DEFM14A 1 d466085ddefm14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to Rule 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):
¨   No fee required.
¨   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

   

 

  (2)  

Aggregate number of securities to which transaction applies:

 

   

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

   

 

  (4)  

Proposed maximum aggregate value of transaction:

 

   

 

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Total fee paid:

   
   

 

x   Fee paid previously with preliminary materials.
¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount previously paid:

 

   

 

  (2)  

Form, Schedule or Registration Statement No.:

 

   

 

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Filing Party:

 

   

 

  (4)  

Date Filed:

 

   

 

 

 

 


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LOGO

To the Stockholders of Arbitron Inc.:

You are cordially invited to attend a special meeting of the stockholders of Arbitron Inc., a Delaware corporation, which we refer to as Arbitron, to be held on April 16, 2013 at The St. Regis Washington, D.C., 923 16th Street, N.W., Washington, D.C. 20006, at 9:30 a.m. Eastern time. This proxy statement is first being mailed to stockholders of Arbitron on or about March 18, 2013.

On December 17, 2012, we entered into an Agreement and Plan of Merger, by and among Nielsen Holdings N.V., TNC Sub I Corporation and Arbitron, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of January 25, 2013, as it may be further amended from time to time, which we refer to as the merger agreement, providing for the acquisition of Arbitron by Nielsen Holdings N.V., which we refer to as Nielsen. The merger agreement was unanimously approved by our board of directors. At the special meeting, you will be asked to consider and vote upon a proposal to adopt the merger agreement and the other proposals described in the accompanying proxy statement. The merger agreement is attached as Annex A to the accompanying proxy statement. Only stockholders of record who held shares of Arbitron common stock at the close of business on March 8, 2013 (which we refer to as the record date) will be entitled to vote. You may vote your shares at the special meeting only if you are present in person or represented by proxy at the special meeting.

If our stockholders adopt the merger agreement and the merger contemplated by the merger agreement takes place, each outstanding share of Arbitron common stock will be converted into the right to receive $48.00 in cash, without interest and subject to any applicable withholding tax (unless you have properly and validly perfected your statutory rights of appraisal with respect to the merger).

At the special meeting, you will also be asked to consider and vote upon a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement and a proposal to approve, on an advisory (non-binding) basis, the “golden parachute” compensation that our named executive officers will or may receive in connection with the merger.

Our board of directors has unanimously determined that the merger agreement and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Arbitron and our stockholders. Our board of directors unanimously recommends that stockholders vote “FOR” the adoption of the merger agreement; “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies; and “FOR” the approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable.

Your vote is very important, regardless of the number of shares of Arbitron common stock you own. The adoption of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the determination of stockholders entitled to vote at the special meeting. Whether or not you expect to attend the special meeting, please complete, date, sign and return the enclosed proxy card or voting instruction form (or submit your proxy or voting instructions by telephone or over the Internet) as soon as possible to ensure that your shares are represented at the special meeting. Submitting your proxy or voting instructions promptly will help to ensure the presence of a quorum at the special meeting and will assist in reducing the expenses of additional proxy solicitation, but it will not prevent you from attending the special meeting and voting in person should you choose to do so. Please note that a failure to vote your shares in person at the special meeting or to submit a proxy or voting instructions has the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

If your shares are held in “street name” by your broker, bank or other nominee, your broker, bank or other nominee will not be able to vote your shares of Arbitron common stock without instructions from you. You should advise your broker, bank or other nominee how to vote your shares of Arbitron common stock in accordance with the instructions provided by your broker, bank or other nominee. The failure to instruct your broker, bank or other nominee to vote your shares of Arbitron common stock has the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.


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The accompanying proxy statement provides detailed information about the merger and the other business to be considered by stockholders at the special meeting. We encourage you to read carefully the entire document, including the annexes. You may also obtain more information about Arbitron from the documents we have filed with the U.S. Securities and Exchange Commission.

On behalf of your board of directors, thank you for your continued support.

Sincerely,

 

LOGO

Sean R. Creamer

President and Chief Executive Officer

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORS HAVE APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED HEREIN, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This proxy statement is dated March 13, 2013.


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ARBITRON INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 16, 2013

 

TIME AND DATE

   9:30 a.m., Eastern time, on April 16, 2013.

PLACE

  

The St. Regis Washington, D.C., 923 16th Street, N.W., Washington, D.C. 20006.

PROPOSALS

  

1. Adoption of the Agreement and Plan of Merger, dated as of December 17, 2012, by and among Nielsen Holdings N.V., TNC Sub I Corporation and Arbitron Inc., as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of January 25, 2013, as such agreement may be further amended from time to time, and as more fully described in the accompanying proxy statement (the “merger agreement”);

  

2. Approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement; and

  

3. Approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable.

RECORD DATE

   March 8, 2013.

MEETING ADMISSION

   You are entitled to attend the special meeting and any adjournment or postponement thereof only if you were a stockholder of record or a beneficial owner as of the close of business on March 8, 2013 or you hold a valid legal proxy for the special meeting. If your shares are held in a stock brokerage account or by a bank, broker or other nominee (that is, in “street name”) rather than directly in your own name with our transfer agent, you are considered a beneficial owner of your shares, and, as a beneficial owner, you will need to provide proof of beneficial ownership on the record date in order to be admitted to the special meeting, such as a brokerage account statement showing that you owned Arbitron common stock as of the record date, a voting instruction form provided by your bank, broker or other nominee, or other similar evidence of ownership as of the record date, including a valid “legal proxy” from your bank, broker or other nominee. You should also be prepared to present photo identification for admission. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the special meeting.

VOTING

   Your vote is very important, regardless of the number of shares of Arbitron common stock you own. The adoption of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the determination of stockholders entitled to vote at the special meeting. Voting requirements for the other proposals are described in the accompanying proxy statement. We encourage you to read the accompanying proxy statement in its entirety and to submit a proxy or voting instructions so that your shares will be represented and voted even if you do not attend the special meeting. Holders of Arbitron common stock who do not vote in favor of the adoption of the merger agreement and hold their shares of Arbitron common stock through the effective time of the merger are entitled to seek appraisal of the fair value of their shares under Delaware law in connection with the merger if they comply with the requirements of Delaware law explained starting on page 62 and Annex C of the accompanying proxy statement.


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RECOMMENDATION

   Our board of directors has unanimously determined that the merger agreement and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Arbitron and you, the stockholders. Our board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement (Proposal No. 1), “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies (Proposal No. 2) and “FOR” the proposal to approve, on an advisory (non-binding) basis, the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable (Proposal No. 3).

Information about how to submit a proxy or voting instructions is provided in the accompanying proxy statement and on the separate proxy card or voting instruction form you received with the accompanying proxy statement.

The accompanying proxy statement provides detailed information about the merger and the other business to be considered by stockholders at the special meeting. We encourage you to read carefully the entire document, including the annexes.

By Order of the Board of Directors,

 

LOGO

Timothy T. Smith

Executive Vice President, Business Development

and Strategy, Chief Legal Officer, and Secretary

Columbia, MD

March 13, 2013

YOUR VOTE IS IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS FOR YOUR SHARES PROMPTLY, REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING.


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TABLE OF CONTENTS

 

     Page  

SUMMARY

     1   

Parties to the Merger (page 18)

     1   

The Merger (page 19)

     1   

The Special Meeting (page 15)

     2   

Treatment of Equity Awards and Other Equity Based Compensation (page 71)

     2   

When the Merger Is Expected to Be Completed

     3   

Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger (page 30)

     3   

Interests of Executive Officers and Directors in the Merger (page 55)

     4   

Opinions of Our Financial Advisors (page 37)

     4   

Financing of the Merger (page 54)

     4   

Our Conduct of Business Pending the Merger (page 75)

     4   

Restrictions on Solicitations of Other Offers and Changes in Recommendation (page 77)

     5   

Conditions to the Merger (pages 66 and 83)

     5   

Termination (page 84)

     5   

Termination Fees (page 85)

     6   

Material U.S. Federal Income Tax Consequences to Stockholders (page 67)

     6   

Litigation Relating to the Merger (page 69)

     7   

Current Market Price of Arbitron Common Stock

     7   

Appraisal Rights (page 62, Annex C)

     7   

Additional Information (page 97)

     7   

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING OF STOCKHOLDERS

     8   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     14   

INFORMATION ABOUT THE SPECIAL MEETING OF STOCKHOLDERS

     15   

Date, Time and Place of the Special Meeting of Stockholders

     15   

Purpose of the Special Meeting of Stockholders

     15   

Recommendation of Our Board of Directors

     15   

Record Date and Outstanding Shares

     15   

Quorum Requirement

     15   

Vote Required

     16   

Shares Held by Directors and Executive Officers

     16   

Attending and Voting at the Special Meeting of Stockholders

     16   

Proxies

     17   

Revocation of Proxies

     17   

Solicitation of Proxies

     17   

Questions and Additional Information

     17   

PARTIES TO THE MERGER

     18   

Arbitron

     18   

Nielsen

     18   

Merger Sub

     18   

PROPOSAL NO. 1 — ADOPTION OF THE MERGER AGREEMENT

     19   

Overview

     19   

Background of the Merger

     19   

 

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Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger

     30   

Prospective Financial Information

     33   

Opinions of Our Financial Advisors

     37   

Financing of the Merger

     54   

Interests of Executive Officers and Directors in the Merger

     55   

Appraisal Rights

     62   

Regulatory Approvals

     66   

Material U.S. Federal Income Tax Consequences of the Merger

     67   

Litigation Relating to the Merger

     69   

Delisting and Deregistration of the Company’s Common Shares

     69   

The Merger Agreement

     70   

MARKET PRICE OF ARBITRON COMMON STOCK

     88   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     89   

PROPOSAL NO. 2 — ADJOURNMENT OF THE SPECIAL MEETING

     92   

Vote Required and Board of Directors Recommendation

     92   

PROPOSAL NO. 3 — ADVISORY VOTE REGARDING CERTAIN EXECUTIVE COMPENSATION

     93   

Golden Parachute Compensation

     93   

Advisory Vote on Golden Parachutes

     95   

OTHER MATTERS

     96   

Additional Proposals for the Special Meeting of Stockholders

     96   

2013 Stockholder Proposals and Nominations

     96   

Delivery of Documents to Stockholders Sharing an Address

     96   

WHERE YOU CAN FIND MORE INFORMATION

     97   

List of Annexes

 

Annex A-1       Agreement and Plan of Merger, dated as of December 17, 2012, by and among Arbitron Inc., Nielsen Holdings N.V. and TNC Sub I Corporation
Annex A-2       Amendment No. 1 to the Agreement and Plan of Merger, dated as of January 25, 2013, by and among Arbitron Inc., Nielsen Holdings N.V. and TNC Sub I Corporation
Annex B-1       Opinion of Guggenheim Securities, LLC, dated December 17, 2012
Annex B-2       Opinion of Signal Hill Capital Group LLC, dated December 17, 2012
Annex C       Section 262 of the General Corporation Law of the State of Delaware

 

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SUMMARY

This summary, together with the “Questions and Answers About the Merger and the Special Meeting of Stockholders,” highlights selected information from this proxy statement and may not contain all of the information that is important to you. We urge you to read carefully the entire proxy statement, the annexes and the other documents to which we refer (including documents incorporated by reference) in order to fully understand the merger and the related transactions. See “Where You Can Find More Information” on page 97. Each item in this summary refers to the page of this proxy statement on which that subject is discussed in more detail. Except as otherwise specifically noted in this proxy statement, “Company,” “Arbitron,” “we,” “our,” “us” and similar words in this proxy statement refer to Arbitron Inc. and its direct and indirect consolidated subsidiaries and references to “the board,” “the board of directors” or “our board of directors” refer to the board of directors of Arbitron Inc.

Parties to the Merger (page 18)

Arbitron

Arbitron Inc., a Delaware corporation, which we refer to as Arbitron, is a leading information services firm. Arbitron’s primary business is measuring network and local market radio audiences across the United States and also includes: estimating the size and composition of audiences to media other than radio, including mobile media, television viewed out-of-home, and content distributed on multiple platforms; providing qualitative information about consumers, including their lifestyles, shopping patterns, and use of media; and providing software to access and analyze media audience and marketing information data.

Nielsen

Nielsen Holdings N.V., a Netherlands company, which we refer to as Nielsen, together with its subsidiaries, is a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior.

TNC Sub I Corporation

TNC Sub I Corporation, which we refer to as Merger Sub, is a Delaware corporation and indirect wholly-owned subsidiary of Nielsen that was formed solely for the purpose of consummating the merger described below and the other related transactions in connection with the merger.

The Merger (page 19)

On December 17, 2012, we entered into an Agreement and Plan of Merger, by and among Nielsen, Merger Sub and Arbitron, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of January 25, 2013 (as such agreement may be further amended from time to time), which we refer to as the merger agreement, which provides that, among other things, at the time the certificate of merger is filed with the Secretary of State of the State of Delaware (or at such other time as may be mutually determined by us, Nielsen and Merger Sub and set forth in the certificate of merger), Merger Sub will merge with and into Arbitron, with Arbitron surviving the merger as an indirect wholly-owned subsidiary of Nielsen, which we refer to as the merger.

As a result of the merger, each share of Arbitron common stock issued and outstanding immediately prior to the effective time of the merger, other than shares owned by Arbitron, Nielsen or Merger Sub and shares held by stockholders who are entitled to demand and properly demand their appraisal rights under Delaware law, will automatically be converted into the right to receive $48.00 in cash, which amount we refer to as the merger consideration, payable without any interest and less any required withholding taxes. After the merger is completed, you will no longer have any rights as an Arbitron stockholder, other than the right to receive the merger consideration and subject to the rights described under “Proposal No. 1 — Adoption of the Merger Agreement —Appraisal Rights” beginning on page 62. As a result of the merger, Arbitron will cease to be a publicly traded company and Nielsen will indirectly own 100% of the equity of Arbitron.

 

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A copy of the merger agreement is included as Annex A to this proxy statement and is incorporated by reference into this proxy statement.

The Special Meeting (page 15)

Date, Time and Place

The special meeting will be held on April 16, 2013 at The St. Regis Washington, D.C., 923 16th Street, N.W., Washington, D.C. 20006 at 9:30 a.m. Eastern time.

Purpose

You will be asked to vote on (1) a proposal to adopt the merger agreement, (2) a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement and (3) a proposal to approve, on an advisory (non-binding) basis, the “golden parachute” compensation that our named executive officers will or may receive in connection with the merger.

Record Date and Quorum

You are entitled to vote at the special meeting if you owned shares of Arbitron common stock at the close of business on March 8, 2013, the record date for the special meeting. You will have one vote for each share of Arbitron common stock that you owned on the record date. As of the record date, there were 27,769,580 shares of Arbitron common stock issued and outstanding and entitled to vote. The presence in person or by proxy of the holders of a majority in voting power of the outstanding shares of Arbitron common stock as of the close of business on the record date will constitute a quorum for the purposes of the special meeting.

Vote Required

The adoption of the merger agreement requires the affirmative vote of holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the special meeting. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies and the non-binding proposal regarding “golden parachute” compensation arrangements each require the affirmative vote of holders of a majority in voting power of the shares of Arbitron common stock represented at the special meeting, either in person or by proxy, and entitled to vote on the proposal.

Treatment of Equity Awards and Other Equity Based Compensation (page 71)

Stock Options

The merger agreement generally provides that each Arbitron stock option that is outstanding immediately before the effective time of the merger, whether vested or unvested, will be automatically converted into the right to receive a cash payment equal to (1) the excess, if any, of $48.00, over the exercise price per share subject to such stock option, multiplied by (2) the number of shares subject to the stock option. Some stock option agreements that govern outstanding Arbitron stock options additionally require that if the fair value of the stock option, determined at the time of a change in control transaction using a Black-Scholes valuation methodology and assumptions specified in the stock option agreements, exceeds the cashout amount described in the prior sentence, then the excess amount will be paid to the option holder in addition to such cashout amount. Consistent with these stock option agreements, the merger agreement provides for such additional cash payments to be made to the holders of these stock options.

Restricted Stock Units and Deferred Stock Units

The merger agreement also provides that, except for restricted stock unit awards granted after the date of the merger agreement, the treatment of which is described separately below, each Arbitron restricted stock unit,

 

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which we refer to as an “RSU,” and each Arbitron deferred stock unit, which we refer to as a “DSU,” whether vested or unvested, and whether or not subject to performance-based vesting conditions, that is outstanding immediately before the effective time of the merger will be canceled in exchange for a cash payment of $48.00 for each share of Arbitron common stock subject to the RSU or DSU.

RSUs granted after the date of the merger agreement will be treated differently. With respect to RSUs granted after the date of the merger agreement to any newly-hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case, if granted in accordance with the limitations in the merger agreement relating to RSU grants between the date of the merger agreement and the effective time of the merger, any portion of the RSU that is not vested as of the effective time of the merger will not vest or be cashed out in connection with the merger, but will, instead, be assumed by Nielsen. Each such assumed RSU will otherwise continue to have, and remain subject to, the same terms and conditions to which the award was subject immediately before the effective time of the merger, including any vesting or forfeiture provisions or repurchase rights, except that the number of shares subject to the award will be adjusted to reflect the difference in Arbitron’s and Nielsen’s common stock values at the effective time of the merger. Specifically, after being assumed, the RSU will cover a number of whole shares of Nielsen common stock equal to the product of (1) the number of shares of Arbitron common stock subject to the RSU immediately before the effective time of the merger, multiplied by (2) the quotient of (x) $48.00 divided by (y) the closing price for one share of Nielsen common stock on the close of business on the business day immediately before the effective time of the merger, with such resulting number of shares rounded down to the nearest whole number of shares. We refer to this quotient in the following paragraph as the “exchange ratio.”

With respect to all other RSUs granted after the date of the merger agreement, part of the RSU will be cancelled in exchange for a cash payment and part of the RSU will be assumed by Nielsen. Specifically, with respect to 50% of the number of shares of Arbitron common stock subject to the RSU when originally granted, which we refer to as the “assumed portion,” the RSU will be assumed by Nielsen, as described below in this paragraph. With respect to any remaining portion of the RSU that is outstanding at the effective time of the merger, such portion will be canceled in exchange for a cash payment of $48.00 for each share of Arbitron common stock covered by such remaining portion of the award. Except as noted below in this paragraph, the assumed portion of the RSUs will continue to have, and remain subject to, the same terms and conditions to which the award was subject immediately before the effective time of the merger, including any vesting or forfeiture provisions or repurchase rights, except that the number of shares subject to the award will be adjusted to reflect the difference in Arbitron’s and Nielsen’s common stock values at the effective time of the merger. Consistent with the approach described in the prior paragraph, the number of shares of Nielsen common stock to which the assumed awards will relate after being assumed will be determined by multiplying the number of whole shares of Arbitron common stock subject to the assumed portion of the RSU, by the exchange ratio. The number of shares of Nielsen common stock with respect to which the assumed RSU will vest on each subsequent vesting date will be determined by dividing the total number of shares of Nielsen common stock subject to the award by the remaining number of vesting dates under the award after the effective time of the merger.

When the Merger Is Expected to Be Completed

We currently expect to complete the merger by the end of the third quarter of 2013. However, we cannot assure you when or if the merger will occur. We must first obtain the approvals of Arbitron stockholders at the special meeting and the required regulatory approvals described below in “Proposal No. 1 — Adoption of the Merger Agreement — Regulatory Approvals” beginning on page 66.

Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger (page 30)

Our board unanimously recommends that you, as a stockholder of the Company, vote “FOR” the proposal to adopt the merger agreement. For a description of the reasons considered by our board in approving the merger agreement and the merger, see “Proposal No. 1 — Adoption of the Merger Agreement — Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger” beginning on page 30.

 

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Interests of Executive Officers and Directors in the Merger (page 55)

In considering the recommendation of our board of directors, you should be aware that certain of our executive officers and directors have interests in the merger that may be different from, or in addition to, your interests as a stockholder. These interests include, among others:

 

   

the cancellation of in-the-money stock options for a cash payment;

 

   

the cancellation of RSUs and DSUs in exchange for a cash payment of $48.00 for each share of Arbitron common stock subject to such RSU or DSU;

 

   

retention agreements providing for severance payments and benefits, including accelerated vesting of stock-based awards, upon qualifying terminations of employment that occur within a limited period following a change in control; and

 

   

continued indemnification and liability insurance for directors and officers following completion of the merger.

See “Proposal No. 1 — Adoption of the Merger Agreement — Interests of Executive Officers and Directors in the Merger” beginning on page 55 for additional information.

