goals have
been met prior to payment of compensation to the extent required
by Section 162(m).
11. Effect
of Termination of Employment or Other Service.
11.1 Rights Upon
Termination. The Committee will have the
authority, in its sole discretion, to determine the effect that
termination of a Participants employment or other service
with the Company and all Subsidiaries, whether due to death,
Disability, Retirement or any other reason, will have on
outstanding Incentive Awards then held by such Participant.
11.2 Modification of Rights Upon
Termination. Notwithstanding the other
provisions of this Section 11, upon a Participants
termination of employment or other service with the Company and
all Subsidiaries, the Committee may, in its sole discretion
(which may be exercised at any time on or after the date of
grant, including following such termination), cause Options (or
any part thereof) or Stock Appreciation Rights then
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held by such Participant to become or continue to become
exercisable
and/or
remain exercisable following such termination of employment or
service and Restricted Stock Awards and Performance Units then
held by such Participant to vest
and/or
continue to vest or become free of restrictions following such
termination of employment or service, in each case in the manner
determined by the Committee; provided, however, that no Option,
Stock Appreciation Right or Restricted Stock Award may continue
to vest beyond its expiration date.
11.3 Date of Termination of Employment or Other
Service. Unless the Committee otherwise
determines in its sole discretion, a Participants
employment or other service will, for purposes of the Plan, be
deemed to have terminated on the date recorded on the personnel
or other records of the Company or the Subsidiary for which the
Participant provides employment or other service, as determined
by the Committee in its sole discretion based upon such records.
12. Payment
of Withholding Taxes.
12.1 General Rules. The
Company is entitled to (a) withhold and deduct from future
wages of the Participant (or from other amounts which may be due
and owing to the Participant from the Company or a Subsidiary),
or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all federal, state
and local withholding and employment-related tax requirements
attributable to an Incentive Award, including, without
limitation, the grant, exercise or vesting of, or payment of
dividends with respect to, an Incentive Award or a disqualifying
disposition of stock received upon exercise of an Incentive
Stock Option, or (b) require the Participant promptly to
remit the amount of such withholding to the Company before
taking any action with respect to an Incentive Award.
12.2 Special Rules. The
Committee may, in its sole discretion and upon terms and
conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or
employment-related tax obligation described in Section 12.1
of the Plan (up to the minimum statutory rate) by electing to
tender Previously Acquired Shares, a Broker Exercise Notice or a
promissory note (on terms acceptable to the Committee in its
sole discretion), or by a combination of such methods.
13. Change
of Control.
13.1 Definitions. For
purposes of this Section 13, the following definitions will
apply:
(a) Benefit Plan means any formal
or informal plan, program or other arrangement heretofore or
hereafter adopted by the Company or any Subsidiary for the
direct or indirect provision of compensation to the Participant
(including groups or classes of participants or beneficiaries of
which the Participant is a member), whether or not such
compensation is deferred, is in the form of cash or other
property or rights, or is in the form of a benefit to or for the
Participant.
(b) Change of Control means any of
the following events:
(1) 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
corporation immediately following the effective date of such
merger or consolidation;
(2) 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 Companys then issued and outstanding
securities by any person or entity, or group of associated
persons or entities acting in concert;
(3) 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;
(4) the stockholders of the Company approve any plan
or proposal for the liquidation of the Company; or
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(5) 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 (1) were directors at the
beginning of such consecutive 24 month period, or
(2) were elected by, or on the nomination or recommendation
of, at least a two-thirds majority of the then-existing Board of
Directors.
13.2 Effect of a Change of
Control. The Committee will have the
authority, in its sole discretion, to determine the effect that
a Change of Control of the Company will have on outstanding
Incentive Awards then held by such Participant.
13.3 Authority to Modify Change of Control
Provisions. Prior to a Change of Control of
the Company, unless otherwise provided in the agreement
evidencing the Incentive Award, the Participant will have no
rights under this Section 13, and the Committee will have
the authority, in its sole discretion, to rescind, modify or
amend the provisions of this Section 13 without the consent
of any Participant.
14. Rights
of Eligible Recipients and Participants;
Transferability.
14.1 Employment or
Service. Nothing in the Plan will interfere
with or limit in any way the right of the Company or any
Subsidiary to terminate the employment or service of any
Eligible Recipient or Participant at any time, nor confer upon
any Eligible Recipient or Participant any right to continue in
the employ or service of the Company or any Subsidiary.
14.2 Rights as a
Stockholder. As a holder of Incentive Awards
(other than Restricted Stock Awards), a Participant will have no
rights as a stockholder unless and until such Incentive Awards
are exercised for, or paid in the form of, shares of Common
Stock and the Participant becomes the holder of record of such
shares. Except as provided in Section 14.3 or as otherwise
provided in the Plan, no adjustment will be made for dividends
or distributions with respect to such Incentive Awards as to
which there is a record date preceding the date the Participant
becomes the holder of record of such shares.
14.3 Dividend
Equivalents. Subject to the provisions of the
Plan and any Incentive Award, the recipient of an Incentive
Award (including any Incentive Award deferred in accordance with
procedures established pursuant to Section 3(d)) may, if so
determined by the Committee, be entitled to receive, currently
or on a deferred basis, cash, stock or other property dividends,
or cash payments in amounts equivalent to cash, stock or other
property dividends on shares of Common Stock (Dividend
Equivalents) with respect to the number of shares of
Common Stock covered by the Incentive Award, as determined by
the Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have been
reinvested in additional shares or otherwise reinvested.
14.4 Restrictions on Transfer.
(a) Except pursuant to testamentary will or the laws
of descent and distribution and except as expressly permitted by
Section 14.4(b) of the Plan, no right or interest of any
Participant in an Incentive Award prior to the exercise or
vesting of such Incentive Award will be assignable or
transferable, or subjected to any lien, during the lifetime of
the Participant, either voluntarily or involuntarily, directly
or indirectly, by operation of law or otherwise. A Participant
will, however, be entitled to designate a beneficiary to receive
an Incentive Award upon such Participants death. In the
event of a Participants death, payment of any amounts due
under the Plan will be made to, and exercise of any Options or
Stock Appreciation Rights (to the extent permitted pursuant to
Section 11 of the Plan) will be made by, the
Participants designated beneficiary. For purposes of the
Plan, a designated beneficiary will be the
beneficiary or beneficiaries designated by the Participant in a
writing filed with the Committee in such form and at such time
as the Committee will require in its sole discretion. If a
Participant fails to designate a beneficiary, or if the
designated beneficiary does not survive the Participant or dies
before the designated beneficiarys exercise of all rights
under the Plan, payment of any amounts due under the Plan will
be made to, and exercise of any Options or Stock Appreciation
Rights (to the extent permitted pursuant to Section 11 of
the Plan) may be made by, the Participants personal
representative.
A-10
(b) The Committee may, in its discretion, authorize
all or a portion of the Options to be granted to a Participant
to be on terms which permit transfer by such Participant to
(i) the spouse, ex-spouse, children, step-children or
grandchildren of the Participant (the Family
Members), (ii) a trust or trusts for the exclusive
benefit of such Family Members, (iii) a partnership in
which such Family Members are the only partners, or
(iv) such other persons or entities as the Committee, in
its discretion, may permit, provided that (1) there may be
no consideration for such a transfer (other than the possible
receipt of an ownership interest in an entity to which such a
transfer is made), (2) the award agreement pursuant to
which such Options are granted must be approved by the Committee
and must expressly provide for transferability in a manner
consistent with this Section 14.4(b), (3) timely
written notice of the transfer must be provided to the Company
by the Participant, and (4) subsequent transfers of the
transferred Options shall be prohibited except for those in
accordance with Section 14.4(a). Following transfer, any
such Option and the rights of any transferee with respect
thereto will continue to be subject to the same terms and
conditions as were applicable immediately prior to the transfer,
including that the events of termination of employment or other
service as provided in the Plan and in any applicable award
agreement will continue to be applied with respect to the
original Participant, with the transferee bound by the
consequences of any such termination of employment or service as
specified in the Plan and the applicable award agreement. The
Company will be under no obligation to provide notice of
termination of a Participants employment or other service
to any transferee of such Participants Options.
Notwithstanding any Option transfer pursuant to this
Section 14.4(b), the Participant will remain subject to and
liable for any employment-related taxes in connection with the
exercise of such Option.
14.5 Non-Exclusivity of the
Plan. Nothing contained in the Plan is
intended to modify or rescind any previously approved
compensation plans or programs of the Company or create any
limitations on the power or authority of the Board to adopt such
additional or other compensation arrangements as the Board may
deem necessary or desirable.
15. Securities
Law and Other Restrictions.
Notwithstanding any other provision of the Plan or any
agreements entered into pursuant to the Plan, the Company will
not be required to issue any shares of Common Stock under this
Plan, and a Participant may not sell, assign, transfer or
otherwise dispose of shares of Common Stock issued pursuant to
Incentive Awards granted under the Plan, unless (a) there
is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state
securities laws or an exemption from such registration under the
Securities Act and applicable state securities laws, and
(b) there has been obtained any other consent, approval or
permit from any other regulatory body which the Committee, in
its sole discretion, deems necessary or advisable. The Company
may condition such issuance, sale or transfer upon the receipt
of any representations or agreements from the parties involved,
and the placement of any legends on certificates representing
shares of Common Stock, as may be deemed necessary or advisable
by the Company in order to comply with such securities law or
other restrictions.
16. Plan
Amendment, Modification and Termination.
The Board may suspend or terminate the Plan or any portion
thereof at any time, and may amend the Plan from time to time in
such respects as the Board may deem advisable in order that
Incentive Awards under the Plan will conform to any change in
applicable laws or regulations or in any other respect the Board
may deem to be in the best interests of the Company; provided,
however, that no Material Amendment of the Plan shall be made
without approval of the stockholders of the Company. For the
purposes hereof, a Material Amendment of the Plan
shall mean any amendment that (a) requires stockholder
approval pursuant to Section 422 of the Code or the rules
of the New York Stock Exchange or (b) increases the
authorized shares, the benefits to Participants, or the class of
Participants under the Plan. No termination, suspension or
amendment of the Plan may adversely affect any outstanding
Incentive Award without the consent of the affected Participant;
provided, however, that this sentence will not impair the right
of the Committee to take whatever action it deems appropriate
under Section 4.4 and Section 13 of the Plan.