Opinions of Our Financial Advisors (page 37)

In connection with the merger, the Company’s financial advisors, Guggenheim Securities, LLC and Signal Hill Capital Group LLC, which we refer to as Guggenheim Securities and Signal Hill, respectively, each delivered a written opinion, dated December 17, 2012, to our board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the $48.00 per share cash consideration to be received in the merger by holders of Company common stock. The full text of the written opinions of Guggenheim Securities and Signal Hill, which describe the assumptions made, procedures followed, matters considered and any limitations on the review undertaken in rendering such opinion, are attached to this proxy statement as Annex B-1 and B-2, respectively. The summaries of each opinion in this proxy statement are qualified in their entireties by reference to the full text of the applicable opinion. You should read these opinions carefully and in their entireties. The opinions of Guggenheim Securities and Signal Hill are not recommendations as to how any holder of Company common stock should act with respect to the merger or any other matter.

Financing of the Merger (page 54)

We anticipate that the total amount of funds necessary to complete the merger and related transactions and pay related transaction fees and expenses will be approximately $1.3 billion. Prior to our execution of the merger agreement, Nielsen obtained, and provided a copy to us of, a debt commitment letter, which we refer to as the commitment letter, in connection with the transactions contemplated by the merger agreement in a maximum aggregate amount of approximately $1.3 billion. Nielsen and Merger Sub have represented that with the net proceeds contemplated by the commitment letter together with the other financial resources of Nielsen, including the cash on hand of Nielsen and the Company, Nielsen and Merger Sub will have sufficient funds to pay the merger consideration to our stockholders, to satisfy all of Nielsen’s obligations under the merger agreement and to pay fees and expenses required to be paid by Nielsen in connection with the merger agreement. The merger is not subject to a financing condition. See “Proposal No. 1 — Adoption of the Merger Agreement — Financing of the Merger” beginning on page 54.

Our Conduct of Business Pending the Merger (page 75)

We have agreed that from December 17, 2012 through the effective time of the merger, we will, and will cause our subsidiaries to, subject to certain exceptions: (a) carry on our business in the ordinary course consistent with past practice and (b) use reasonable best efforts to preserve intact its current business organization and goodwill, keep available the services of its current officers, key employees and consultants, and keep and preserve its present relationships with customers, suppliers, licensors, licensees, distributors and others having material business dealings with it.

 

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In addition, as described below and set forth in the merger agreement, we have agreed that, prior to the effective time of the merger, subject to certain exceptions, we will not take certain actions without the prior written consent of Nielsen (which consent will not be unreasonably withheld, conditioned or delayed).

Restrictions on Solicitations of Other Offers and Changes in Recommendation (page 77)

The merger agreement restricts our ability to solicit or engage in discussions or negotiations with a third party regarding specified transactions involving us or our subsidiaries. Notwithstanding these restrictions, prior to the time that Arbitron stockholders adopt the merger agreement, our board of directors may respond to an unsolicited bona fide written proposal for an alternative acquisition that our board of directors determines in good faith, after consultation with its outside legal counsel and financial advisors constitutes, or could reasonably be expected to lead to a superior company proposal (as described under “Proposal No. 1 — Adoption of the Merger Agreement — Restrictions on Solicitations of Other Offers and Changes in Recommendation — No Solicitation” beginning on page 77) by furnishing information with respect to Arbitron and its subsidiaries or by participating in discussions or negotiations with the party or parties making the alternative acquisition proposal, so long as we comply with the terms of the merger agreement. In addition, prior to the time Arbitron stockholders adopt the merger agreement, our board of directors may cause us to terminate the merger agreement in order for us to enter into an acquisition agreement with respect to a superior company proposal, so long as we comply with the terms of the merger agreement. Our board of directors may also withdraw its recommendation of the merger agreement prior to the time Arbitron stockholders adopt the merger agreement in certain circumstances unrelated to an alternative acquisition proposal if it determines in good faith, after consultation with its outside legal counsel, that the failure to do so could reasonably be determined to be inconsistent with its fiduciary duties to Arbitron’s stockholders, so long as we comply with the terms of the merger agreement. In the event that Arbitron terminates the merger agreement to accept a superior proposal and in other specified circumstances, Arbitron may be required to pay to Nielsen a termination fee of $32.7 million.

Conditions to the Merger (pages 66 and 83)

As more fully described in this proxy statement and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others, adoption of the merger agreement by our stockholders, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, which we refer to as the HSR Act, and the absence of any injunction or other applicable law prohibiting the consummation of the merger. See “Proposal No. 1 — Adoption of the Merger Agreement — Regulatory Approvals” and “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Conditions to the Merger” beginning on pages 66 and 83, respectively.

Termination (page 84)

The merger agreement may be terminated at any time prior to the effective time:

 

   

by mutual written consent of Nielsen and the Company;

 

   

by either Nielsen or the Company if, subject to specified exceptions: (a) the merger has not been consummated on or before October 1, 2013 (as such date may be extended, the “Outside Date”), (b) any law or any federal, state, local or foreign judgment, injunction, order, writ, ruling or decree permanently enjoining, restraining or prohibiting the consummation of the merger has become final and nonappealable, or (c) upon a vote taken at the special meeting, the merger agreement is not approved by the required vote of the Company’s stockholders;

 

   

by Nielsen, if the Company breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement, such that the conditions to Nielsen’s obligation to consummate the merger would not be satisfied if the date of such termination was the Outside Date, and such breach or failure to perform has not been cured as specified in the merger agreement;

 

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by Nielsen, prior to (but not after) the time at which the required stockholder approval has been obtained, if, subject to specified exceptions, (i) an Adverse Recommendation Change (as defined in “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Restrictions on Solicitations of Other Offers and Changes in Recommendation” beginning on page 77) has occurred, (ii) the Company has breached or failed to perform in any material respect its obligations or agreements contained in the no solicitation or preparation of proxy statement/stockholder meeting provisions of the merger agreement, (iii) the Company failed to reconfirm, after a Company Takeover Proposal (as defined in “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Restrictions on Solicitations of Other Offers and Changes in Recommendation” beginning on page 77) has been publicly announced, the Company Recommendation (as defined in “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Recommendation” beginning on page 72) within the Response Period (as defined in “Proposal No. 1 — Adoption of the Merger Agreement — The Merger — Termination” beginning on page 84) following the receipt of a written request from Nielsen to do so or (iv) if any tender offer or exchange offer is commenced by any third party with respect to the outstanding Company common stock prior to the time at which the Company receives the required stockholder approval, and our board of directors has not recommended that the Company’s stockholders reject such tender offer or exchange offer and not tender their Company common stock into such tender offer or exchange offer within the Response Period, unless the Company has issued a press release that expressly reaffirms the Company Recommendation within the Response Period;

 

   

by the Company, if Nielsen or Merger Sub breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement such that the conditions to the Company’s obligation to consummate the merger would not be satisfied if the date of such termination was the Outside Date, and such breach or failure to perform has not been cured as specified in the merger agreement; or

 

   

by the Company, prior to (but not after) the time at which the required stockholder approval has been obtained, if, subject to specified exceptions, (i) the Company has not breached or failed to perform in any material respect its obligations or agreements contained in the no solicitation or preparation of proxy statement/stockholder meeting provisions of the merger agreement, (ii) our board of directors authorizes the Company, subject to complying with the terms of the merger agreement, to enter into a binding definitive Alternative Acquisition Agreement (as defined in “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Restrictions on Solicitations of Other Offers and Changes in Recommendation” beginning on page 77) providing for a Superior Company Proposal (as defined in “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Restrictions on Solicitations of Other Offers and Changes in Recommendation” beginning on page 77), (iii) the Company prior to or concurrently with such termination pays to Nielsen in immediately available funds a termination fee of $32.7 million and (iv) the Company enters into such Alternative Acquisition Agreement substantially concurrently with such termination.

Termination Fees (page 85)

Upon termination of the merger agreement under specified circumstances, including, among others, those involving an alternative acquisition proposal or a change in our board of directors’ recommendation of the merger agreement, the Company will be required to pay Nielsen a termination fee of $32.7 million. Upon termination of the merger agreement under specified circumstances relating to antitrust approvals, Nielsen may be required to pay the Company a termination fee of $131.0 million.

Material U.S. Federal Income Tax Consequences to Stockholders (page 67)

The merger will be a taxable transaction to U.S. holders and certain non-U.S. holders of Arbitron common stock for U.S. federal income tax purposes.

You should read “Proposal No. 1 — Adoption of the Merger Agreement — Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 67 for a more complete discussion of the U.S. federal

 

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income tax consequences of the merger. Tax matters can be complicated, and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.

Litigation Relating to the Merger (page 69)

On January 24, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware regarding the merger. On March 7, 2013, the parties to the litigation entered into a memorandum of understanding providing for a settlement, subject to court approval, of the action. Pursuant to this memorandum of understanding, Arbitron included in this definitive proxy statement certain additional disclosures related to the merger and made certain modifications to its existing confidentiality agreements with parties as identified in “Proposal No. 1 — Adoption of the Merger Agreement — Background of the Merger.” See “Proposal No. 1 —Adoption of the Merger Agreement—Litigation Relating to the Merger” beginning on page 69 for additional information.

Current Market Price of Arbitron Common Stock

Our common stock is listed on the New York Stock Exchange, which we refer to as the NYSE, under the trading symbol “ARB.” On December 17, 2012, which was the last full trading day before we announced the transaction, our stock closed at $38.04. On March 12, 2013, which was the last trading day before the date of this proxy statement, our common stock closed at $46.88.

Appraisal Rights (page 62, Annex C)

Under Delaware law, holders of Arbitron common stock who do not vote in favor of the adoption of the merger agreement, who properly demand appraisal rights and who otherwise comply with the requirements of Section 262 of the General Corporation Law of the State of Delaware, which we refer to as the DGCL, will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of Arbitron common stock in lieu of receiving the merger consideration if the merger is completed, but only if they comply with all applicable requirements of Delaware law. This value could be more than, the same as, or less than the merger consideration. Any holder of Arbitron common stock intending to exercise appraisal rights, among other things, must submit a written demand for appraisal to us prior to the vote on the proposal to adopt the merger agreement and must not vote or otherwise submit a proxy in favor of adoption of the merger agreement and must otherwise strictly comply with all of the procedures required by Delaware law. The relevant provisions of the DGCL are included as Annex C to this proxy statement. You are encouraged to read these provisions carefully and in their entirety. Moreover, due to the complexity of the procedures for exercising the right to seek appraisal, stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the provision of Delaware law will result in loss of the right of appraisal.

Additional Information (page 97)

You can find more information about Arbitron in the periodic reports and other information we file with the U.S. Securities and Exchange Commission, which we refer to as the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at www.sec.gov. For a more detailed description of the additional information available, see “Where You Can Find More Information” beginning on page 97.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

AND THE SPECIAL MEETING OF STOCKHOLDERS

The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder of Arbitron. Please refer to the more detailed information contained elsewhere in this proxy statement, including the annexes and the documents we refer to in this proxy statement.

 

Q: Why am I receiving this proxy statement?

 

A: You are receiving this proxy statement because you have been identified as a stockholder of Arbitron as of the close of business on the record date for the determination of stockholders entitled to notice of the special meeting. This proxy statement contains important information about the merger and the special meeting of stockholders, and you should read this proxy statement carefully.

The Merger

 

Q: What is the proposed transaction for which I am being asked to vote?

 

A: You are being asked to vote on the adoption of the merger agreement. The merger agreement provides that at the effective time of the merger, Merger Sub will merge with and into Arbitron, with Arbitron surviving the merger as an indirect wholly-owned subsidiary of Nielsen. After the merger, Arbitron will cease to be a publicly traded company and will be an indirect wholly-owned subsidiary of Nielsen. As a result, you will no longer have any rights as an Arbitron stockholder, including but not limited to the fact that you will no longer have any interest in our future earnings or growth, if any. Following completion of the merger, shares of Arbitron common stock will no longer be listed on the NYSE and the registration of such shares under the Exchange Act is expected to be terminated.

Please see “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement” beginning on page 70 for a more detailed description of the merger and the merger agreement. A copy of the merger agreement is attached to this proxy statement as Annex A.

 

Q: What happens if the merger is not completed?

 

A: If the merger agreement is not adopted by our stockholders, or if the merger is not completed for any other reason, our stockholders will not receive any payment for their Arbitron common stock pursuant to the merger agreement. Instead, we will remain a public company and our common stock will continue to be registered under the Exchange Act and listed and traded on the NYSE. Under specified circumstances, we may be required to pay Nielsen a termination fee or Nielsen may be required to pay us a reverse termination fee. See “Proposal No. 1 — Adoption of the Merger Agreement — The Merger Agreement — Termination Fees” beginning on page 85.

 

Q: Am I entitled to exercise appraisal rights under the DGCL instead of receiving the merger consideration for my shares of Arbitron common stock?

 

A: Yes. As a holder of Arbitron common stock, you are entitled to exercise appraisal rights under the DGCL in connection with the merger if you take certain actions and meet certain conditions. See “Proposal No. 1—Adoption of the Merger Agreement—Appraisal Rights” beginning on page 62.

 

Q: When is the merger expected to be completed?

 

A: The parties to the merger agreement are working to complete the merger as quickly as possible. In order to complete the merger, the Company must obtain the stockholder approval described in this proxy statement and the other closing conditions under the merger agreement must be satisfied or waived. The parties to the merger agreement currently expect to complete the merger by the end of the third quarter of 2013, although the Company cannot assure completion by any particular date, if at all. Because the merger is subject to a number of conditions, the exact timing of the merger cannot be determined at this time.

 

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The Special Meeting

 

Q: When and where is the special meeting?

 

A: The special meeting will be held on April 16, 2013 at The St. Regis Washington, D.C., 923 16th Street, N.W., Washington, D.C. 20006, at 9:30 a.m., Eastern time.

 

Q: What other proposals are being presented at the special meeting?

 

A: In addition to the merger proposal, Arbitron stockholders will be asked to vote on the following proposals at the special meeting:

 

   

approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement (Proposal No. 2); and

 

   

approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable (Proposal No. 3).

 

Q: How does Arbitron’s board of directors recommend that I vote?

 

A: Our board of directors unanimously recommends that you vote your shares:

 

   

FOR” the adoption of the merger agreement (Proposal No. 1);

 

   

FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies (Proposal No. 2); and

 

   

FOR” the approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable (Proposal No. 3).

 

Q: Who is entitled to vote at the special meeting?

 

A: All stockholders of record as of the close of business on March 8, 2013, the record date for the determination of stockholders entitled to vote at the special meeting, are entitled to vote at the special meeting. On that date, 26,769,580 shares of Arbitron common stock were issued and outstanding.

As of the record date for the determination of stockholders entitled to vote at the special meeting, our executive officers and directors held an aggregate of 1,221,094 shares of Arbitron common stock, which represented approximately 4.38% of all shares of Arbitron common stock issued and outstanding on the record date.

 

Q: What vote is required to approve each proposal?

 

A: The adoption of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the determination of stockholders entitled to vote at the special meeting. If you do not submit a proxy or voting instructions or do not vote in person at the meeting, or if you “ABSTAIN” from voting on the proposal to adopt the merger agreement, the effect will be the same as a vote “AGAINST” the proposal to adopt the merger agreement.

Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies and the non-binding proposal regarding “golden parachute” compensation arrangements each require the affirmative vote of holders of a majority in voting power of the shares of Arbitron common stock represented at the special meeting, either in person or by proxy, and entitled to vote on the proposal. With respect to Proposal No. 2 and Proposal No. 3, if you do not submit a proxy or voting

 

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instructions or do not vote in person at the meeting, your shares will not be counted in determining the outcome of these proposals. If you “ABSTAIN” from voting on Proposal No. 2 or Proposal No. 3, the effect will be the same as a vote “AGAINST” that proposal.

 

Q: Can I attend the special meeting? What do I need for admission?

 

A: You are entitled to attend the special meeting if you were a stockholder of record or a beneficial owner as of the close of business on March 8, 2013 (the record date) or you hold a valid legal proxy for the special meeting. If you are a stockholder of record, your name will be verified against the list of stockholders of record prior to your being admitted to the special meeting. If you are a beneficial owner, you will need to provide proof of beneficial ownership on the record date in order to be admitted to the special meeting, such as a brokerage account statement showing that you owned Arbitron common stock as of the record date, a voting instruction form provided by your bank, broker or other nominee, or other similar evidence of ownership as of the record date, including a valid “legal proxy” from your bank, broker or other nominee. You should also be prepared to present photo identification for admission. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the special meeting.

 

Q: How can I vote my shares in person at the special meeting?

 

A: All stockholders of record and stockholders who hold their shares through a bank, broker or other nominee, are invited to attend the special meeting and vote their shares in person.

If your shares of Arbitron common stock are registered directly in your name with our transfer agent, Broadridge Corporate Issuer Solutions, Inc., you are considered the stockholder of record with respect to those shares. If you are a stockholder of record as of the close of business on the record date for the determination of stockholders entitled to vote at the meeting, you have the right to vote your shares in person at the special meeting. If you choose to do so, you can vote at the special meeting using the written ballot that will be provided at the special meeting or you can complete, sign and date the enclosed proxy card you received with this proxy statement and submit it at the special meeting.

If your shares are held in a stock brokerage account or by a bank, broker or other nominee (that is, in “street name”) rather than directly in your own name with our transfer agent, you are considered a beneficial owner of your shares and this proxy statement is being forwarded to you by your bank, broker or other nominee. As a beneficial owner, you may attend the special meeting and vote your shares in person at the special meeting only if you obtain a “legal proxy” from the bank, broker or other nominee that holds your shares giving you the right to vote such shares at the special meeting.

Even if you plan to attend the special meeting, we recommend that you submit your proxy or voting instructions in advance of the special meeting as described below so that your vote will be counted if you later decide not to attend the special meeting.

 

Q: How can I vote my shares without attending the special meeting?

 

A: Whether you are a stockholder of record or a beneficial owner, you may direct how your shares are voted without attending the special meeting. If you are a stockholder of record, you may submit a proxy to authorize how your shares are voted at the special meeting. Your proxy can be submitted by mail by completing, signing and dating the proxy card you received with this proxy statement and then mailing it in the enclosed prepaid envelope. Stockholders of record may also submit a proxy over the Internet or by telephone by following the instructions provided in the proxy card you received with this proxy statement. If you are a beneficial owner, you must submit voting instructions to your bank, broker or other nominee in order to authorize how your shares are voted at the special meeting. Please follow the instructions provided by your bank, broker or other nominee.

 

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Submitting a proxy or voting instructions will not affect your right to vote in person should you decide to attend the special meeting, although beneficial owners must obtain a “legal proxy” from the bank, broker or other nominee that holds their shares giving them the right to vote such shares at the special meeting in order to vote in person at the special meeting.

If you need assistance voting your shares, please contact our proxy solicitor, D. F. King & Co., Inc., at (800) 755-7250.

 

Q: What does it mean if I received more than one set of proxy materials?

 

A: If you received more than one set of proxy materials, it means that you hold shares of Arbitron common stock in more than one account. For example, you may own your shares in various forms, including jointly with your spouse, as trustee of a trust or as custodian for a minor. To ensure that all of your shares are voted, please provide a proxy or voting instructions for each account for which you received proxy materials.

 

Q: How will my shares be voted if I do not provide specific voting instructions in the proxy or voting instruction form I submit?

 

A: If you submit a proxy or voting instructions but do not indicate your specific voting instructions on one or more of the proposals to be presented at the special meeting, your shares will be voted as recommended by our board of directors on those proposals.

 

Q: What is the deadline for voting my shares?

 

A: If you are a stockholder of record, your proxy must be received by telephone or the Internet by 11:59 p.m. Eastern time on April 15, 2013 in order for your shares to be voted at the special meeting. However, if you are a stockholder of record, you may instead mark, sign, date and return the enclosed proxy card, which must be received before the polls close at the special meeting, in order for your shares to be voted at the meeting. If you are a beneficial owner, please read the voting instructions provided by your bank, broker or other nominee for information on the deadline for voting your shares.

 

Q: What is a quorum?

 

A: The presence in person or by proxy of the holders of a majority in voting power of the outstanding shares of Arbitron common stock as of the close of business on the record date will constitute a quorum for purposes of the special meeting. Abstentions, if any, are counted as present for the purpose of determining whether a quorum is present.

 

Q: Why am I being asked to cast a non-binding, advisory vote to approve the “golden parachute” compensation arrangements that certain Arbitron executive officers will or may receive in connection with the merger?

 

A: In accordance with the rules promulgated under Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to cast a non-binding, advisory vote on the compensation that will or may be payable to our named executive officers in connection with the merger.

 

Q: What will happen if our stockholders do not approve the “golden parachute” compensation arrangements at the special meeting?

 

A: Approval of the “golden parachute” compensation arrangements payable under existing agreements that the named executive officers of Arbitron will or may receive in connection with the merger is not a condition to completion of the merger. The vote with respect to the “golden parachute” compensation arrangements is an advisory vote and will not be binding on us. Therefore, if the merger agreement is adopted by our stockholders and completed, the “golden parachute” compensation arrangements will still be paid to our named executive officers if and when due, regardless of the results of the vote.

 

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Q: How will abstentions be counted?

 

A: If you “ABSTAIN” from voting on any of Proposals No. 1, No. 2 or No. 3, the effect will be the same as a vote “AGAINST” such proposal.

 

Q: Why is my vote important?

 

A: If you do not submit a proxy or voting instructions or vote in person at the special meeting, it will be more difficult for us to obtain the necessary quorum to hold the special meeting. In addition, because the merger proposal must be approved by the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the special meeting, your failure to submit a proxy or voting instructions or to vote in person at the special meeting will have the same effect as a vote “AGAINST” Proposal No. 1, adoption of the merger agreement.

If you do not submit a proxy or voting instructions or do not vote in person at the special meeting, your shares will not be counted in determining the outcome of any of the other proposals at the special meeting.

 

Q: If my shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me if I do not submit voting instructions?

 

A: No. We do not expect that your broker, bank or other nominee will have discretion to vote your shares on any of the matters listed in the notice of special meeting, except in accordance with your specific instructions. Therefore, if you hold your shares in “street name” through a brokerage account and do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be able to vote your shares of Arbitron common stock on any of the proposals at the special meeting and the effect will be that such shares will not be counted for purposes of determining a quorum and will have the same effect as a vote AGAINST” the proposal to adopt the merger agreement. Please note, however, that if you properly submit voting instructions to your broker, bank or other nominee but do not indicate how you want your shares to be voted, your shares will be voted as recommended by our board of directors on those proposals.

 

Q: May I change my vote after I have submitted my proxy or voting instructions?

 

A: Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before your proxy is voted at the special meeting by:

 

   

attending the meeting and voting in person;

 

   

filing with the Secretary of Arbitron an instrument revoking the proxy; or

 

   

properly submitting another proxy on a later date prior to 11:59 p.m. Eastern time on April 15, 2013, by using one of the alternatives described above under “How can I vote my shares without attending the special meeting?”

Attendance at the special meeting in and of itself, without voting in person at the meeting, will not cause your previously granted proxy to be revoked.

Please note that if you hold your shares in “street name” through a broker, bank or other nominee and you have instructed your broker, bank or other nominee to vote your shares, the above-described options for changing your vote do not apply, and instead, you must follow the instructions received from your broker, bank or other nominee to change your vote.

 

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Q: What happens if I transfer my shares of common stock after the record date?

 

A: The record date for the determination of stockholders entitled to vote at the special meeting is earlier than the effective time of the merger. Therefore, transferors of shares of Arbitron common stock after the record date but prior to the consummation of the merger will retain their right to vote at the special meeting, but the right to receive the merger consideration will transfer with the shares.

 

Q: Will any proxy solicitors be used in connection with the special meeting?

 

A: Yes. To assist in the solicitation of proxies, we have engaged D.F. King & Co., Inc.

 

Q: What do I need to do now?

 

A: We urge you to read carefully this proxy statement, including its annexes and the documents we refer to in this proxy statement, and then mail your completed, dated and signed proxy card or voting instruction form in the enclosed prepaid return envelope as soon as possible, or submit your proxy or voting instruction via the Internet or by phone in accordance with the instructions included with this proxy statement and the enclosed proxy card or voting instruction form, so that your shares can be voted at the special meeting.

 

Q: Should I send in my stock certificates now?

 

A: No. If you hold certificates of Arbitron common stock, you will be sent a letter of transmittal promptly, and in any event within three business days, after the completion of the merger, describing how you may exchange your shares of Arbitron common stock for the merger consideration. Please do NOT return your stock certificate(s) with your proxy.

 

Q: Who can help answer my questions?

 

A: If you have any questions or need further assistance in voting your shares of Arbitron common stock, or if you need additional copies of this proxy statement or the proxy card, please contact D.F. King & Co., Inc., our proxy solicitor, in writing at D.F. King & Co., Inc., 48 Wall Street, 22nd Floor, New York, NY 10005, or by telephone at (800) 755-7250 (banks and brokers call collect at (212) 269-5550).

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This proxy statement and the documents to which we refer you in this proxy statement contain “forward-looking statements” as that term is defined by the Private Securities Litigation Reform Act of 1995, we which we refer to as the Act, and the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. Examples of forward-looking statements include information concerning possible or assumed future results of operations of Arbitron, the expected completion and timing of the merger and other information relating to the merger. You can identify some of the forward-looking statements by the use of forward-looking words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “may” and other similar expressions, although not all forward-looking statements contain these identifying words.

In addition to other factors and matters contained or incorporated in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:

 

   

risks that the governmental and regulatory approvals required to be obtained under the merger agreement will not be obtained in a timely manner or at all;

 

   

the inability to complete the merger due to the failure to obtain stockholder approval or failure to satisfy any other conditions to the completion of the merger;

 

   

business uncertainty and contractual restrictions during the pendency of the merger;

 

   

the amount of the costs, fees, expenses and charges related to the merger;

 

   

diversion of management’s attention from ongoing business concerns;

 

   

the effect of the announcement of the merger on our business, operating results and business relationships, including our ability to retain key employees;

 

   

the possible adverse effect on our business and the price of our common stock if the merger is not completed in a timely manner or at all; and

 

   

other risks and uncertainties applicable to our business set forth in our filings with the SEC. See “Where You Can Find More Information” beginning on page 97.

Forward-looking statements are based on the information currently available and are applicable only as of the date on which such statements were made. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. You are urged to carefully review the disclosures we make in this proxy statement and the documents to which we refer you in this proxy statement concerning risks and other factors that may affect us, including those made in our Annual Report on Form 10-K for the fiscal year ended 2012, filed with the SEC on February 25, 2013, and updated in our subsequently filed current reports on Form 8-K. The forward-looking statements are qualified in their entirety by these cautionary statements, which are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act. We caution you that any forward-looking statements made in this proxy statement or the documents to which we refer you in this proxy statement are not guarantees of future performance and that you should not place undue reliance on any of such forward-looking statements, which speak only as of the date of this document. There may be additional risks of which we are presently unaware or that we currently deem immaterial. We do not intend, and undertake no obligation, to update our forward-looking statements to reflect future events or circumstances, except as required by law.

 

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INFORMATION ABOUT THE SPECIAL MEETING OF STOCKHOLDERS

This section contains information about the special meeting of stockholders.

Together with this proxy statement, we are sending you a notice of special meeting of stockholders and a form of proxy that is being solicited by our board of directors for use at the special meeting. The information and instructions contained in this section are addressed to Arbitron stockholders and all references to “you” or “stockholders” in this section and elsewhere in the proxy statement should be understood to be addressed to Arbitron stockholders.

Date, Time and Place of the Special Meeting of Stockholders

This proxy statement is being furnished by our board of directors in connection with the solicitation of proxies from holders of Arbitron common stock for use at the special meeting of stockholders to be held on April 16, 2013 at The St. Regis Washington, D.C., 923 16th Street, N.W., Washington, D.C. 20006, at 9:30 a.m., Eastern time, and at any adjournment or postponement of the special meeting, if applicable.

Purpose of the Special Meeting of Stockholders

The following proposals will be considered and voted upon at the special meeting of stockholders:

 

   

adoption of the merger agreement (Proposal No. 1);

 

   

approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement (Proposal No. 2); and

 

   

approval, on an advisory (non-binding) basis of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable (Proposal No. 3).

Recommendation of Our Board of Directors

Our board of directors has unanimously determined that the merger agreement and the consummation of the transactions contemplated thereby, including the merger, are advisable and fair to and in the best interests of Arbitron and our stockholders and unanimously recommends that stockholders vote “FOR” Proposal No. 1, adoption of the merger agreement, “FOR” Proposal No. 2, approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, and “FOR” Proposal No. 3, approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable.

For more information concerning the recommendation of our board of directors with respect to the merger, see “Proposal No. 1 — Adoption of the Merger Agreement — Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger” beginning on page 30.

Record Date and Outstanding Shares

The record date for the determination of stockholders entitled to notice of and to vote at the special meeting of stockholders is March 8, 2013. Only stockholders of record of Arbitron common stock as of the close of business on the record date will be entitled to notice of, and to vote at, the special meeting of stockholders and any adjournments or postponements thereof. At the close of business on the record date, there were 26,769,580 shares of Arbitron common stock issued and outstanding.

Quorum Requirement

The presence in person or by proxy of the holders of a majority in voting power of the outstanding shares of Arbitron common stock as of the close of business on the record date will constitute a quorum for purposes of the

 

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special meeting. Your shares of Arbitron common stock will be counted for purposes of determining whether a quorum exists for the special meeting if you return a signed and dated proxy card or voting instruction form, if you submit a proxy or voting instructions by telephone or over the Internet, if you vote in person at the special meeting (and if you are a beneficial owner of shares of Arbitron common stock or if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the special meeting), even if you “ABSTAIN” from voting on the proposals.

If a quorum is not present at the special meeting of stockholders, we expect that the special meeting will be adjourned to a later date.

Vote Required

Each share of Arbitron common stock outstanding on the record date will be entitled to one vote, in person or by proxy, on each proposal submitted for the vote of stockholders.

Proposal No. 1, adoption of the merger agreement, requires the affirmative vote of the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date. If you do not submit a proxy or voting instructions or do not vote in person at the special meeting, or if you “ABSTAIN” from voting on the adoption of the merger agreement, the effect will be the same as a vote “AGAINST” the adoption of the merger agreement.

Proposal No. 2, approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement, requires the affirmative vote of holders of a majority in voting power of the shares of Arbitron common stock represented at the special meeting, either in person or by proxy, and entitled to vote on the proposal.

Proposal No. 3, approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable, requires the affirmative vote of holders of a majority in voting power of the shares of Arbitron common stock represented at the special meeting, either in person or by proxy, and entitled to vote on the proposal.

With respect to Proposal No. 2 and Proposal No. 3, if you do not submit a proxy or voting instructions or do not vote in person at the meeting, your shares will not be counted in determining the outcome of these proposals. If you “ABSTAIN” from voting on Proposal No. 2 or Proposal No. 3, the effect will be the same as a vote “AGAINST” that proposal.

Shares Held by Directors and Executive Officers

As of the close of business on the record date, our directors and executive officers held and are entitled to vote at the special meeting 141,654 shares of our common stock (excluding options, DSUs and RSUs), representing approximately 0.53% of the aggregate common stock issued and outstanding on that date.

Attending and Voting at the Special Meeting of Stockholders

Only stockholders of record as of the close of business on the record date for the determination of stockholders entitled to vote at the special meeting, authorized proxy holders and our guests may attend the special meeting. If you are a stockholder of record as of the close of business on the record date and you attend the special meeting, you may vote in person by completing a ballot at the special meeting even if you already have signed, dated and returned a proxy card or submitted a proxy by telephone or over the Internet. If your shares of common stock are held in the name of a bank, broker or other nominee, you may not vote your shares of common stock in person at the special meeting unless you obtain a “legal proxy” from the record holder giving you the right to vote such shares of common stock. In addition, whether you are a stockholder of record or a beneficial owner, you must bring a form of personal photo identification with you in order to be admitted to the special meeting. We reserve the right to refuse admittance to anyone without proper proof of share ownership or proper photo identification.

 

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Proxies

Each copy of this proxy statement mailed to holders of Arbitron common stock is accompanied by a proxy card or voting instruction form with instructions for authorizing how your shares are to be voted at the special meeting. If you hold stock in your name as a stockholder of record, you may submit a proxy to instruct how your shares are to be voted at the special meeting by (a) completing, signing, dating and returning the enclosed proxy card, (b) calling the telephone number on your proxy card or (c) following the Internet proxy submission instructions on your proxy card to ensure that your vote is counted at the special meeting, or at any adjournment or postponement thereof, regardless of whether you plan to attend the special meeting. Instructions for submitting a proxy by telephone or over the Internet are printed on the proxy card. In order to submit a proxy via the Internet, please have your proxy card available so you can input the required information from the card.

If you hold your Arbitron common stock in street name through a bank, broker or other nominee, you must submit voting instructions to your bank, broker or nominee in accordance with the instructions you have received from your bank, broker or nominee.

All shares represented by valid proxies that are received through this solicitation, and that are not revoked, will be voted in accordance with the instructions on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted in accordance with the recommendation of our board of directors on each of the proposals indicated above.

Revocation of Proxies

Submitting a proxy on the enclosed form does not preclude a stockholder from voting in person at the special meeting. A stockholder of record may revoke a proxy at any time before it is voted by filing with our corporate secretary a duly executed revocation of proxy, by properly submitting a proxy by mail, the Internet or telephone with a later date or by appearing at the special meeting and voting in person. A stockholder of record may revoke a proxy by any of these methods, regardless of the method used to deliver the stockholder’s previous proxy. Attendance at the special meeting without voting will not itself revoke a proxy. If your shares of Company common stock are held in street name, you must contact your broker, bank or other nominee to revoke your proxy.

Solicitation of Proxies

This proxy solicitation is being made by the Company on behalf of the board of directors and will be paid for by the Company. The Company’s directors and officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication. These persons will not be paid additional remuneration for their efforts. The Company has also retained D.F. King & Co., Inc. to assist in the solicitation of proxies for a fee of approximately $12,500 plus the reimbursement of out-of-pocket expenses incurred on behalf of the Company.

Questions and Additional Information

If you have questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call D.F. King & Co., Inc., our proxy solicitor, toll-free at (800) 755-7250 (banks and brokers call collect at (212) 269-5550).

Your vote is important. Please sign, date and return your proxy card or voting instruction form or submit your proxy and/or voting instructions by telephone or over the Internet promptly.

 

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PARTIES TO THE MERGER

Arbitron

Arbitron Inc., a Delaware corporation, is a leading information services firm. Arbitron’s primary business is measuring network and local market radio audiences across the United States and also includes: estimating the size and composition of audiences to media other than radio, including mobile media, television viewed out-of-home, and content distributed on multiple platforms; providing qualitative information about consumers, including their lifestyles, shopping patterns, and use of media; and providing software to access and analyze media audience and marketing information data.

Our common stock currently trades on the NYSE under the symbol “ARB.” Our executive offices are located at 9705 Patuxent Woods Drive, Columbia, Maryland 21046, and our telephone number is (410) 312-8000.

Nielsen

Nielsen, a Netherlands company, together with its subsidiaries, is a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior.

Nielsen’s corporate headquarters are located at 770 Broadway, New York, New York 10003, and its telephone number is (646) 654-5000.

Merger Sub

Merger Sub is a Delaware corporation and an indirect wholly-owned subsidiary of Nielsen that was formed solely for the purpose of consummating the merger and the related transactions in connection with the merger. The address of the principal executive offices of Merger Sub is c/o Nielsen Holdings N.V., 770 Broadway, New York, New York 10003, and its telephone number is (646) 654-5000.

 

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PROPOSAL NO. 1 — ADOPTION OF THE MERGER AGREEMENT

The following is a description of the material aspects of the merger, including the merger agreement. While we believe that the following description covers the material terms of the merger, the description may not contain all of the information that may be important to you. We encourage you to read carefully this entire proxy statement, including the merger agreement attached to this proxy statement as Annex A, for a more complete understanding of the merger.

Overview

The merger agreement, dated December 17, 2012, among Nielsen, Merger Sub and Arbitron provides for the merger of Merger Sub, a newly formed, indirect wholly-owned subsidiary of Nielsen, with and into Arbitron, with Arbitron surviving the merger as an indirect wholly-owned subsidiary of Nielsen. Upon consummation of the merger, each share of Arbitron common stock issued and outstanding, other than shares held by Arbitron, Nielsen or Merger Sub and shares held by stockholders who properly demand their appraisal rights under Delaware law, will automatically be converted into the right to receive the merger consideration.

Background of the Merger

The board of directors and the Company’s management, in the ordinary course of business, review the Company’s long-term strategic plan with the goal of maximizing stockholder value. As part of this ongoing process, the board and management have periodically evaluated potential strategic opportunities relating to the Company’s businesses and engaged in discussions with third parties. From time to time, members of management have discussed the marketplace and strategic landscape with Guggenheim Securities.

In the course of its ongoing dialogue with Guggenheim Securities during the first half of 2012, Financial Party A suggested to Guggenheim Securities that it would have interest in meeting with members of the Company’s management team to discuss a potential acquisition. Guggenheim Securities informed the Company of this potential interest.

On May 21, 2012, Sean Creamer, who was then the Company’s chief operating officer, and Timothy Smith, the Company’s executive vice president, business development and strategy, chief legal officer and secretary, and a representative from Guggenheim Securities met with Financial Party A to discuss Financial Party A’s preliminary interest in a potential transaction with the Company.

On July 11, 2012, William T. Kerr, who was then the Company’s chief executive officer, Mr. Creamer and Mr. Smith met with Financial Party A to further discuss Financial Party A’s preliminary interest in a potential transaction with the Company.

On August 28, 2012, the board of directors had a meeting, at which management was present. As part of that meeting, the board discussed Financial Party A’s interest and other potential opportunities in connection with its review of the Company’s exploration of strategic opportunities.

On September 20, 2012, the executive committee, a standing committee of the board that was established to assist the board in connection with potential strategic transactions, had a telephonic meeting, at which management was present, to discuss creating a process to evaluate the Company’s strategic opportunities and reviewed a memorandum regarding board of director fiduciary duties prepared by outside counsel.

On October 1, 2012, Brian West, the chief financial officer of Nielsen, called Mr. Creamer to express Nielsen’s preliminary interest in exploring a strategic opportunity.

On October 2, 2012, the executive committee had a meeting, at which representatives from management, Guggenheim Securities and Morrison & Foerster LLP, which we refer to as Morrison & Foerster, were present, to discuss their qualifications to serve as the Company’s financial and legal advisors in connection with the Company’s consideration of strategic opportunities. In connection with their presentation on their qualifications, Guggenheim Securities informed the executive committee that it had a long history with many of the strategic partners that may be relevant to the Company’s process, including an existing relationship with Nielsen’s senior management. After a discussion of the qualifications of the proposed professional advisors and the current

 

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familiarity of each firm with the Company and its business, the executive committee determined to recommend that the board engage Guggenheim Securities as its financial advisor and Morrison & Foerster as its legal advisor in connection with the Company’s consideration of strategic opportunities.

On October 4, 2012, the executive committee had a telephonic meeting, at which management and representatives from Morrison & Foerster and Guggenheim Securities were present, to discuss the process for a strategic transaction. At the meeting, Mr. Creamer informed the executive committee of Nielsen’s potential interest. Representatives from Guggenheim described its recommended process in which targeted and qualified financial sponsors and strategic parties would be contacted in order to evaluate potential market interest in the Company. Guggenheim Securities recommended contacting potential financial buyers first in order to establish the likelihood of a transaction in the absence of strategic interest as well as to establish a price floor and then to contact strategic buyers after transaction viability was determined and the price floor established in light of competitive sensitivities and because strategic buyers would be able to complete their due diligence process more quickly. Guggenheim Securities further advised the Company that it recommended engaging with Nielsen in any event once Nielsen’s preliminary interest was confirmed. The executive committee discussed and approved that recommendation and determined that the Company should engage in a process to explore strategic opportunities with Financial Party A and other potential acquirers.

On October 5, 2012, Guggenheim Securities had discussions with Financial Party A and other private equity firms, which we refer to as Financial Party B, Financial Party C and Financial Party D, respectively, to determine each party’s interest in a possible transaction with the Company.

On October 8, 2012, Guggenheim Securities, at the request of the executive committee, provided draft confidentiality agreements to Financial Party A, Financial Party B, Financial Party C and Financial Party D.

On October 9, 2012, the executive committee had a telephonic meeting, at which representatives from management, Guggenheim Securities and Morrison & Foerster were present, to further discuss the proposed process for exploring the Company’s strategic opportunities. Representatives from Guggenheim Securities updated the committee on the discussions to date with interested parties. The executive committee also discussed Mr. Creamer’s upcoming dinner with Mr. West of Nielsen.

Later in the day on October 9, 2012, Mr. Creamer met Mr. West for dinner, during which Mr. West further described Nielsen’s potential interest in a strategic transaction. Mr. West indicated that he expected that Nielsen would be in a position to confirm its interest shortly after Nielsen’s board meeting on October 25, 2012.

On October 10, 2012, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to update the committee members on Mr. Creamer’s discussion with Mr. West, and to inform the executive committee that Nielsen would be in a position to confirm its interest after Nielsen’s October 25, 2012 board meeting.

Following the executive committee meeting on October 10, 2012, Financial Party C informed Guggenheim Securities that it would not be participating further in the process.

On October 15, 2012, the executive committee held a telephonic meeting, with representatives from management, Morrison & Foerster and Guggenheim Securities present. On Guggenheim Securities’ recommendation, the executive committee determined to include two additional private equity firms in the process, which we refer to as Financial Party E and Financial Party F, and directed Guggenheim Securities to contact each of them to determine their interest in a possible transaction with the Company. The executive committee also proposed to convene a meeting to update the full board on the status of the process.