A-11
17. Effective
Date and Duration of the Plan.
The Plan is effective as of February 3, 1999, the date it
was adopted by the Board. The Plan will terminate at midnight on
February 2, 2009, and may be terminated prior thereto by
Board action, and no Incentive Award will be granted after such
termination. Incentive Awards outstanding upon termination of
the Plan may continue to vest, or become free of restrictions,
in accordance with their terms.
18. Miscellaneous.
18.1 Governing Law. The
validity, construction, interpretation, administration and
effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed
exclusively in accordance with the laws of the State of Delaware.
18.2 Successors and
Assigns. The Plan will be binding upon and
inure to the benefit of the successors and permitted assigns of
the Company and the Participants.
As
Amended: ,
2007
A-12
Your vote is important.
Vote by Internet/Telephone
24 hours a day, 7 days a week
Save your company money its fast and convenient.
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INTERNET
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TELEPHONE
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MAIL |
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https://www.proxypush.com/arb
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1-866-813-1246 |
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- Go to the Web Site address
listed above.
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OR
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- Use any touch-tone telephone.
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OR
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- Mark, sign and date your proxy card. |
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- Have your proxy card ready.
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- Have your proxy card ready.
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- Detach your proxy card. |
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- Follow the simple
instructions that appear on
your computer screen.
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- Follow the simple recorded
instructions.
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- Return your proxy card in the
postage-paid envelope provided. |
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Your Internet or telephone vote
authorizes the named proxies to vote
your shares in the same manner as if
you marked, signed and returned your
proxy card. If you have submitted
your proxy by telephone or the
Internet there is no need for you to
mail back your proxy card. |
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THE INTERNET AND TELEPHONE VOTING
FACILITIES WILL CLOSE AT 5:00 P.M.
E.T. ON MAY 14, 2007. |
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1-866-813-1246
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CALL TOLL-FREE TO VOTE.
THERE IS NO CHARGE FOR THIS CALL!! |
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6DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET6
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(Please sign,
date and
return
this proxy card in the
enclosed envelope.) |
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Votes Must be indicated
(x) in Black or Blue ink. |
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The undersigned hereby instructs said proxies or their substitutes to:
The Board of Directors recommends a vote FOR each of the nominees for director.
1. |
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Election of seven (7) directors |
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FOR all nominees listed below
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WITHHOLD AUTHORITY to vote
for all nominees listed below
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*EXCEPTIONS
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Nominees: |
01 Shellye L. Archambeau, 02 Philip Guarascio, 03 William T. Kerr, 04 Larry E. Kittelberger, 05 Stephen B. Morris, 06 Luis G. Nogales, 07 Richard A. Post |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the
Exceptions box and write that nominees name in the space provided below.)
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*Exceptions |
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The Board of Directors recommends a vote FOR the following proposal. |
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2. |
Amendment of the Arbitron Inc. 1999 Stock Incentive Plan |
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FOR o |
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AGAINST o |
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ABSTAIN o |
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In their discretion,
the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment
or postponement thereof. If this proxy is properly executed and returned, the proxy will be voted in the manner
directed hereby by the undersigned stockholder(s). If no direction is made, this proxy will be voted for the election of the
seven (7) director nominees named herein and for the approval of the Amendment of the Arbitron Inc. 1999 Stock Incentive Plan. All former
Proxies hereby revoked.
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If you wish to have your votes on all matters kept
confidential in accordance with Arbitron Inc. policy, check this box. |
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To change your address, please mark this box. |
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To include any comments, please mark this box. |
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Please sign exactly as your name is printed to the left
and date. Joint owners, co-executors or co-trustees should both sign. Persons signing as attorney, executor, administrator, trustee or guardian should give
their full title as such. If the holder is a corporation or partnership, the
full corporate or partnership name should be signed by a duly authorized officer.
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Date
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Share Owner sign here
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Co-Owner sign here |
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ARBITRON INC.
PROXY CARD
This proxy is solicited on behalf of the Board of Directors
of Arbitron Inc. for the annual meeting of stockholders on May 15, 2007.
The undersigned hereby appoints Sean R. Creamer and Timothy T. Smith and either of them, as
the proxies of the undersigned, with full power of substitution in each, to vote at the annual
meeting of stockholders to be held on May 15, 2007, and at any adjournment or postponement thereof
all of the undersigneds shares of common stock of Arbitron Inc. held of record on April 2, 2007,
in the manner indicated on the reverse side hereof.
The undersigned hereby acknowledges receipt of the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement.
You are encouraged to specify your choices by marking the appropriate boxes on the reverse
side.
(Continued, and to be signed and dated on the reverse side.)
ARBITRON INC.
P.O. BOX 11367
NEW YORK, NY 10203-0367