On October 18, 2012, the board of directors had a telephonic meeting, at which members of management were present, to discuss the executive committee’s actions to consider the Company’s strategic opportunities. The board ratified all executive committee actions taken in furtherance of assessing the Company’s strategic opportunities.

On October 19, 2012, the Company executed a confidentiality agreement with Financial Party B. Also, on October 19, 2012, Guggenheim Securities had discussions with Financial Party E and Financial Party F to determine each party’s interest in a possible transaction with the Company and provided each party with draft confidentiality agreements.

 

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On October 22, 2012, a private equity firm that we refer to as Financial Party G contacted Guggenheim Securities to indicate that it understood that the Company was exploring strategic opportunities and, if that were true, Financial Party G was interested in a potential transaction with the Company, which Guggenheim relayed to the Company.

On October 24, 2012, at the direction of the executive committee, Guggenheim Securities had discussions with Financial Party G to determine its interest in a possible transaction with the Company and provided it with a draft confidentiality agreement.

On October 26, 2012, David Calhoun, Nielsen’s chief executive officer, called Mr. Kerr to express Nielsen’s interest in a potential transaction with the Company and to discuss entering into a confidentiality agreement with the Company to allow Nielsen access to non-public information. Later that day, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to update the committee on the status of various matters related to the transaction process, including the call that Mr. Kerr received from Mr. Calhoun. The executive committee discussed the interest shown by Nielsen and decided to provide Nielsen with access to information that was being provided to other interested parties.

On October 27, 2012, the Company executed a confidentiality agreement with Financial Party A.

Also on October 27, 2012, Guggenheim Securities provided a draft confidentiality agreement to Nielsen.

On October 28, 2012, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss information received to date from various interested parties. Representatives from Morrison & Foerster briefed the board on regulatory matters associated with a potential transaction with Nielsen.

On October 29, 2012, the Company executed a confidentiality agreement with Financial Party G. Also on October 29, 2012, Mr. Calhoun called Mr. Kerr to propose a meeting among each company’s outside legal counsel to review any potential regulatory issues related to a possible transaction between the Company and Nielsen. Later that day, the executive committee had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss the previously distributed draft management presentation.

Also on October 29, 2012, the Company’s management, at the request of the executive committee, made a presentation to Financial Party G by videoconference. Representatives from Guggenheim Securities were also present at the meeting.

On October 30, 2012, the Company’s management, at the request of the executive committee, made a presentation to Financial Party B and a presentation by videoconference to Financial Party D. Representatives from Guggenheim Securities were also present at the meetings. The Company executed a confidentiality agreement with Financial Party D prior to the management presentation. Also on October 30, 2012, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to provide a summary of the meetings with Financial Party D and Financial Party B that occurred earlier that day and also to update the committee on the status of various other matters related to the transaction process.

On October 31, 2012, Mr. Calhoun and Mr. Kerr had conversations regarding Nielsen’s participation in the Company’s exploration of strategic opportunities and scheduled a meeting for November 7, 2012.

Also on October 31, 2012, the Company executed a confidentiality agreement with Nielsen, and the Company’s management, at the request of the executive committee, made a presentation to Financial Party A. Later that day, the executive committee had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to provide a summary of the meeting with Financial Party A that occurred earlier that day and to discuss the status of the process for exploring the Company’s strategic opportunities and information received to date from various interested parties. The executive committee decided to expand the process to include three additional strategic parties, which we refer to as Strategic Party H, Strategic Party I and Strategic Party J, all of whom were contacted soon thereafter by Guggenheim Securities on November 1, 2012.

 

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On November 1, 2012, Financial Party F indicated it was no longer interested in pursuing a potential transaction with the Company in light of competing priorities.

On November 2, 2012, the executive committee had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss the status of the process for exploring the Company’s strategic opportunities and information received to date from various interested parties. At that meeting, Guggenheim Securities indicated that senior management at Strategic Party J indicated that it would not be interested in pursuing a potential transaction with the Company at that time.

On November 3, 2012, Guggenheim Securities informed the Company that Strategic Party H indicated that it would not be interested in pursuing a transaction with the Company in light of the size of the transaction and other strategic priorities.

On November 5, 2012, at the request of the executive committee, Guggenheim Securities sent bid process letters to Financial Party A, Financial Party B, Financial Party D and Financial Party G, which provided, among other things, that non-binding proposals to acquire the Company were due by November 27, 2012.

On November 5, 2012, representatives from the Company, Morrison & Foerster, Nielsen and Paul, Weiss, Rifkind, Wharton & Garrison LLP, antitrust counsel to Nielsen, which we refer to as Paul Weiss, had a meeting by videoconference to discuss regulatory issues associated with the potential transaction with Nielsen.

On November 6, 2012, the executive committee had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss the status of the Company’s exploration of strategic opportunities, including a discussion of regulatory issues and a potential transaction with Nielsen. In connection with this discussion, the executive committee discussed comments from Nielsen about their strong interest in a potential strategic transaction and whether the Company would be willing to receive a pre-emptive bid from Nielsen. The executive committee determined that it would consider a bid from Nielsen. The executive committee determined to expand the process to include Strategic Party K, and Guggenheim Securities contacted Strategic Party K later that day.

Also on November 6, 2012, the Company executed a confidentiality agreement with Financial Party E.

On November 7, 2012, Mr. Kerr met with Mr. Calhoun to discuss Nielsen’s interest in a potential transaction and Nielsen’s view on timing of the transaction. At this meeting Mr. Calhoun indicated that Nielsen would be prepared to make an offer following the Company’s management presentation, which was scheduled for November 15, 2012.

Also on November 7, 2012, Financial Party B indicated to Guggenheim Securities that it would like to explore backing a strategic party that we refer to as Strategic Party L, in a potential acquisition of the Company as it did not believe that it could pay a significant enough premium to acquire the Company without a partner.

Later on November 7, 2012, Guggenheim Securities, at the request of the executive committee, had discussions with Strategic Party I. Also that day, the Company’s management presented to Financial Party E and had an in-person due diligence meeting with Financial Party G. Representatives from Guggenheim Securities were also present at these meetings.

On November 8, 2012, the executive committee had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss the status of the process for exploring the Company’s strategic opportunities and information received to date from various interested parties. The executive committee also discussed Financial Party B’s interest in exploring a potential acquisition transaction with Strategic Party L. The executive committee indicated it was not inclined to further explore a potential transaction proposed by Financial Party B, in which Financial Party B would back Strategic Party L, because the executive committee believed that such a transaction was not likely to provide the highest value to stockholders and would have significant execution risk.

Also on November 8, 2012, the Company’s management and representatives from Guggenheim Securities met with each of Financial Party A and Financial Party D for additional due diligence relating to a potential transaction. On the same day, Guggenheim Securities communicated to Financial Party B that the Company would not likely be interested in the proposed transaction involving Financial Party B backing Strategic Party L on the terms initially provided, and Financial Party B subsequently withdrew its interest in a possible transaction prior to the initial bid date.

 

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On November 12, 2012, Strategic Party K declined to pursue a transaction with the Company.

On November 13, 2012, the board of directors had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to receive updates from the executive committee on various matters related to the transaction process, including the status of discussions with Nielsen. As part of this discussion, management and Guggenheim Securities indicated that they expected Nielsen would likely make a bid following the Company’s management presentation later in the week. At the same meeting, representatives from Morrison & Foerster advised the board of its fiduciary duties and provided the board with an overview of regulatory matters in the context of acquisition transactions. Guggenheim Securities recommended that a potential strategic acquirer, that we refer to as Strategic Party M, be contacted to determine its interest in a possible transaction with the Company. The board of directors ratified all actions taken by the executive committee to date in connection with the potential transaction and agreed that the Company should pursue a bid from Nielsen. Later that day, Guggenheim Securities, at the request of the executive committee, had discussions with Strategic Party M to determine its interest in a transaction.

Between November 13, 2012 and November 15, 2012, Guggenheim Securities received inbound inquiries regarding the Company from private equity firms that we refer to as Financial Party N, Financial Party O and Financial Party P. Guggenheim Securities had conversations with each of them to further ascertain the seriousness of their interest.

On November 14, 2012, the Company’s management and representatives from Guggenheim Securities met with Financial Party D to further discuss Financial Party D’s interest in a potential transaction. Later that evening, the Company’s management and representatives from Guggenheim Securities met with Financial Party A to further discuss Financial Party A’s interest in a potential transaction.

On November 15, 2012, the Company’s management made a presentation to representatives of Nielsen and Nielsen’s financial advisor, J.P. Morgan Securities LLC (which we refer to as J.P. Morgan) regarding the Company’s business and prospects and, at the request of the executive committee, Guggenheim Securities sent a bid process letter to Nielsen which provided, among other things, that non-binding proposals to acquire the Company were due by November 27, 2012.

Also on November 15, 2012, the Company’s management and representatives from Guggenheim Securities spoke by telephone with Financial Party G to further discuss Financial Party G’s interest in a potential transaction.

Later on November 15, 2012, representatives of Nielsen and J.P. Morgan met with representatives of Guggenheim Securities and management, and Nielsen presented a written proposal to acquire the Company at a price of $45.00 per share, along with a draft merger agreement and a proposed timeline for completing a transaction, which contemplated entering into the merger agreement on or before November 30, 2012.

On November 16, 2012, the executive committee had a telephonic meeting, at which representatives from management, Guggenheim Securities and Morrison & Foerster were present. Representatives from Guggenheim Securities provided an update on the process for exploring the Company’s strategic opportunities and discussed Nielsen’s proposal, including the proposed timeline. As part of this update, the executive committee expressed concern that both the price and the terms proposed by Nielsen were not attractive enough to cause the Company to discontinue discussions with other potential acquirers and requested that management report back to the executive committee with proposals on how to improve Nielsen’s proposal.

Also on November 16, 2012, the Company’s management and representatives from Guggenheim Securities met with Financial Party E to further discuss Financial Party E’s interest in a potential transaction.

Also on November 16, 2012, the Company executed a confidentiality agreement with Strategic Party M.

On November 19, 2012, Guggenheim Securities, at the request of the executive committee, had further discussions with Financial Party N to determine the extent of its continued interest in a possible transaction with the Company and provided a draft confidentiality agreement to Financial Party N.

Also on November 19, 2012, the executive committee had a telephonic meeting, at which representatives from management, Guggenheim Securities and Morrison & Foerster were present. Representatives from

 

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Guggenheim Securities provided an update on the status of various matters related to the transaction process. In discussing Nielsen’s draft merger agreement, representatives from Morrison & Foerster noted, among other things, that the level of efforts required by Nielsen to obtain regulatory clearance did not include any affirmative obligations to take specific actions. The draft merger agreement included a proposed reverse termination fee in the amount of two times the termination fee and the circumstances upon which such a fee would be paid. After the conclusion of this meeting the executive committee requested that management and its advisors make a revised proposal to Nielson on regulatory risk allocation before continuing discussions on valuation.

On November 20, 2012, Guggenheim Securities, at the request of the executive committee, delivered to J.P. Morgan the Company’s proposed set of provisions for the merger agreement relating to regulatory approvals, which provided for an affirmative obligation on the part of Nielsen to take remediation steps in order to obtain antitrust approval for the transaction and proposed a reverse termination fee in the amount of 10% of the transaction value, as well as a trigger for payment of the reverse termination fee that was not contingent on the Company’s conditions to closing being satisfied.

Also on November 20, 2012, representatives from Guggenheim Securities spoke by telephone with the executive committee to provide a preliminary valuation presentation to assist the executive committee in evaluating Nielsen’s proposal and in the related negotiation of valuation.

On November 21, 2012, a representative from J.P. Morgan communicated to Guggenheim Securities that Nielsen did not view regulatory risk as a significant issue for the proposed transaction and was not willing to agree to the Company’s proposal regarding regulatory approvals. J.P. Morgan reiterated that Nielsen was willing to agree to a reverse termination fee equal to two times the termination fee as a way to address any perceived regulatory risk. J.P. Morgan also communicated that in the absence of substantial engagement by the Company with Nielsen by Wednesday, November 28, 2012, Nielsen would terminate discussions with the Company.

Between November 21 and 25, 2012, representatives of the Company, the executive committee, Guggenheim Securities and Morrison & Foerster discussed Nielsen’s proposal, including the proposed timeline, and various potential responses to Nielsen.

On November 24 and 25, 2012, a representative of Guggenheim Securities and a representative of J.P. Morgan discussed the nature of Nielsen’s proposal and a potential transaction process. The representatives from J.P. Morgan communicated that Nielsen wanted to sign a definitive transaction document in December because it did not want to be constrained from pursuing other corporate priorities by being involved in a lengthy process that extended into 2013. Guggenheim Securities informed the executive committee that it believed that Nielsen’s priority most likely was to complete a potential capital markets transaction by the end of the year.

On November 25, 2012, the Company executed a confidentiality agreement with Financial Party N and, at the request of the executive committee, Guggenheim Securities sent a bid process letter to Financial Party N which provided, among other things, that non-binding proposals to acquire the Company were due by November 27, 2012.

On November 26, 2012, J.P. Morgan provided Guggenheim Securities with a revised transaction timeline, which indicated that Nielsen was targeting December 7, 2012 as a date for entering into a definitive agreement. Also on November 26, 2012, Strategic Party I informed Guggenheim Securities and the Company that it would not be participating further in the process.

During the afternoon on November 26, 2012, the Company’s management, at the request of the executive committee, made a presentation to Financial Party N. Representatives from Guggenheim Securities were also present at the meeting.

Later in the day on November 26, 2012, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss various matters related to the transaction process, including discussions with Nielsen and a proposed response on regulatory and valuation matters. Also on November 26, 2012, the board of directors had a telephonic meeting, at which representatives from management, Guggenheim Securities and Morrison & Foerster were present, to receive an update from the executive committee on various matters related to the transaction process, including

 

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an update on the status of Nielsen’s proposal and proposed timeline. The board ratified the decisions and recommendations of the executive committee relating to the process to evaluate a potential transaction. Representatives from Guggenheim Securities provided the board with information regarding valuation to assist the board in evaluating Nielsen’s proposal, and representatives from Morrison & Foerster provided an update on negotiations.

On November 27, 2012, Morrison & Foerster, at the request of the executive committee, sent a proposed draft merger agreement to Simpson Thacher & Bartlett LLP, which we refer to as Simpson Thacher, outside legal counsel to Nielsen. Also on that day, Financial Party A presented to Guggenheim Securities a written proposal to acquire the Company at a price in the range of $44.00 to $46.00 per share and Financial Party G presented to Guggenheim Securities a written proposal to acquire the Company at a price of $42.50 per share, in both cases, subject to finalizing the terms and conditions of a mutually satisfactory merger agreement. Additionally, Financial Party D informed Guggenheim Securities that it would not be participating further in the process because its valuation was at a level that would likely be unattractive to the board of directors given the low implied premium to the current stock price. The executive committee subsequently directed Guggenheim Securities to expand the process to include Financial Party O and Financial Party P.

On November 28, 2012, Financial Party N presented to Guggenheim Securities a written proposal to acquire the Company at a price of $45.00 per share, subject to finalizing the terms and conditions of a mutually satisfactory merger agreement, and Financial Party E informed Guggenheim Securities that it would not be participating further in the process.

On November 28, 2012, representatives from Morrison & Foerster spoke by telephone with representatives from Simpson Thacher to discuss any significant concerns Nielsen had with the Company’s draft of the merger agreement.

Later on November 28, 2012, the executive committee had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss the Nielsen offer and the other proposals received by the Company, including a discussion of the Company’s proposed responses. Representatives from Morrison & Foerster provided a review of negotiation matters and how pursuing a transaction with a strategic party such as Nielsen would differ from a transaction with a financial sponsor. Representatives from Guggenheim Securities advised the Company that, based on its experience in comparable situations and its interactions with bidders to date, it believed that it was more likely that a final offer price from the other bidders would fall within the initial bidding range than be at a higher price.

On November 29, 2012, the board of directors had a meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to receive an update from the executive committee on various matters related to the transaction process, including a summary of the proposals received by the Company from financial sponsors and strategic parties. Representatives from Guggenheim Securities provided an overview of the proposals received and information from other parties included in the process. Representatives from Morrison & Foerster briefed the board on negotiation matters and how pursuing a transaction with a strategic party such as Nielsen would differ from a transaction with a financial sponsor. The board of directors and its advisors then discussed the Company’s proposed response to each of the bidders. As a result of this discussion, the board of directors directed Guggenheim Securities to propose to Nielsen a transaction at a price per share in excess of $50.00, a reverse termination fee of 10% of the transaction value and a trigger for payment of the reverse termination fee that was not contingent on the Company’s conditions to closing being satisfied. The board of directors also authorized the executive committee to proceed with its proposed responses to the other bidders.

Also on November 29, 2012, Guggenheim Securities communicated to J.P. Morgan the board of directors’ response. Guggenheim also contacted Financial Party A, Financial Party G and Financial Party N on November 29, 2012 to discuss their respective proposals and continuing interest in pursuing a transaction. Financial Party G indicated later that day that it would not be able to increase its bid to be competitive and therefore declined to continue to pursue a transaction with the Company.

Later on November 29, 2012, representatives from Nielsen and J.P. Morgan indicated to Guggenheim Securities that Nielsen would be unable to complete a transaction at $50.00 per share. Representatives from Nielsen and J.P. Morgan also indicated that Nielsen would send a letter to the Company’s board of directors that would contain Nielsen’s best and final offer.

 

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On December 3, 2012, Nielsen delivered a revised offer to the Company, together with a markup of the merger agreement and a proposed revised timeline for completing a transaction, which proposed that the merger agreement would be entered into between December 14 and December 16. The revised offer indicated that it was a best and final offer and reflected a price of $48.00 per share, but included a reverse termination fee of 10% of the transaction value and other concessions relating to the regulatory covenants. Nielsen also communicated to Guggenheim Securities that it was unable to defer the resolution of its proposal beyond these dates.

Later on December 3, 2012, the Company’s management and representatives from Guggenheim Securities spoke by telephone with Strategic Party M to further discuss Strategic Party M’s interest in a potential transaction. Also on December 3, 2012, the Company’s management and representatives from Guggenheim Securities spoke by telephone with Financial Party P to further discuss Financial Party P’s interest in a potential transaction. Later on December 3, 2012, the Company entered into a confidentiality agreement with Financial Party P.

Also on December 3, 2012, the board of directors had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present. Representatives from Guggenheim Securities provided an update on various matters related to the transaction process since the November 29, 2012 board meeting, including the status of the other participants in the process. The board of directors discussed the letter received by the Company from Nielsen, Nielsen’s proposed timeline, including the reasons expressed by Nielsen for its proposed timeline, and Nielsen’s material revisions to the draft merger agreement. The board of directors directed Guggenheim Securities to set up a meeting among representatives of Nielsen and the Company on December 5 to discuss key aspects of Nielsen’s proposal.

On December 5, 2012, representatives from the Company, Morrison & Foerster and Guggenheim Securities met with representatives from Nielsen, Simpson Thacher and J.P. Morgan to discuss the merger agreement and negotiate key open issues, including, among others, the antitrust covenants, the termination provisions, the fiduciary out, the termination fees and reverse termination fees and the financing covenant. Later that day, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss various matters related to the transaction process, the status of the potential bidders, and the meeting with Nielsen.

In light of the status and nature of the Company’s discussions with Nielsen, on December 6, 2012, on behalf of the Company, Morrison & Foerster made an inquiry of Guggenheim Securities to obtain additional information on the current status of Guggenheim Securities’ relationship with Nielsen. Guggenheim Securities indicated that during the last two years it had received customary compensation as a co-manager for Nielsen’s initial public offering and concurrent offering of 6.25% Mandatory Convertible Subordinated Bonds due 2013 and a secondary offering of Nielsen common stock, and that Guggenheim Securities indicated for the first time that it believed it would participate as a member of Nielsen’s underwriting syndicate in the potential capital markets transaction that Guggenheim Securities previously discussed with the executive committee, if it occurred. Later on December 6, 2012, the executive committee had a telephonic meeting, at which representatives from management and Morrison & Foerster were present, to discuss Guggenheim Securities’ relationship with Nielsen, the potential conflict of interest with Guggenheim Securities’ role as financial advisor to the Company and the provisions of the Company’s engagement letter with Guggenheim Securities (including provisions of the Company’s engagement letter with Guggenheim Securities relating to Guggenheim Securities providing investment banking services to other parties). In light of these developments, the executive committee discussed the possibility of retaining an additional financial advisor.

Also on December 6, 2012, the Company’s management and representatives from Guggenheim Securities spoke by telephone with Financial Party O to further discuss Financial Party O’s interest in a potential transaction.

On December 7, 2012, the Company sent a revised draft of the merger agreement to Nielsen. Later that day, Mr. Guarascio spoke by telephone with Mr. Calhoun to discuss the possibility of Nielsen increasing its offer. Mr. Calhoun indicated that Nielsen was unable to increase its offer beyond $48.00 per share. Subsequent to that meeting, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster and Guggenheim Securities were present, to discuss Nielsen’s unwillingness to increase its offer. Given the premium of Nielsen’s offer over the proposals submitted by other bidders, the board of director’s

 

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belief that it was unlikely that the other bidders would be in a position to offer a price comparable to Nielsen’s offer and the progress on transaction terms, the executive committee agreed to continue discussions with Nielsen based upon Nielsen’s bid price, subject to finalizing the other material terms of the transaction, while simultaneously continuing to pursue alternative transactions. Later that day, the executive committee had a meeting, at which representatives from management and Morrison & Foerster were present, to discuss ongoing transaction process issues and the advantages of retaining Signal Hill, who had maintained a general financial advisory relationship with the Company since 2007, and the various roles that Signal Hill might assume. The executive committee then instructed management to initiate discussions to engage Signal Hill as co-advisor. The executive committee met for a third time on December 7, 2012, with representatives from management and Morrison & Foerster, to discuss Mr. Guarascio’s call with Nielsen and the potential engagement of Signal Hill as co-advisor.

Also on December 7, 2012, the Company’s management and representatives from Guggenheim Securities met with Financial Party A for additional due diligence relating to a potential transaction. On the same day, representatives from Guggenheim Securities spoke by telephone with each of Financial Party A and Financial Party N to further discuss the status of each party’s due diligence efforts and estimated time to completion.

On December 8, 2012, Simpson Thacher sent a revised draft of the merger agreement to Morrison & Foerster.

On December 9, 2012, the board of directors had a meeting, at which representatives from management, Guggenheim Securities and Morrison & Foerster were present, to discuss the significant open issues with respect to a transaction with Nielsen, including the antitrust covenants and the reverse termination fee trigger contained in the proposed merger agreement. The board of directors re-convened later that day with representatives from Morrison & Foerster to discuss Guggenheim Securities’ relationship with Nielsen and how it may affect the process and the board’s evaluation of the transaction. Management provided an update on the timing and process for a potential engagement of Signal Hill by the Company as co-advisor. The board of directors considered various options with respect to how the Company might proceed with Nielsen.

On December 10, 2012, the Company’s management and representatives from Guggenheim Securities spoke by telephone with Nielsen to further discuss the potential transaction.

Later on December 10, 2012, the executive committee had a meeting, at which representatives from management, Morrison & Foerster, and Richards, Layton & Finger, P.A., which we refer to as Richards Layton, the Company’s Delaware counsel, were present, to discuss matters relating to the interest of other parties, Nielsen’s proposal and the engagement of Signal Hill, including Signal Hill’s due diligence efforts to date. At the board’s request, representatives from Morrison & Foerster and Richards Layton discussed the fiduciary duties of the board of directors in connection with a potential change of control of the Company and the board’s options with respect to the current process.

The executive committee then asked Signal Hill to join the meeting and requested Signal Hill to take appropriate steps to become fully involved in the transaction process so that Signal Hill would be in a position to advise on the present indications of interest, the Nielsen proposal and the fairness, from a financial point of view, of the proposed consideration offered by Nielsen.

The executive committee then determined to continue the process with respect to other potential acquirers and directed management to continue meeting with potential acquirers while the Company continued to negotiate with Nielsen.

On December 11, 2012, Morrison & Foerster sent a revised draft of the merger agreement to Simpson Thacher.

Also on December 11, 2012, the Company’s management and representatives from Guggenheim Securities spoke by telephone with Financial Party A to further discuss Financial Party A’s interest in a potential transaction.

On December 12, 2012, the Company’s management and representatives from Guggenheim Securities and Signal Hill met with Financial Party N for additional due diligence relating to a potential transaction. During that meeting, Financial Party N indicated that it did not believe that it could deliver a value to the Company as high as

 

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the value that certain of the other bidders could deliver and therefore would not continue to explore a transaction with the Company.

Also on December 12, 2012, the executive committee had a telephonic meeting, at which representatives from management, Morrison & Foerster, Guggenheim Securities and Signal Hill were present. Representatives from Guggenheim Securities and Signal Hill and Mr. Creamer provided a summary of the meeting with Financial Party N. Representatives from Signal Hill and Guggenheim Securities summarized the discussions with various potential acquirers since the last executive committee meeting. The status of the Company’s preliminary regulatory review in connection with the potential Nielsen transaction was also discussed. Morrison & Foerster discussed the status of the draft merger agreement with Nielsen and the principal open issues, including Nielsen’s continuing disagreement with the Company’s proposed regulatory efforts covenant and the triggers for the reverse termination fee.

Also on December 12, 2012, the Company completed negotiations of the engagement letter with Signal Hill, which was executed by the Company on December 14.

On December 13, 2012, the Company’s management and representatives from Guggenheim Securities and Signal Hill met with Financial Party A for further due diligence relating to a potential transaction.

Also on December 13, 2012, the executive committee had a meeting, at which representatives from management, Morrison & Foerster, Guggenheim Securities and Signal Hill were present, to discuss the status of various matters related to the transaction process. After receiving an update regarding the status of discussions with Nielsen, the executive committee instructed Guggenheim Securities and Signal Hill to discuss with Financial Party A and Financial Party N the status of their respective due diligence reviews of the Company.

In connection with the executive committee’s review of the Projections (as defined in “—Prospective Financial Information” below) that management had provided to potential bidders in connection with the transaction, the executive committee asked management to prepare an additional set of Projections for internal use and based on assumptions that were more conservative and that the executive committee viewed as more likely to be achieved. Specifically, the executive committee wanted to understand a sensitivity analysis around the assumptions relating to margin growth and the development of new product offerings, including mobile and cross-platform offerings. The additional Projections were based on the following assumptions: (1) future price escalators on traditional services would be lower than as assumed in the original Projections, (2) Portable People Meter panel costs would be higher than as assumed in the original Projections, and (3) mobile/cross-platform revenue and margins would be lower than as assumed in the original Projections. The additional set of Projections was provided to the executive committee, the board of directors, Guggenheim Securities and Signal Hill.

On December 13, 2012 and December 14, 2012, Simpson Thacher and Morrison & Foerster continued to negotiate the merger agreement and exchange drafts of the merger agreement.

Also on December 13, 2012, in connection with the Company’s preexisting succession planning, the Company entered into an Amended and Restated Retention Agreement with Mr. Creamer (as further discussed in “Interests of Executive Officers and Directors in the Merger—Executive Retention Agreements”).

On December 14, 2012, Guggenheim Securities and Signal Hill had discussions with Financial Party A and Financial Party N regarding the status of their respective due diligence reviews. Financial Party A and Financial Party N each indicated that they were approximately 4-6 weeks away from completing sufficient due diligence to more definitively value the Company and to obtain financing commitments. Later on December 14, 2012, the executive committee held a meeting with representatives from Morrison & Foerster, Guggenheim Securities and Signal Hill to receive an update regarding the discussions with Financial Party A and Financial Party N. Both Guggenheim Securities and Signal Hill advised the Company that based on their prior experience, interaction with the bidders and status of the due diligence investigation to date, that it was unlikely that either Financial Party A or Financial Party N would be in a position to provide a final offer, including financing commitments, on terms comparable to Nielsen.

On December 15, 2012, the executive committee held a telephonic meeting, at which representatives from management, Morrison & Foerster, Guggenheim Securities and Signal Hill were present, to discuss the transaction. Guggenheim Securities and Signal Hill updated the executive committee regarding the status of dis-

 

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cussions with Financial Party A and Financial Party N. The executive committee then met separately with representatives from management and Morrison & Foerster to discuss the transaction process and the status of discussions regarding the proposed merger agreement with Nielsen.

On December 15, 2012 and December 16, 2012, Simpson Thacher and Morrison & Foerster continued to negotiate the merger agreement and exchange drafts of the merger agreement.

On December 16, 2012, the board of directors held a telephonic meeting, at which representatives from management, Morrison & Foerster, Guggenheim Securities and Signal Hill were present, to discuss the transaction. Guggenheim Securities and Signal Hill updated the board regarding the status of discussions with interested parties since the prior board meeting. Representatives from Morrison & Foerster updated the board on negotiations. The board then met separately with Morrison & Foerster and discussed the transaction process and the status of discussions regarding the proposed merger agreement with Nielsen and the advice of its financial advisors. Representatives from Signal Hill then re-joined the meeting to discuss its ability to provide the board with a fairness opinion.

Also on December 16, 2012, in connection with discussions regarding the impact of the proposed merger on Mr. Creamer’s existing employment agreement, Nielsen first inquired of Mr. Creamer if he would agree not to resign as an employee of the Company for at least three months following the consummation of the proposed transaction to assist with transition matters.

On December 17, 2012, the board of directors had a meeting, at which representatives from management, Morrison & Foerster, Guggenheim Securities and Signal Hill were present, to discuss the transaction. Representatives from Guggenheim Securities and Signal Hill gave an overview of the history of the proposed transaction process and the individual discussions with each of the bidders to date, as well as updated the board on the current status of those discussions. Each of Guggenheim Securities and Signal Hill then met separately with the board of directors and representatives from management and Morrison & Foerster, and delivered to the board of directors an oral opinion, which opinion was subsequently confirmed in writing as of the same date, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, the $48.00 cash merger consideration to be paid by Nielsen to the holders of the outstanding shares of the Company’s common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of each of Guggenheim Securities and Signal Hill, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex B-1 and B-2 to this proxy statement, respectively.

Morrison & Foerster then described to the board of directors the terms of the proposed merger agreement with Nielsen, including termination fees, antitrust covenants, closing conditions, provisions relating to the Company’s ability to respond to alternative proposals, employee benefits provisions and other terms and conditions. Representatives of each of Guggenheim Securities and Signal Hill reviewed the financial terms of the Nielsen proposal. Throughout the presentations, the board asked numerous questions of each of Guggenheim Securities and Signal Hill. Members of the executive committee discussed the reasons for and against moving forward with a transaction with Nielsen, and the executive committee then recommended entering into the merger agreement with Nielsen, if the Company could come to agreement on the remaining outstanding terms.

Among the reasons in favor of moving forward with a transaction with Nielsen, were the fact that Financial Party A and Financial Party N had individually indicated that they were several weeks away from completing sufficient due diligence to more definitively value the Company. Each of Guggenheim Securities and Signal Hill indicated to the board their respective beliefs that, upon conclusion of due diligence, it would be unlikely that either of Financial Party A or Financial Party N would be willing to improve its bid to terms comparable to Nielsen.

After considering the proposed terms of the merger agreement, the views of management and the various presentations of its legal and financial advisors, and taking into consideration the factors described under “—Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger”, and “—Interests of Executive Officers and Directors in the Merger,” the board of directors unanimously determined that the merger and the other transactions contemplated by the merger agreement are advisable and fair to, and in the best inter-

 

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ests of, Arbitron stockholders, and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, and recommended that Arbitron stockholders adopt the merger agreement. The board also ratified all actions taken by the executive committee to date in connection with the Company’s exploration of strategic opportunities.

During the course of the Company’s exploration of strategic opportunities, each of the confidentiality agreements entered into with potential bidders contained, upon advice of the Company’s counsel, a standstill provision (a “standstill”) preventing the potential bidder from offering to purchase shares of the Company’s stock for a specified period. In addition, each confidentiality agreement contained a provision stating that a potential bidder was not permitted to ask for a waiver of a standstill (a “no-ask, no-waiver” provision). Thus, absent the Company’s decision affirmatively to waive a no-ask, no-waiver provision of the confidentiality agreement, none of the parties to the confidentiality agreements could approach the Company to request a waiver of a standstill in order to present an offer to purchase shares of the Company’s stock in a consensual merger or other form that might constitute a superior proposal under Section 5.03 of the merger agreement with Nielsen.

During the course of the day of December 17, 2012, the Company and representatives from Morrison & Foerster and Simpson Thacher and Nielsen finalized items relating to the merger agreement and on the evening of December 17, 2012, the Company, Nielsen and Merger Sub executed the merger agreement.

On December 18, 2012, the Company, Nielsen and Merger Sub issued a joint press release announcing the execution of the merger agreement.

On January 25, 2013, the Company, Nielsen and Merger Sub entered into Amendment No. 1 to the Agreement and Plan of Merger to provide for the possibility that additional financing sources may be included in the financing.

On March 8, 2013, with Nielsen’s consent, the Company sent letters to Financial Party A, Financial Party B, Financial Party D, Financial Party E, Financial Party G, Strategic Party M, Financial Party N and Financial Party P waiving the “no-ask, no-waiver” provision.

Recommendation of Our Board of Directors as to the Merger; Reasons for the Merger

Reasons for the Merger

Our board of directors evaluated, with the assistance of its legal and financial advisors, the merger agreement and the transactions contemplated by the merger agreement, including the merger and, on December 17, 2012, unanimously determined that the merger agreement, the merger and the other transactions contemplated thereby, were fair, advisable and in the best interests of the Company and its stockholders.

In the course of making the unanimous recommendation described above, the members of the board considered the following positive factors relating to the merger agreement, the merger and the other transactions contemplated thereby, each of which the members of our board believed supported their decision:

 

   

Consideration: Historical Trading Prices.    The current and historical market prices of the Company’s common stock, including the fact that the merger consideration of $48.00 per share represented a premium of approximately 26.2% to the closing price of the common stock on December 17, 2012 (the last full trading day before the announcement of the merger) and an approximately 31.6% premium over the Company’s average closing price over the six months preceding the announcement of the merger agreement.

 

   

Comparability to Other Alternatives.    That our board unanimously believed the merger consideration of $48.00 per share was more favorable to the Company’s stockholders than the potential value that might result from other alternatives reasonably available to the Company, including the alternative of remaining a stand-alone public company and other alternatives or strategies that might be undertaken as a stand-alone public company in light of a number of factors, including the risks and uncertainty associated with those alternatives and strategies.

 

   

Results of Process.    That the Company had conducted a process, during which representatives of the Company contacted or had discussions with ten financial and seven strategic parties (including Nielsen)

 

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believed to be potentially interested acquirers, which process resulted in multiple proposals, none of which produced a higher offer than the Nielsen proposal.

 

   

Cash Consideration; Certainty of Value.    That the form of consideration to be paid to holders of Company common stock is cash, which will provide certainty of value and immediate liquidity to the holders of such Company common stock, while avoiding long-term business risk.

 

   

Financial Condition and Prospects of the Company.    Our board’s understanding of the Company’s business, assets, financial condition and results of operations, its competitive position and historical and projected financial performance, and the nature of the industry and regulatory environment in which the Company operates, including:

 

   

The Company’s Growth Prospects.    The risks affecting economic trends and changes in media consumption affecting the Company’s traditional customer base and whether the Company can successfully leverage new services and markets.

 

   

Customer Concentration.    The risks associated with the Company’s high customer concentration, including that the Company’s largest client represents approximately 20% of the Company’s revenue.

 

   

Achievement of Projected Operating Margins.    The Company faced increasing challenges related to profit margins due to, among other things:

 

   

the costs of obtaining and maintaining Media Rating Council accreditation for the Company’s Portable People Meter (PPM) technology in existing and new markets;

 

   

the costs related to expansion into new media platforms; and

 

   

the increasing costs associated with the Company’s data collection, including the costs of address-based sampling, cell phone-only household recruitment and in-person recruiting.

 

   

Financial Advisor Opinions.

 

   

The opinion and financial presentation of Guggenheim Securities, dated December 17, 2012, provided to our board that based on and subject to the various considerations, limitations and other matters set forth in its opinion, the consideration to be received pursuant to the merger agreement by holders of shares of Arbitron common stock is fair, from a financial point of view, to such stockholders, as more fully described in the section entitled “Proposal No. 1 — Adoption of the Merger Agreement — Opinions of Our Financial Advisors — Opinion of Guggenheim Securities” beginning on page 37.

 

   

The opinion and financial presentation of Signal Hill, dated December 17, 2012, provided to our board that based on and subject to the various considerations, limitations and other matters set forth in its opinion, the consideration to be received pursuant to the merger agreement by holders of shares of Arbitron common stock is fair, from a financial point of view, to such stockholders, as more fully described in the section entitled “Proposal No. 1 — Adoption of the Merger Agreement — Opinions of Our Financial Advisors — Opinion of Signal Hill” beginning on page 47.

 

   

Terms of the Merger Agreement.    The terms and conditions of the merger agreement and related transaction documents, including:

 

   

the requirement that the merger agreement be adopted by the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the determination of stockholders entitled to vote at the special meeting;

 

   

the provision of the merger agreement allowing the Company, under certain circumstances, to provide information to, or participate in discussions or negotiations with, third parties regarding other potential takeover proposals;

 

   

the provision of the merger agreement allowing the board, under certain circumstances, to withdraw or change its recommendation of the merger agreement, and to terminate the merger agreement, in

 

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certain circumstances relating to the presence of a superior proposal, subject, in certain cases, to the payment by the Company of a termination fee of $32.7 million;

 

   

the absence of a financing condition in the merger agreement;

 

   

the fact that Nielsen and Merger Sub had already obtained committed debt financing for the transaction, the limited number and nature of the conditions to the debt financing and Nielsen’s representations and warranties regarding the availability of financing;

 

   

the fact that Nielsen must use reasonable best efforts to obtain necessary antitrust clearances and that, under certain circumstances, if such clearances are not obtained despite such efforts, Nielsen may be required to pay Arbitron a reverse termination fee of $131.0 million;

 

   

the fact that the financial and other terms and conditions of the merger agreement, including the antitrust covenants agreed to by Nielsen, the absence of a financing condition and the Company’s right in certain circumstances to specifically enforce Nielsen’s obligations under the merger agreement, were the product of arm’s-length negotiations among the parties and provided reasonable assurances that the merger was likely to be consummated; and

 

   

the fact that the termination date (i.e., the Outside Date) under the merger agreement allows sufficient time to complete the merger.

 

   

Availability of Appraisal Rights.    The availability of appraisal rights under Delaware law to holders of shares of Arbitron common stock who do not vote in favor of the adoption of the merger agreement and comply with all of the required procedures under Delaware law, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under the merger agreement.

In the course of reaching the determinations and decisions and making the recommendation described above, our board considered the following risks and potentially negative factors relating to the merger agreement, the merger and the other transactions contemplated thereby:

 

   

That the Company’s stockholders will have no ongoing equity participation in the Company following the merger, and that such stockholders will cease to participate in the Company’s future earnings or growth, if any, or to benefit from increases, if any, in the value of Arbitron common stock, and will not participate in any potential future sale of the Company to a third party.

 

   

The fact that the merger might not be completed in a timely manner or at all due to a delay in receiving or a failure to receive necessary antitrust and other approvals, including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

   

The risk that the Company may be unable to obtain the stockholder approval necessary to consummate the merger.

 

   

The risk that there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, and as a result, it is possible that the merger may not be completed even if the merger agreement is adopted by the Company’s stockholders.

 

   

The merger agreement’s restrictions on the conduct of the Company’s business prior to the completion of the merger, generally requiring the Company to conduct its business only in the ordinary course, subject to specific limitations, which may delay or prevent the Company from undertaking business opportunities that may arise pending completion of the merger.

 

   

The risks and costs to the Company if the merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential effect on business and customer relationships.

 

   

That the receipt of cash in exchange for shares of Arbitron common stock pursuant to the merger will be a taxable transaction for Arbitron stockholders for U.S. federal income tax purposes.

 

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The possibility that, under circumstances specified in the merger agreement, the Company may be required to pay Nielsen a termination fee of $32.7 million, and the possibility that such termination fee may discourage a competing proposal to acquire the Company.

 

   

The risk of incurring substantial expenses related to the merger.

In addition, our board made its evaluation of the merger agreement and the merger based upon the factors discussed in this proxy statement and with the full knowledge of the interests of certain directors and executive officers with respect to the merger that differ from, or are in addition to, their interests as stockholders of the Company. See “Proposal No. 1 — Adoption of the Merger Agreement — Interests of Executive Officers and Directors in the Merger” and “Proposal No. 3 — Advisory Vote Regarding Certain Executive Compensation — Golden Parachute Compensation” beginning on pages 55 and 93, respectively.

This discussion of the information and factors considered by our board includes the material positive and negative factors considered by our board, but is not intended to be exhaustive and may not include all of the factors considered by our board. Our board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger, the merger agreement and the other transactions contemplated by the merger agreement are fair and advisable to and in the best interests of the Company and its stockholders. Rather, our board conducted an overall analysis of the factors described above, including thorough discussion with, and questioning of, Company management and the Company’s outside advisors, and considered the factors overall to be favorable to, and to support, its determination and recommendation. In addition, individual members of our board may have given different weight to different factors. Our board of directors based its ultimate decision on its business judgment that the benefits of the merger agreement and the merger to the Company’s stockholders outweigh the negative considerations. Our board determined that the merger agreement and the merger represent the best reasonably available alternative to maximize stockholder value.

Recommendation of the Board of Directors

Our board consists of eleven directors. On December 17, 2012, on the basis of the other factors described above, our board unanimously:

 

   

determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement, are advisable and fair to and in the best interests of the Company and its stockholders;

 

   

approved and adopted the merger agreement and the transactions contemplated thereby (including, without limitation, the merger); and

 

   

resolved to recommend that the Company’s stockholders vote to adopt the merger agreement.

The board unanimously recommends that you vote “FOR” the adoption of the merger agreement.

Prospective Financial Information

The Company’s management made available prospective financial information to Guggenheim Securities and Signal Hill for use in connection with the financial analyses performed by Guggenheim Securities and Signal Hill in connection with delivering their written financial opinions to our board and to Nielsen to assist Nielsen with its due diligence review of the Company.

The Company made available to Guggenheim Securities and Signal Hill, in their capacity as financial advisors to the Company, certain unaudited prospective financial information concerning the Company (collectively, the “Projections”). The Projections do not take into account any circumstances or events occurring after the date they were prepared, including the transactions contemplated by the merger agreement. Further, the Projections do not take into account the effect of any failure of the merger to occur.

The Company’s management prepared an initial set of Projections (“Management Case 1”), and provided those Projections to potential bidders, the Company’s financial advisors and the board of directors. In connection with the executive committee’s, a standing committee of the board that was established to assist the board in

 

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connection with potential strategic transactions, review of the Projections, the executive committee asked management to prepare an additional set of Projections based on assumptions that were more conservative and that the executive committee viewed as more likely to be achieved. Specifically, the executive committee wanted to understand a sensitivity analysis around the assumptions relating to margin growth and the development of new product offerings, including mobile and cross-platform offerings. Management prepared an additional set of Projections (“Management Case 2”) and provided these to the executive committee, the board of directors, Guggenheim Securities and Signal Hill. The Management Case 2 Projections were based on the following assumptions: (1) future price escalators on traditional services would be lower than as assumed in Management Case 1, (2) Portable People Meter panel costs would be higher than as assumed in Management Case 1, and (3) mobile/cross-platform revenue and margins would be lower than as assumed in Management Case 1.

The Projections reflect numerous estimates and assumptions made by the Company with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Company’s business, all of which are difficult to predict and many of which are beyond the Company’s control. The material business and economic assumptions underlying the Projections were industry performance, the static economic conditions and the projected financial performance of the Company. The Projections reflect subjective judgment in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Projections constitute forward-looking information and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Projections, including, but not limited to, the Company’s performance, industry performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in the Company’s reports filed with the SEC. There can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than forecast. The Projections cover multiple years and such information by its nature becomes less reliable with each successive year. In addition, the Projections will be affected by the Company’s ability to achieve strategic goals, objectives and targets over the applicable periods. The assumptions upon which the Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. The Projections reflect assumptions as to certain business decisions that are subject to change. The Projections cannot, therefore, be considered a guaranty of future operating results, and this information should not be relied on as such. The inclusion of the Projections should not be regarded as an indication that the Company and its financial advisors or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such.

The summary of such information below is included solely to give stockholders access to the information that was made available and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the merger, including whether or not to seek appraisal rights with respect to the shares of Company common stock.

The inclusion of the Projections herein should not be deemed an admission or representation by the Company that they are viewed by the Company as material information of the Company, and in fact the Company views the Projections as non-material because of the inherent risks and uncertainties associated with such long-range forecasts. The inclusion of the Projections in this proxy statement should not be regarded as an indication that the Projections will be necessarily predictive of actual future events, and it should not be relied on as such. No representation is made by the Company or any other person to any stockholder of the Company regarding the Projections or the ultimate performance of the Company compared to such information. The Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Company’s public filings with the SEC. In light of the foregoing factors and the uncertainties inherent in the Projections, stockholders are cautioned not to place undue, if any, reliance on the Projections.

Neither the Company’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the Projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

 

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Certain information set forth in the Projections are non-generally accepted accounting principles, which we refer to as non-GAAP, financial measures. These non-GAAP financial measures are not calculated in accordance with, or a substitute for financial measures calculated in accordance with, GAAP and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures, in that they exclude a variety of charges and credits that are required to be included in a GAAP presentation. Accordingly, these non-GAAP financial measures should be considered together with, and not as an alternative to, GAAP basis financial measures.

Management Case 1 — Consolidated

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E     2015E     2016E     2017E  
     (US$ in millions)  

Revenue

   $ 449.9      $ 468.5      $ 498.5      $ 537.2      $ 578.9      $ 625.9   

Adjusted EBITDA(1)

   $ 140.1      $ 147.5      $ 164.3      $ 185.9      $ 204.2      $ 232.2   

Change in Net Working Capital

   $ (2.1   $ 1.2      $ (1.5   $ (2.2   $ (1.0   $ (2.7

Capital Expenditures

   $ (23.2   $ (23.7   $ (24.8   $ (22.0   $ (22.1   $ (21.4

 

(1) Represents EBITDA adjusted for stock-based compensation expense. EBITDA is defined as net income before interest expense, income tax expense, depreciation and amortization. We prepare Adjusted EBITDA to eliminate the impact of stock-based compensation expense, which is a non-cash expense that is not a key measure of our operation. Reconciliations of these non-GAAP financial measures to the GAAP basis financial measures most directly comparable are provided below.

Set forth below is a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure based on financial information available to, or projected by, the Company (totals may not add due to rounding):

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E     2015E     2016E     2017E  
     (US$ in millions)  

Net Income

   $ 61.1      $ 67.4      $ 79.1      $ 93.6      $ 105.1      $ 124.2   

Net Interest (Expense)

   $ (0.4   $ (0.4   $ (0.4   $ (0.3   $ (0.3   $ (0.2

Taxes

   $ (37.8   $ (42.2   $ (49.5   $ (58.6   $ (65.8   $ (77.7

Depreciation and Amortization

   $ 31.6      $ 29.8      $ 27.3      $ 24.7      $ 24.1      $ 21.3   

EBITDA

   $ 130.9      $ 139.8      $ 156.2      $ 177.2      $ 195.2      $ 223.4   

Stock-Based Compensation

   $ 9.1      $ 7.7      $ 8.0      $ 8.6      $ 9.0      $ 8.8   

Adjusted EBITDA

   $ 140.1      $ 147.5      $ 164.3      $ 185.9      $ 204.2      $ 232.2   

Management Case 1 — By Business

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E     2015E     2016E     2017E  
     (US$ in millions)  

Traditional Services Revenue

   $ 446.6      $ 457.1      $ 471.6      $ 492.3      $ 517.8      $ 540.2   

New Services Revenue

   $ 3.3      $ 11.4      $ 26.9      $ 44.9      $ 61.1      $ 85.7   

Traditional Services EBITDA(1)

   $ 144.0      $ 148.9      $ 153.9      $ 161.4      $ 170.0      $ 178.9   

New Services EBITDA(1)

   $ (13.1   $ (9.1   $ 2.4      $ 15.9      $ 25.2      $ 44.4   

Traditional Services Change in Net Working Capital

   $ (2.1   $ 1.2      $ (1.5   $ (2.2   $ (1.0   $ (2.7

New Services Change in Net Working Capital

   $      $      $      $      $      $   

Traditional Services Capital Expenditures

   $ (23.1   $ (22.3   $ (21.1   $ (20.2   $ (20.1   $ (20.1

New Services Capital Expenditures

   $ (0.2   $ (1.4   $ (3.6   $ (1.8   $ (1.9   $ (1.3

 

(1) Reconciliations of these non-GAAP financial measures to the GAAP basis financial measures most directly comparable are provided below.

 

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Set forth below are reconciliations of Traditional Services EBITDA and New Services EBITDA to the most comparable GAAP financial measures based on financial information available to, or projected by, the Company (totals may not add due to rounding):

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E     2015E     2016E     2017E  
     (US$ in millions)  

Traditional Services Net Income

   $ 70.7      $ 74.5      $ 79.1      $ 85.5      $ 91.0      $ 97.6   

Net Interest (Expense)

   $ (0.4   $ (0.4   $ (0.4   $ (0.3   $ (0.3   $ (0.2

Taxes

   $ (43.7   $ (46.6   $ (49.5   $ (53.5   $ (57.0   $ (61.1

Depreciation and Amortization

   $ 29.2      $ 27.4      $ 24.9      $ 22.0      $ 21.7      $ 19.9   

Traditional Services EBITDA

   $ 144.0      $ 148.9      $ 153.9      $ 161.4      $ 170.0      $ 178.9   

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E      2015E     2016E     2017E  
     (US$ in millions)  

New Services Net Income

   $ (9.6   $ (7.1   $ 0.0       $ 8.1      $ 14.1      $ 26.5   

Taxes

   $ 5.9      $ 4.4      $ 0.0       $ (5.1   $ (8.8   $ (16.6

Depreciation and Amortization

   $ 2.4      $ 2.4      $ 2.4       $ 2.7      $ 2.3      $ 1.3   

New Services EBITDA

   $ (13.1   $ (9.1   $ 2.4       $ 15.9      $ 25.2      $ 44.4   

Management Case 2 — Consolidated

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E     2015E     2016E     2017E  
     (US$ in millions)  

Revenue

   $ 449.9      $ 464.5      $ 489.5      $ 519.5      $ 549.7      $ 580.3   

Adjusted EBITDA(1)

   $ 140.1      $ 148.3      $ 160.3      $ 173.6      $ 183.5      $ 196.8   

Change in Net Working Capital

   $ (2.1   $ 1.2      $ (1.5   $ (2.2   $ (1.0   $ (2.7

Capital Expenditures

   $ (23.2   $ (23.7   $ (24.8   $ (22.0   $ (22.1   $ (21.4

 

(1) Represents EBITDA adjusted for stock-based compensation expense. EBITDA is defined as net income before interest expense, income tax expense, depreciation and amortization. We prepare Adjusted EBITDA to eliminate the impact of stock-based compensation expense, which is a non-cash expense that is not a key measure of our operation. Reconciliations of these non-GAAP financial measures to the GAAP basis financial measures most directly comparable are provided below.

Set forth below is a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure based on financial information available to, or projected by, the Company (totals may not add due to rounding):

 

     As of and for the year ended December 31,  
     2012E     2013E     2014E     2015E     2016E     2017E  
     (US$ in millions)  

Net Income

   $ 61.1      $ 67.9      $ 76.6      $ 86.0      $ 92.3      $ 102.4   

Net Interest (Expense)

   $ (0.4   $ (0.4   $ (0.4   $ (0.3   $ (0.3   $ (0.2

Taxes

   $ (37.8   $ (42.5   $ (48.0   $ (53.9   $ (57.8   $ (64.1

Depreciation and Amortization

   $ 31.6      $ 29.8      $ 27.3      $ 24.7      $ 24.1      $ 21.3   

EBITDA

   $ 130.9      $ 140.6      $ 152.3      $ 164.9      $ 174.5      $ 188.0   

Stock-Based Compensation

   $ 9.1      $ 7.7      $ 8.0      $ 8.6      $ 9.0      $ 8.8   

Adjusted EBITDA

   $ 140.1      $ 148.3      $ 160.3      $ 173.6      $ 183.5      $ 196.8   

See “— Opinions of Our Financial Advisors” beginning on page 37 of this proxy statement for additional information regarding the use of the above prospective financial information.

 

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THE COMPANY DOES NOT INTEND TO, AND DOES NOT UNDERTAKE ANY OBLIGATION TO, UPDATE OR REVISE, OR PUBLICLY DISCLOSE ANY UPDATE OR REVISION TO, SUCH PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION THEREOF, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH FORECASTS CHANGE OR ARE SHOWN TO BE IN ERROR, EXCEPT AS REQUIRED BY LAW.

Opinions of Our Financial Advisors

Opinion of Guggenheim Securities

Overview

Pursuant to an engagement letter dated October 22, 2012, Arbitron retained Guggenheim Securities to act as its financial advisor with respect to an evaluation of various potential strategic alternatives, including a potential sale of Arbitron. In selecting Guggenheim Securities as its financial advisor, the board of directors considered that, among other things, Guggenheim Securities is an internationally recognized investment management, investment banking and financial advisory firm whose senior professionals have substantial experience advising companies in the telecom, media and technology industry as well as significant experience providing strategic and financial advisory services. Guggenheim Securities, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and financial assessment of businesses and securities in connection with mergers and acquisitions, restructurings and recapitalizations, spin-offs/split-offs, securities offerings in both the private and public capital markets and valuations for corporate and other purposes.

At the December 17, 2012 meeting of the board of directors, Guggenheim Securities delivered its oral opinion, which subsequently was confirmed in writing, to the effect that, as of that date and based on the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the sale price in connection with the merger was fair, from a financial point of view, to the holders of shares of common stock of Arbitron.

The full text of Guggenheim Securities’ written opinion is attached as Annex B-1 to this proxy statement and you should read the opinion carefully and in its entirety. The summary of Guggenheim Securities’ opinion that follows is qualified in its entirety by reference to the full text of the opinion. Guggenheim Securities’ written opinion sets forth the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken by Guggenheim Securities. Guggenheim Securities’ opinion, which was authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim Securities, is subject to the assumptions, limitations, qualifications and other conditions contained in such opinion and is necessarily based on economic, capital markets and other conditions, and the information made available to Guggenheim Securities, as of the date of such opinion. Guggenheim Securities has no responsibility for updating or revising its opinion based on facts, circumstances or events occurring after the date of the rendering of its opinion.

In reading the discussion of the opinion set forth below, you should be aware that Guggenheim Securities’ opinion:

 

   

was provided to the board of directors (solely in its capacity as such) for its information and assistance in connection with its consideration of the merger and not intended to be used or relied upon for any other purpose or by any other person or entity;

 

   

did not constitute a recommendation to the board of directors in connection with the merger;

 

   

does not constitute advice or a recommendation to any holder of Arbitron common stock as to how to vote in connection with the merger or otherwise;

 

   

did not address Arbitron’s underlying business or financial decision to pursue the merger, the relative merits of the merger as compared to any alternative business or financial strategies that might exist for Arbitron, the financing of the merger or the effects of any other transaction in which Arbitron might engage;

 

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addressed only the fairness, from a financial point of view, of the sale price pursuant to the merger agreement;

 

   

expressed no view or opinion as to (1) any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or to be entered into or amended in connection with the merger or (2) the fairness, financial or otherwise, of the merger to, or of any consideration to be paid to or received by, the holders of any other class of securities, creditors or other constituencies of Arbitron; and

 

   

expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Arbitron’s officers, directors or employees, or any class of such persons, in connection with the merger relative to the sale price pursuant to the merger agreement.

In the course of performing its reviews and analyses for rendering its opinion, Guggenheim Securities:

 

   

reviewed a draft of the merger agreement dated December 15, 2012;

 

   

reviewed draft copies dated December 15, 2012 of the debt commitment letter with respect to Nielsen’s contemplated financing of the merger;

 

   

reviewed certain publicly available business and financial information regarding Arbitron;

 

   

reviewed the Projections furnished to Guggenheim Securities by the Company (as more fully described in “— Prospective Financial Information” beginning on page 33), including Management Case 1 and Management Case 2 (each as more fully described in “— Prospective Financial Information” beginning on page 33);

 

   

discussed with Arbitron’s senior management their strategic and financial rationale for the merger as well as their views of Arbitron’s business, operations, historical and projected financial results and future prospects;

 

   

reviewed the historical prices, trading multiples and trading volumes of the Arbitron common stock;

 

   

compared the financial performance, end market growth, customer concentration and cost of capital of Arbitron, as well as the trading multiples and trading activity of the shares of Arbitron common stock to relevant data for certain other publicly traded companies which Guggenheim Securities deemed generally comparable to Arbitron;

 

   

reviewed the valuation and financial metrics of certain relevant mergers and acquisitions involving companies which Guggenheim Securities deemed generally comparable to Arbitron;

 

   

performed discounted cash flow analyses based on the Projections furnished to Guggenheim Securities by Arbitron;

 

   

performed illustrative leveraged buyout analyses based on the Projections;

 

   

reviewed the premia paid for companies in the Technology, Media and Telecom (“TMT”) industry and of a comparable size to Arbitron; and

 

   

conducted such other studies, analyses, inquiries and investigations as Guggenheim Securities deemed appropriate.

In connection with rendering its opinion, Guggenheim Securities noted that:

 

   

Guggenheim Securities relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax, accounting, actuarial and other information (including, without limitation, any of the Projections and other estimates and other forward-looking information) provided to or discussed with Guggenheim Securities by Arbitron or obtained by Guggenheim Securities from public sources and data suppliers.

 

   

Guggenheim Securities (1) did not and does not assume any responsibility, obligation or liability (whether direct or indirect, in contract or tort or otherwise) for the accuracy, completeness, reasonableness, achiev-

 

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ability or independent verification of, and Guggenheim Securities did not independently verify, any such information (including, without limitation, the Projections, other estimates and other forward-looking information), (2) expressed no view, opinion, representation, guaranty or warranty (in each case, express or implied) regarding the reasonableness or achievability of the Projections and other estimates and other forward-looking information or the assumptions upon which they are based and (3) relied upon the assurances of Arbitron’s senior management that they were unaware of any facts or circumstances that would have made such information (including, without limitation, the Projections, other estimates and other forward-looking information) incomplete, inaccurate or misleading.

 

   

Specifically, with respect to (1) the Projections, other estimates and other forward-looking information provided to Guggenheim Securities by Arbitron, Guggenheim Securities was advised by Arbitron’s senior management, and Guggenheim Securities assumed, that such Projections, other estimates and other forward-looking information had been reasonably prepared on bases reflecting the best then-currently available estimates and judgments of Arbitron’s senior management as to the expected future performance of Arbitron and (2) the Projections, estimates and/or other forward-looking information obtained by Guggenheim Securities from public sources and data suppliers, Guggenheim Securities assumed that such information was reasonable and reliable.

 

   

During the course of Guggenheim Securities’ engagement, Guggenheim Securities was asked by the board of directors to solicit indications of interest from various strategic and private equity acquirers identified in consultation with the board of directors, and Guggenheim Securities considered the results of such solicitation in rendering its fairness opinion.

 

   

Guggenheim Securities did not perform or obtain any independent appraisal of the assets or liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of Arbitron nor was Guggenheim Securities furnished with any such appraisals.

 

   

Guggenheim Securities did not express any view or render any opinion regarding the tax consequences to Arbitron or the holders of Arbitron common stock of the merger. Guggenheim Securities is not a legal, regulatory, tax, accounting or actuarial expert and it relied on the assessments made by Arbitron and its advisors with respect to such issues.

 

   

Guggenheim Securities assumed that:

 

   

In all respects material to its analyses, (1) the final executed form of the merger agreement would not differ from the most recent draft that Guggenheim Securities reviewed, (2) Arbitron and Nielsen would comply with all terms of the merger agreement and (3) the representations and warranties of Arbitron and Nielsen contained in the merger agreement were true and correct and all conditions to the obligations of each party to the merger agreement to consummate the merger would be satisfied without any waiver thereof; and

 

   

The merger would be consummated in a timely manner and in accordance with the terms of the merger agreement, without any limitations, restrictions, conditions, amendments or modifications, regulatory or otherwise, that would have an adverse effect on Arbitron.

 

   

Guggenheim Securities expressed no view or opinion as to the price or range of prices at which the shares of common stock or other securities of Arbitron may trade at any time, including, without limitation, subsequent to the announcement or consummation of the merger.

Summary of Valuation and Financial Analyses

Overview/Definitions

This “Summary of Valuation and Financial Analyses” presents a summary of the principal valuation and financial analyses performed by Guggenheim Securities and presented to the board of directors in connection with rendering its opinion.

 

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Some of the valuation and financial analyses summarized below include summary data and information presented in tabular format. In order to understand fully such valuation and financial analyses, the summary data and tables must be read together with the full text of the summary. Considering the summary data and tables alone could create a misleading or incomplete view of Guggenheim Securities’ valuation and financial analyses.

Throughout this “Summary of Valuation and Financial Analyses,” the following financial terms are used in connection with Guggenheim Securities’ various valuation and financial analyses:

 

   

Enterprise value: represents the relevant company’s net equity value plus (1) the face amount of total debt and preferred stock and (2) the book value of any non-controlling/minority interests less (3) cash and equivalents, investments and (4) the book value of any non-cash generating assets.

 

   

EBITDA: means the relevant company’s operating earnings before interest, taxes, depreciation and amortization. For Arbitron, we calculated EBITDA to include net income from its affiliates. We also calculated EBITDA before and after the deduction of stock-based compensation expense and referred to that EBITDA as being “pre-SBC” or “post-SBC.”

 

   

EBITDA multiple: represents the relevant company’s enterprise value divided by its historical or projected EBITDA.

 

   

SBC: means the relevant company’s stock based compensation.

 

   

Growth-adjusted EBITDA multiple: represents the relevant company’s forward EBITDA multiple divided by the projected future growth rate in its EBITDA.

 

   

CAGR: means compound annual growth rate.

 

   

Management Case 1: Arbitron management’s Projections, which imply a 2012-2017 revenue CAGR of 6.8% and EBITDA CAGR of 10.6% during that time period.

 

   

Management Case 2: Arbitron management’s Projections, which imply a 2012-2017 revenue CAGR of 5.2% and EBITDA CAGR of 7.0% during that time period.

 

   

CapEx: means capital expenditures.

 

   

Unlevered free cash flow or ULFCF: means the relevant company’s after-tax unlevered operating cash flow minus CapEx and changes in working capital.

 

   

DCF: means discounted cash flow.

 

   

WACC: means weighted average cost of capital.

Recap of Transaction Valuation

Based on the transaction price of $48.00 per share and Arbitron’s closing stock price of $37.49 on December 14, 2012, Guggenheim Securities reviewed the implied transaction enterprise value/forward EBITDA multiples on a pre-SBC and post-SBC basis. Guggenheim Securities also calculated the transaction price premia in relation to various Arbitron stock prices that were based on (1) the closing stock price as of December 14, 2012, (2) the 30-day and 60-day volume-weighted average stock prices as of December 14, 2012 and (3) the past year’s high stock prices as of December 14, 2012.

 

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Transaction Premia and Implied Transaction Multiples

 

Transaction Price per Share

  

   $ 48.00   
     Arbitron
Stock
Price
        

Acquisition Premium/(Discount) Relative to:

     

Closing Stock Price @ 12/14/12

   $ 37.49         28.0

Volume-Weighted Average Stock Price:

     

30-Day

     36.72         30.7   

60-Day

     37.12         29.3   

Past Year’s High Stock Price

     39.98         20.1   

Transaction Enterprise Value/EBITDA (pre-SBC/post-SBC) for Arbitron:

     

2012E:

     

Wall Street Consensus Estimates

        9.2/9.8

Arbitron Management Case 1

        9.1/9.7   

Arbitron Management Case 2

        9.1/9.7   

2013E:

     

Wall Street Consensus Estimates

        8.7/9.3

Arbitron Management Case 1

        8.6/9.1   

Arbitron Management Case 2

        8.6/9.1   

2014E:

     

Wall Street Consensus Estimates

        8.2/8.7

Arbitron Management Case 1

        7.7/8.1   

Arbitron Management Case 2

        7.9/8.4   

Transaction Growth-Adjusted EBITDA (pre-SBC/post-SBC) for Arbitron:

     

2012E:

     

Wall Street Consensus Estimates

        1.6/1.7

Arbitron Management Case 1

        1.1/1.1   

Arbitron Management Case 2

        1.3/1.2   

Arbitron Valuation Analyses

Peer Group Financial Benchmarking and Trading Valuation Analysis.    Guggenheim Securities reviewed and analyzed Arbitron’s historical stock price performance, historical and projected financial performance and trading valuation metrics compared to such information for certain publicly traded companies in the audience measurement and market research sector that Guggenheim Securities deemed relevant for purposes of its valuation analysis. The following publicly traded peer group companies were used by Guggenheim Securities for purposes of its valuation analysis and were selected on the basis of industry focus:

Selected Peer Group Companies

 

   

Nielsen Holdings

   

comScore

   

GfK

   

Ipsos

 

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Guggenheim Securities calculated the following pre-SBC EBITDA and Growth-Adjusted EBITDA trading multiples for the selected peer group companies based on Wall Street consensus estimates and the most recent publicly available financial filings:

Selected Peer Group Companies

 

     Enterprise
Value/EBITDA
    Growth-
Adjusted
EBITDA
Multiple
 
     2012E     2013E    

Peer Group:

      

Nielsen Holdings

     10.8     10.1     1.6

comScore

     10.6        9.5        0.8   

GfK

     8.1        7.3        0.8   

Ipsos

     9.6        8.4        0.8   

Mean

     9.8     8.8     1.0

Median

     10.1        9.0        0.8   

Arbitron:

      

Trading Basis Wall Street

     7.0     6.6     1.2

Trading Basis Case 1

     7.0        6.6        0.8   

Trading Basis Case 2

     7.0        6.6        1.0   

Transaction Basis Wall Street

     9.2        8.7        1.6   

Transaction Basis Case 1

     9.1        8.6        1.1   

Transaction Basis Case 2

     9.1        8.6        1.3   

In performing its peer group trading valuation analysis:

 

   

Guggenheim Securities noted that the valuation multiples implied by the transaction price of $48.00 per share were generally in line with the peer group trading averages.

 

   

Guggenheim Securities also compared the financial performance, end market growth, customer concentration and cost of capital of Arbitron to the peer group in order to provide context for an analysis of the trading multiples, and noted that (1) Arbitron’s end market (terrestrial radio) is projected to grow at a slower rate of 3.0% as compared to 7.0% end market growth (television) for Nielsen and 15.5% for comScore (online), in each case based on industry research estimates, (2) its customer concentration was higher and (3) its cost of capital was generally higher than the peer companies.

Precedent Merger and Acquisition Transaction Analysis.    Guggenheim Securities reviewed and analyzed the valuation and financial metrics of certain relevant precedent merger and acquisition transactions during the past several years involving companies in the audience measurement and market research sector that Guggenheim Securities deemed relevant for purposes of its valuation analysis. The following precedent merger and acquisition transactions were reviewed and considered by Guggenheim Securities for purposes of its valuation analysis:

Selected Precedent M&A Transactions

 

Date Announced

   Acquiror    Target Company

07/27/11

   Ipsos    Synovate

11/05/09

   TPG/Canada Pension    IMS Health

07/02/08

   WPP Group    Taylor Nelsen Sofres

03/08/06

   Valcon Acquisition    VNU

 

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A summary of Guggenheim Securities’ analysis of the precedent merger and acquisition transactions is presented in the tables below:

Selected Precedent M&A Transaction Multiples

 

            Transaction Enterprise Value/Revenue     Transaction Enterprise Value/EBITDA
(post-SBC where available)
 

Acquiror / Target

Company

   Enterprise
Value ($M)
     Current
Year
    Forward
Year
    Forward
Year +1
    Growth-
Adjusted
Multiple
    Current
Year
    Forward
Year
    Forward
Year +1
    Growth-
Adjusted
Multiple
 

Ipsos / Synovate

   $ 858         0.9     0.9     0.8     0.2     9.0     NA        NA        NA   

TPG/Canada Pension / IMS Health

     5,195         2.4        2.4        2.3        1.4        9.6        9.1     8.6     1.8

WPP Group / Taylor Nelsen Sofres

     3,038         1.3        1.2        1.2        0.3        10.2        9.5        8.4        1.0   

Valcon Acquisition / VNU

     10,290         2.3        2.2        2.1        0.5        11.5        10.7        9.5        1.2   

Mean

        1.7     1.7     1.6     0.6     10.1     9.8     8.8     1.3

Median

        1.8        1.7        1.6        0.4        9.9        9.5        8.6        1.2   

Arbitron Management Case 1

        2.8     2.7     2.6     0.5     9.7     9.1     8.1     1.1

Arbitron Management Case 2

        2.8        2.7        2.6        0.7        9.7        9.1        8.4        1.2   

In performing its precedent merger and acquisition transactions analysis:

 

   

Guggenheim Securities noted that the multiples implied by the transaction price of $48.00 per share was generally in line with the precedent transaction median on an EBITDA multiple and growth adjusted EBITDA basis and higher on a revenue multiple basis.

Discounted Cash Flow Analyses.    Guggenheim Securities performed illustrative stand-alone discounted cash flow analyses of Arbitron based on projected after-tax unlevered free cash flows for Arbitron and an estimate of its perpetual growth rate of unlevered free cash flow at the end of the projection horizon. The after-tax unlevered free cash flows were calculated by taking Arbitron’s projected earnings before interest and taxes, minus taxes (using a marginal tax rate of 38.5%) plus depreciation and amortization, minus capital expenditures and change in working capital. In performing its illustrative discounted cash flow analyses:

 

   

Guggenheim Securities based its discounted cash flow analyses on the Management Case 1 and Case 2 five-year Projections for Arbitron as provided by Arbitron’s senior management.

 

   

Guggenheim Securities estimated Arbitron’s weighted average cost of capital to be 9.25-11.25% based on, among other factors, (1) Guggenheim Securities’ then-current estimate of the prospective US equity risk premium range of 5.5% to 6.5%, (2) a review of Arbitron’s Bloomberg historical five-year average adjusted beta, its Bloomberg historical two-year average adjusted beta and its then-current Barra predicted beta as well as similar information for Arbitron’s selected peer group companies, resulting in an estimated unlevered beta range of 0.900 to 1.200, (3) the prevailing yield on the 20-year US Treasury bond as a proxy for the risk-free rate of 2.29%, (4) Arbitron’s target capital structure which was assumed not to include any debt and (5) Guggenheim Securities’ investment banking and capital markets judgment and experience in valuing companies similar to Arbitron.

 

   

In calculating Arbitron’s terminal value for purposes of its discounted cash flow analyses, Guggenheim Securities used an illustrative reference range of perpetual growth rates in Arbitron’s terminal year normalized after-tax unlevered free cash flow of 1.0% to 2.0% for the Management Case 1 Projections and 0.5% to 1.5% for the Management Case 2 Projections. The difference in perpetual growth rate assumptions reflects greater exposure to higher growth businesses, resulting in reduced percentages in the Management Case 2 Projections. The terminal year EBITDA multiple implied by these assumptions were (1) 5.4x to 7.7x based on the Management Case 1 Projections and 5.0x to 6.9x based on the Management

 

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Case 2 Projections, in each case when treating SBC as a tax-deductible cash operating expense and (2) 5.7x to 8.0x based on the Management Case 1 Projections and 5.3x to 7.3x based on the Management Case 2 Projections, in each case without any deduction for SBC.

 

   

Guggenheim Securities’ illustrative discounted cash flow analyses resulted in an overall reference range of (1) $42.33 to $57.13 based on the Management Case 1 Projections and $35.00 to $46.30 based on the Management Case 2 Projections, in each case when treating SBC as a tax-deductible cash operating expense and (2) $44.18 to $59.63 based on the Management Case 1 Projections and $36.86 to $48.69 based on the Management Case 2 Projections, in each case without any deduction for SBC.

 

   

Guggenheim Securities noted that the transaction price of $48.00 per share was in line or above the aforementioned discounted cash flow valuation ranges.

Other Financial Reviews and Analyses

Guggenheim Securities performed various additional financial reviews and analyses as summarized below solely for reference purposes and to provide certain context for the various valuation and financial analyses in connection with its opinion.

LBO Analysis.    Guggenheim Securities performed an illustrative analysis of the implied price per share of Arbitron common stock that could theoretically be paid by a financial sponsor, provided that the financial sponsor required a 5-year IRR ranging from 18% to 22% (excluding the impact of dilution arising from management incentive equity compensation or any other stock-based compensation). Guggenheim Securities performed the illustrative LBO analysis assuming that the transaction was completed with $840 million of debt (or approximately 6x Arbitron’s last twelve months’ EBITDA (“LTM EBITDA”)) at prevailing market rates. Guggenheim Securities performed the illustrative LBO analysis based on both the Management Case 1 and Case 2 Projections. The results of the illustrative LBO analysis were as follows:

 

   

Based on the Management Case 1 Projections and assuming an exit multiple of 6.5x-8.5x Arbitron’s LTM EBITDA, the LBO analysis implied a range of values of $44.82-$54.34 per share of Arbitron common stock.

 

   

Based on the Management Case 2 Projections and assuming an exit multiple of 6.0x-8.0x Arbitron’s LTM EBITDA, the LBO analysis implied a range of values of $39.69-$47.28 per share of Arbitron common stock. Guggenheim Securities noted that it believed a lower range of exit multiples was appropriate when using the Management Case 2 Projections given that Arbitron would have less exposure to higher growth businesses in that case relative to the Management Case 1 Projections.

 

   

Guggenheim Securities noted that the $48.00 transaction price was in line with the range of values implied by this analysis based on the Management Case 1 projections and above the high end of the range of values implied by this analysis based on the Management Case 2 projections.

Arbitron Wall Street Equity Research Analyst Price Targets. Guggenheim Securities reviewed selected Wall Street equity research analyst price targets for Arbitron:

 

   

Guggenheim Securities reviewed selected public market trading price targets for Arbitron’s common stock as prepared and published by certain Wall Street equity research analysts prior to December 17, 2012 (the last trading day prior to Arbitron’s board meeting approving the merger agreement). Guggenheim Securities noted that the range of equity research analyst price targets for Arbitron’s common stock was $37.00-47.00 per share. Guggenheim Securities noted that the public market trading price targets published by Wall Street equity research analysts generally reflect a target price one year from the date of the underlying report, with exceptions to that rule noted. Such target prices do not necessarily reflect current market trading prices for Arbitron’s common stock and such estimates are subject to various uncertainties, including the future financial performance of Arbitron and future capital markets conditions. Guggenheim Securities also noted that the transaction price was higher than any of the Wall Street equity research future price targets and that the target prices had trended downward during 2012.

 

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Arbitron’s Stock Price Trading History. Guggenheim Securities reviewed Arbitron’s stock price trading history over various timeframes:

 

   

Guggenheim Securities indicated that from December 14, 2011 to December 14, 2012, Arbitron’s common stock generally had traded in a range of approximately $32.34 to $39.98 per share. Guggenheim Securities also compared the relative stock price performance of Arbitron to the peer companies, radio companies and the broader market since January 1, 2009, the all-time high in the S&P 500 and each such company’s all-time high.

Premia Paid. Guggenheim Securities reviewed TMT all-cash deals since January 1, 2011 with deal values between $1.0 billion and $2.0 billion:

 

   

Guggenheim Securities indicated the mean and median premia paid on the reviewed set of deals was 29.1% and 27.6% to their 1-day closing price after announcement, 30.7% and 30.1% to their 1-week closing price after announcement, and 42.3% and 35.7% to their 4-weeks closing price after announcement, respectively. The transaction price of $48.00 represented a 28.0% premium to Arbitron’s closing price 1-day prior to December 14, 2012, 26.0% premium to Arbitron’s closing price 1-week prior to December 14, 2012, and 34.9% premium to Arbitron’s closing price 4-weeks prior to December 14, 2012.

Other Considerations

The preparation of a fairness opinion is a complex process and involves various judgments and determinations as to the most appropriate and relevant valuation and financial analyses and the application of those methods to the particular circumstances involved. A fairness opinion therefore is not readily susceptible to partial analysis or summary description, and taking portions of the valuation and financial analyses set out above, without considering such analysis as a whole, would in the view of Guggenheim Securities create an incomplete and misleading picture of the processes underlying the valuation and financial analyses considered in rendering Guggenheim Securities’ opinion.

In arriving at its opinion, Guggenheim Securities:

 

   

based its valuation and financial analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions, capital markets considerations and industry-specific and company-specific factors, all of which are beyond the control of Arbitron, Nielsen and Guggenheim Securities;

 

   

did not form a view or opinion as to whether any individual analysis or factor, whether positive or negative, considered in isolation, supported or failed to support its opinion;

 

   

considered the results of all of its valuation and financial analyses and did not attribute any particular weight to any one analysis or factor; and

 

   

ultimately arrived at its opinion based on the results of all of its valuation and financial analyses assessed as a whole and believes that the totality of the factors considered and the various valuation and financial analyses performed by Guggenheim Securities in connection with its opinion operated collectively to support its determination as to the fairness, from a financial point of view, of the sale price to be received by the stockholders of Arbitron pursuant to the merger.

Guggenheim Securities also noted that:

 

   

The valuation and financial analyses performed by Guggenheim Securities, particularly those based on estimates and the Projections, are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by these analyses.

 

   

None of the selected publicly traded companies used in the peer group trading analysis described above are identical or directly comparable to Arbitron, and none of the selected precedent merger and acquisition transactions used in the precedent merger and acquisitions transactions analysis described above are identical or directly comparable to the merger (including as a result of differences in projected growth and risk); however, such companies and transactions were selected by Guggenheim Securities, among other

 

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reasons, because they represented or involved target companies which may be considered broadly similar, for purposes of Guggenheim Securities’ valuation analyses, to Arbitron based on their media measurement businesses;

 

   

In any event, peer group trading analysis and precedent merger and acquisition transactions analysis are not mathematical; rather, such analyses involve complex considerations and judgments concerning the differences in business, financial, operating and capital markets-related characteristics and other factors regarding the peer group companies and precedent merger and acquisition transactions to which Arbitron and the merger transaction were compared.

 

   

The valuation and financial analyses performed by Guggenheim Securities do not purport to be appraisals or to reflect the prices at which any securities may trade at the present time or at any time in the future.

Arbitron did not provide specific instructions to, or place any limitations on, Guggenheim Securities with respect to the procedures to be followed or factors to be considered in performing its valuation and financial analyses or providing its opinion. The type and amount of consideration payable in the merger were determined through negotiations between Arbitron and Nielsen and were approved by the board of directors. The decision to enter into the merger agreement was solely that of the board of directors. Guggenheim Securities’ opinion was just one of the many factors taken into consideration by the board of directors. Consequently, Guggenheim Securities’ valuation and financial analyses should not be viewed as determinative of the decision of the board of directors with respect to the fairness, from a financial point of view, of the sale price pursuant to the merger.

Pursuant to the terms of Guggenheim Securities’ engagement letter, Arbitron has agreed to pay Guggenheim Securities a transaction fee equal to 1.0% of the aggregate consideration in the merger, all but $2.0 million of which is payable upon successful consummation of the merger; Guggenheim Securities received $2.0 million upon delivery of its fairness opinion, which will be credited against the fee payable upon consummation of the merger. In addition, Arbitron has agreed to reimburse Guggenheim Securities for certain expenses and to indemnify it against certain liabilities arising out of its engagement.

Guggenheim Securities’ engagement letter also provides that, at any given time, Guggenheim Securities and/or its affiliates may be engaged by any potential acquirer of the Company or one or more entities that may be competitors with, or otherwise adverse to, the Company in connection with matters unrelated to a potential transaction, but during the term of this engagement, neither Guggenheim Securities nor its affiliates (a) will act as financial advisor to any potential acquirer with respect to such potential acquirer’s involvement in connection with a potential transaction, and (b) without the Company’s prior written consent, will provide or arrange financing for a potential acquirer with respect to such party’s potential transaction with the Company.

Guggenheim Securities has not served as a financial advisor or investment banker to, or a potential financing source for, any potential strategic, financial or other third parties solicited in connection with the solicitation process, and Guggenheim Securities is not assisting Nielsen in financing the merger. However, Guggenheim Securities previously has been engaged by Nielsen and its affiliates to provide certain investment banking and/or financial advisory services in connection with matters unrelated to the merger, for which Guggenheim Securities has received customary fees and compensation. Specifically in the past two years, Guggenheim Securities has been engaged as an underwriter in Nielsen’s initial public offering and concurrent offering of 6.25% Mandatory Convertible Subordinated Bonds due 2013 for which it received underwriting fees of $2.0 million and a subsequent secondary offering of common stock for which Guggenheim Securities received underwriting fees of $0.9 million. Guggenheim Securities may seek to provide Nielsen and its affiliates with certain investment banking and financial advisory services unrelated to the merger. Guggenheim Securities has not provided investment banking and/or financial advisory services to Arbitron in the last two years other than in connection with the merger.

Guggenheim Securities and its affiliates engage in a wide range of financial services activities for their own accounts and the accounts of customers, including asset and investment management, investment banking, corporate finance, mergers and acquisitions, restructuring, merchant banking, fixed income and equity sales, trading and research, derivatives, foreign exchange and futures. In the ordinary course of these activities, Guggenheim Securities or its affiliates may (1) provide such financial services to Arbitron, Nielsen, or their

 

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respective affiliates, shareholders, subsidiaries, investment funds and portfolio companies for which services Guggenheim Securities or certain of its affiliates has received, and may receive, compensation and (2) directly or indirectly, hold long or short positions, trade and otherwise conduct such activities in or with respect to certain debt or equity securities, bank debt and derivative products of or relating to Arbitron, Nielsen or their respective affiliates, shareholders, subsidiaries, investment funds and portfolio companies. Furthermore, Guggenheim Securities’ affiliates, directors, officers and employees may have investments in Arbitron, Nielsen or their respective affiliates, shareholders, subsidiaries, investment funds and portfolio companies.

Consistent with applicable legal and regulatory guidelines, Guggenheim Securities has adopted certain policies and procedures to establish and maintain the independence of its research departments and personnel. As a result, Guggenheim Securities’ research analysts may hold views, make statements or investment recommendations and publish research reports with respect to Arbitron, Nielsen, other participants in the industry in which Arbitron operates or their respective affiliates, shareholders, subsidiaries, investment funds and portfolio companies and the merger that differ from the views of Guggenheim Securities’ investment banking personnel.

Opinion of Signal Hill

The Company engaged Signal Hill to act as its co-financial advisor with respect to a possible sale of the Company. On December 17, 2012, Signal Hill rendered its oral opinion (which was subsequently confirmed in writing) to our board that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be received by the holders of Company common stock is fair, from a financial point of view, to such holders.

The full text of Signal Hill’s written opinion, dated as of December 17, 2012, is attached as Annex B-2 to this proxy statement. Signal Hill’s written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Signal Hill in rendering its opinion. You are encouraged to read Signal Hill’s opinion carefully in its entirety. The following is a summary of Signal Hill’s opinion and the methodology that Signal Hill used to render its opinion. This summary is qualified in its entirety by reference to the full text of Signal Hill’s opinion.

Signal Hill’s opinion, the issuance of which was approved by Signal Hill’s Fairness Opinion Committee, was provided at the request of and for the information of our board. Signal Hill’s opinion is limited to the fairness, from a financial point of view, of the consideration to be received by holders of Company common stock. Signal Hill does not express an opinion as to the merits of the underlying decision by the Company to enter into the merger agreement and engage in the merger or to the relative merits of the merger as compared to any alternative business transaction or strategy. Signal Hill’s opinion is not a recommendation to the holders of the Company common stock to approve the merger. Signal Hill did not recommend any specific form of consideration to the Company or that any specific form of consideration constituted the only appropriate consideration for the merger. In addition, Signal Hill expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the consideration to be offered to the holders of Company common stock in the merger.

In arriving at its opinion, Signal Hill, among other things:

 

   

reviewed the terms of a draft merger agreement dated December 17, 2012;

 

   

reviewed certain publicly available financial and other information concerning the Company and Nielsen and certain internal analyses and other information furnished to Signal Hill by the Company;

 

   

reviewed and analyzed the Projections furnished to Signal Hill by the Company (as more fully described in “— Prospective Financial Information” beginning on page 33), including Management Case 1 and Management Case 2 (each as more fully described in “— Prospective Financial Information” beginning on page 33);

 

   

reviewed the reported prices and trading activity for Arbitron’s common stock;

 

   

compared certain financial and stock market information for the Company with similar information for certain other companies whose securities are publicly traded;

 

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reviewed the financial terms of certain recent business combinations that Signal Hill deemed comparable in whole or in part;

 

   

reviewed the discounted unlevered projected free cash flows of the Company on a standalone basis;

 

   

reviewed premiums paid for acquisitions of other companies whose securities are publicly-traded;

 

   

had discussions with the members of the senior management of the Company regarding the business and prospects of the Company; and

 

   

performed such other studies and analyses and considered such other factors as Signal Hill deemed appropriate.

Signal Hill relied on the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of rendering its opinion. Signal Hill has not conducted a physical inspection of any of the properties or assets of the Company, and has not prepared or obtained any independent evaluation or appraisal of any of the assets or liabilities of the Company. With respect to the Projections, Signal Hill assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company, including management’s adjustments to reflect different possible growth and margin scenarios. In rendering its opinion, Signal Hill expressed no view as to the reasonableness of the Projections or the assumptions on which they are based. Signal Hill has not independently verified the information supplied to it by the Company or its representatives. Signal Hill’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available as of, December 17, 2012. Signal Hill’s opinion also took into account its assessment of general economic, market and financial conditions, as well as Signal Hill’s experience in securities and business valuation, in general, and with respect to similar transactions, in particular. Signal Hill assumed no responsibility for updating, revising or reaffirming its opinion based on events or circumstances that may have occurred after December 17, 2012.

Signal Hill assumed that, in all respects material to its analysis, the representations and warranties of the Company, Nielsen, and Merger Sub contained in the merger agreement are true and correct, the Company, Nielsen, and Merger Sub will each perform all of the covenants and agreements to be performed by it under the merger agreement and all conditions to the obligations of each of the Company, Nielsen, and Merger Sub to consummate the merger will be satisfied without any waiver thereof. Signal Hill also assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the merger will be obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents, no limitations, restrictions, or conditions will be imposed that would have a material adverse effect on the Company or Nielsen. Signal Hill did not express any opinion as to any tax or other consequences that might result from the merger, nor did its opinion address any legal, tax, regulatory or accounting matters, as to which Signal Hill understands that the Company has obtained such advice as it deemed necessary from qualified professionals.

In connection with rendering its opinion, Signal Hill performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Signal Hill did not ascribe a specific range of values to the Company common stock but rather made its determination as to fairness, from a financial point of view, to the holders of Company common stock of the consideration to be offered to such holders in the merger on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

In arriving at its opinion, Signal Hill did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Signal Hill believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

 

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The following is a summary of the material financial analyses used by Signal Hill in preparing its opinion for our board. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Signal Hill, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. In performing its analyses, Signal Hill made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the merger. None of the Company, Nielsen, Merger Sub, Signal Hill or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold.

Historical Share Price Analysis

To illustrate the trend in the historical trading prices of the Company common stock, Signal Hill considered historical data with regard to the trading prices of the Company common stock for the period from December 15, 2011 to December 14, 2012, which represented the trailing twelve-month period when Signal Hill presented its opinion to the board of directors. Signal Hill noted that during this period, the price of the Company common stock ranged from $32.34 to $39.98.

Selected Comparable Company Analysis

In order to assess how the public market values shares of similar publicly traded companies, Signal Hill reviewed and compared specific financial and operating data relating to the Company with selected companies that Signal Hill, based on its experience, deemed comparable to the Company. The selected comparable measurement and information services companies were:

 

   

comScore, Inc.

 

   

Dun & Bradstreet Corp.

 

   

Forrester Research Inc.

 

   

Gartner Inc.

 

   

GfK SE

 

   

Ipsos SA

 

   

The McGraw-Hill Companies

 

   

Moody’s Corp.

 

   

MSCI Inc.

 

   

Nielsen Holdings N.V.

 

   

Thomson Reuters Corp.

 

   

WPP plc

Signal Hill calculated and compared various financial multiples and ratios of the Company and the selected comparable companies. As part of its selected comparable company analysis, Signal Hill calculated and analyzed each company’s enterprise value to certain projected financial criteria (such as revenue, and earnings before interest, taxes, depreciation and amortization, and non-cash stock-based compensation (“Adjusted EBITDA”)). The enterprise value of each company was obtained by adding its short and long-term debt to the sum of the market value of its common equity, the book value of any minority interest, and subtracting its cash and cash equivalents. Adjusted EBITDA for the Company also included equity in net income of affiliates. All of these calculations were performed, and based on publicly available financial data and closing prices, as of December 14, 2012, the last trading date prior to the delivery of Signal Hill’s opinion. The following table summarizes the results of these calculations.

 

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Comparable Measurement and Information Services Companies

   Enterprise Value / Calendar
Year 2012E Adjusted
EBITDA
 

comScore, Inc.

     10.4x   

Dun & Bradstreet Corp.

     7.7x   

Forrester Research Inc.

     7.5x   

Gartner Inc.

     12.7x   

GfK SE

     7.8x   

Ipsos SA

     9.5x   

The McGraw-Hill Companies

     8.6x   

Moody’s Corp.

     9.1x   

MSCI Inc.

     9.1x   

Nielsen Holdings N.V.

     10.7x   

Thomson Reuters Corp.

     8.5x   

WPP plc

     8.3x   

 

     Measurement
and Information
Services
 
     Mean      Median  

Enterprise Value / Calendar Year 2012E Adjusted EBITDA

     9.1x         8.8x   

Signal Hill selected the comparable companies listed above because of similarities to the Company in one or more business, operating or end-market characteristics. However, because no selected comparable company is exactly the same as the Company, Signal Hill believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Signal Hill also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, sector overlaps, growth prospects, profitability levels and degree of operational risk between the Company and the companies included in the selected company analysis. Based upon these judgments, Signal Hill selected a range of 8.0x to 9.0x multiples of calendar year 2012 estimated enterprise value/adjusted EBITDA and applied such ranges to Management Case 1 to calculate a range of implied prices per share of the Company common stock of $42.66 to $47.52.

Signal Hill noted that on the basis of the selected comparable company analysis, the transaction consideration of $48.00 per share was above the range of implied values per share calculated on a standalone basis using the calendar year 2012 estimated enterprise value/Adjusted EBITDA comparable company analysis.

Research Analyst Price Targets

Signal Hill evaluated the publicly available price targets for the Company common stock published by independent equity research analysts following the Company’s third quarter earnings call on October 24, 2012. The independent equity research analyst target prices ranged from $37.00 to $47.00 per share. Signal Hill noted that the transaction consideration of $48.00 per share was above the range of price targets per share published by the independent equity research analysts.

Selected Precedent Transaction Analysis

Signal Hill reviewed and compared the purchase prices and financial multiples paid in selected other transactions that Signal Hill, based on its experience with merger and acquisition transactions, deemed relevant. Signal Hill chose such transactions based on, among other things, the similarity of the applicable target companies in the transactions to the Company with respect to the size, mix, margins and other characteristics of their businesses.

 

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The reasons for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse, and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected precedent transaction analysis. Accordingly, Signal Hill believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the merger. Signal Hill therefore made qualitative judgments concerning differences between the characteristics of the selected precedent transactions and the merger which would affect the acquisition values of the selected target companies and the Company. Based upon these judgments, Signal Hill selected a range of 8.0x to 9.0x the last twelve months (“LTM”) Adjusted EBITDA and applied such range to the Company’s LTM September 30, 2012 Adjusted EBITDA to calculate a range of implied prices per share of the Company common stock of $42.12 to $46.91 per share. The following table sets forth the transactions analyzed based on such characteristics:

Precedent Measurement and Information Services Transactions

 

Announcement Date

   Acquirer    Target    Transaction
Enterprise
Value
(in millions)
     Transaction
Enterprise
Value / LTM
Adj. EBITDA
 

February 17, 2012

   Advent
International and
GS Capital Partners
   TransUnion Corp.    $ 3,178.4         9.0x   

July 27, 2011

   Ipsos SA    Synovate    £ 525.0         8.5x   

February 14, 2011

   Eurovestech, Invesco
and Velinvest
   Toluna plc    £ 147.8         7.4x   

July 29, 2010

   Aegis Group plc    Mitchell Communication

Group Limited

     AUD 321.4         9.2x   

November 5, 2009

   CPP Investment
Board and TPG
Capital
   IMS Health Inc.    $ 5,178.5         8.7x   

October 23, 2009

   e-Rewards, Inc.    Research Now plc    £ 79.2         7.2x   

July 2, 2008

   WPP Group    Taylor Nelson Sofres plc    £ 1,584.3         9.8x   

August 4, 2006

   infoUSA Inc.    Opinion Research Group    $ 125.0         8.3x   

Enterprise Value as a Multiple of LTM Adjusted EBITDA:

 

     Mean      Median  

Precedent Measurement and Information Services Transactions

     8.5x         8.6x   

Signal Hill noted that on the basis of the selected precedent transaction analysis, the transaction consideration of $48.00 per share was above the range of implied values per share calculated based on the selected precedent transaction analysis.

 

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Transaction Premium Analysis

In order to assess the premium offered to the holders of Company common stock in the merger relative to the premiums offered to stockholders in other transactions, Signal Hill reviewed the premium paid in all-cash transactions of companies having an equity value ranging from $500 million to $2.0 billion announced from 2010 to 2012. For each transaction, Signal Hill calculated the premium per share paid by the acquirer by comparing the announced transaction value per share to the target company’s volume weighted average price (“VWAP”) (a) one day prior to announcement; (b) five days prior to announcement; and (c) twenty days prior to announcement. The results of this transaction premium analysis are summarized below:

Percentage Premium to the VWAP Prior to Transaction Announcement

100% Cash Transactions between $500M and $2.0B since 2010

 

     1-Day     5-Day     20-Day  

Median

     23.7     26.3     31.0

 

     1-Day      5-Day      20-Day  

Implied Share Price applying Median Premium to VWAP of the Company (12/14/12)

   $ 46.36       $ 47.94       $ 48.29   

The reasons for and the circumstances surrounding each of the transactions analyzed in the transaction premium analysis were diverse, and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the transaction premium analysis. Signal Hill noted that the transaction consideration of $48.00 per share was within the range of implied values per share calculated in the transaction premium analysis.

Discounted Cash Flow Analysis

In order to estimate the present value of the Company common stock, Signal Hill performed three separate discounted cash flow (“DCF”) analyses: (a) consolidated DCF using Management Case 1; (b) sum-of-the-parts DCF using Management Case 1; and (c) consolidated DCF using Management Case 2. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

To calculate the estimated enterprise value of the Company using the discounted cash flow method for each of the three scenarios, Signal Hill added (a) projected after-tax unlevered free cash flows for fiscal years 2013 through 2017 to (b) the “terminal value” of the Company as of the end of 2017, and discounted such amounts to their present value using a range of selected discount rates, in each case for each of the three scenarios. The after-tax unlevered free cash flows were calculated by taking the Company’s projected earnings before interest and taxes, minus taxes (using a marginal tax rate of 38.5%) plus depreciation and amortization, minus capital expenditures and change in working capital. The residual value of the Company at the end of the forecast period, or “terminal value,” was estimated by applying a range of perpetual growth rates of 2.0% to 4.0% to the Projections in each of the three scenarios. Based on an analysis of the weighted average cost of capital of the Company, the range of after-tax discount rates of 11.0% to 13.0% was selected for the consolidated DCFs using Management Case 1 and Management Case 2. This range was selected based on, among other inputs, an equity cost of capital of 11.8%, which was derived using a capital asset pricing model which took into account certain financial metrics, including betas from the selected comparable companies, a size risk premium of 1.8% obtained from Ibbotson Associates, which was deemed applicable to companies with market capitalization between $1.1 billion and $1.6 billion, as well as certain financial metrics from the United States financial markets generally. The following table shows the betas for the selected comparable companies.

 

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Comparable Measurement and Information Services Companies

   Beta  

comScore, Inc.

     1.76   

Dun & Bradstreet Corp.

     0.90   

Forrester Research Inc.

     0.53   

Gartner Inc.

     0.89   

Gfk SE

     0.62   

Ipsos SA

     0.74   

The McGraw-Hill Companies, Inc.

     0.91   

Moody’s Corp.

     1.45   

MSCI Inc.

     0.95   

Nielsen Holdings N.V.

     0.74   

Rentrak Corporation

     2.04   

Thomson Reuters Corporation

     0.57   

WPP plc

     0.90   

Mean

     1.00   

For the sum-of-the-parts DCF using Management Case 1, a range of after-tax discount rates of 11.0% to 13.0% was selected for the Company’s traditional services business and a range of after-tax discount rates of 17.0% to 19.0% was selected for the Company’s new services business. For new services, the range was selected based on, among other inputs, an equity cost of capital of 18.1%, which was derived using a capital asset pricing model which took into account certain financial metrics, including a beta of 1.76 for comScore, Inc. (a comparable company focused on new services), a size risk premium of 3.9% obtained from Ibbotson Associates, which was deemed applicable to companies with market capitalization between $1.0 million and $422.8 million, as well as certain financial metrics from the United States financial markets generally. Signal Hill then calculated a range of implied prices per share of the Company by subtracting net debt as of September 30, 2012 from the estimated enterprise value using the discounted cash flow method and dividing such amount by the fully diluted number of shares of Company common stock.

The discounted cash flow analysis based on (a) the consolidated DCF using Management Case 1 implied an equity value range for the Company of $36.31 to $52.88 per share; (b) the sum-of-the-parts DCF using Management Case 1 implied an equity value range for the Company of $33.78 to $47.91 per share; and (c) the consolidated DCF using Management Case 2 implied an equity value range for the Company of $31.40 to $45.23 per share. Signal Hill noted that on the basis of the discounted cash flow analysis, the transaction consideration of $48.00 per share was (a) within the range of implied values per share calculated in the consolidated DCF using Management Case 1; (b) above the range of implied values per share calculated in the sum-of-the-parts DCF using Management Case 1; and (c) above the range of implied values per share calculated in the consolidated DCF using Management Case 2.

Leveraged Buyout Analysis

Signal Hill performed a leveraged buyout analysis based on Management Case 2 in order to ascertain a price for the Company common stock which might be achieved in a leveraged transaction with a financial buyer based upon current market conditions. Signal Hill assumed the following in its analysis based on Management Case 2: (a) an equity investment that would achieve a rate of return of between 20% and 25%; (b) a 2017 exit multiple of 8.5x; and (c) transaction leverage of 6.0x estimated calendar year 2012 Adjusted EBITDA. Based upon these assumptions, Signal Hill calculated a range of implied prices per share of the Company common stock of $43.15 to $45.80.

Signal Hill noted that on the basis of the leveraged buyout analysis, the transaction consideration of $48.00 per share was above the range of implied values per share calculated using Management Case 2.

 

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General

Signal Hill is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, private placements, corporate and other purposes. The Company’s board of directors selected Signal Hill because of its familiarity with the Company and its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as experience in transactions comparable to the merger.

Signal Hill’s engagement letter also provides that (1) at any given time, Signal Hill may have and may continue to have investment banking, financial advisory and other relationships with parties other than the Company pursuant to which Signal Hill may acquire information of interest to the Company, but that Signal Hill shall have no obligation to disclose such information to the Company or to use such information in the preparation of its opinion and (2) during the term of its engagement, (a) neither Signal Hill nor its affiliates will provide investment banking or financial advisory services to, or enter into any other relationship with, any potential acquirer with respect to such potential acquirer’s involvement in connection with a potential transaction, and (b) neither Signal Hill nor its affiliates, without the Company’s prior written consent, will provide or arrange financing for a potential acquirer with respect to such party’s potential transaction with the Company.

Signal Hill is acting as co-financial advisor to the Company in connection with the merger. As compensation for its services in connection with the merger, a fee of $1.0 million is payable to Signal Hill for the delivery of its opinion. Additional compensation of $1.5 million will be payable subject to completion of the merger. In addition, the Company has agreed to reimburse Signal Hill for its reasonable out of pocket expenses incurred in connection with the merger and to indemnify Signal Hill for certain liabilities that may arise out of its engagement by the Company and the rendering of Signal Hill’s opinion. Since 2007, Signal Hill was engaged on a retainer basis to provide advisory services generally as requested from time to time by the Company but was not engaged to advise on, and receive fees for, a particular transaction until Signal Hill was engaged on December 7, 2012 to assist the Company in considering its strategic options, including the transaction contemplated by the merger agreement. No prior material relationship has existed between Signal Hill and the Company or any party to the merger agreement that is the subject of the opinion. Signal Hill is not presently and never has been engaged by Nielsen to provide investment banking or financial advisory services.

Financing of the Merger

We anticipate that the total amount of funds necessary to complete the merger and related transactions and pay related transaction fees and expenses will be approximately $1.3 billion. Prior to our execution of the merger agreement, Nielsen obtained, and provided a copy to us of, a debt commitment letter, which we refer to as the commitment letter, in connection with the transactions contemplated by the merger agreement in a maximum aggregate amount of approximately $1.3 billion. Nielsen and Merger Sub have represented that with the net proceeds contemplated by the commitment letter together with the other financial resources of Nielsen, including the cash on hand of Nielsen and the Company, Nielsen and Merger Sub will have sufficient funds to pay the merger consideration to our stockholders, to satisfy all of Nielsen’s obligations under the merger agreement and to pay fees and expenses required to be paid by Nielsen in connection with the merger agreement.

The merger is not subject to a financing condition. However, we cannot assure you that the amounts provided by the financing contemplated by the commitment letter will be sufficient to complete the merger. These amounts may be insufficient if, among other things, the parties to the commitment letter fail to fulfill their obligations under the commitment letter or if the conditions to such commitments are not met. Although obtaining the financing is not a condition to the completion of the merger, the failure of Nielsen and Merger Sub to obtain sufficient financing may result in the failure of the merger to be completed.

The financing is subject to customary terms and conditions, including, among others: the absence of a Company Material Adverse Effect (as defined in the merger agreement).

 

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Nielsen has agreed to use its reasonable best efforts to obtain the financing on the terms and conditions described in the commitment letter. In addition, Nielsen has agreed not to permit any amendment, supplement or other modification to or waiver of any provision under or replacement of, the commitment letter if, subject to certain exceptions, such amendment, supplement, modification, waiver or replacement:

 

   

imposes additional conditions to the receipt of the financing, in a manner that could reasonably be expected to prevent or materially delay the consummation of the merger; or

 

   

reduces the aggregate amount of the financing to an amount below the amount that is required, together with the financial resources of Nielsen and Merger Sub, including cash on hand of Nielsen and Arbitron, to consummate the merger.

If any portion of the financing becomes unavailable and is reasonably required (taking into account cash on hand and other financial resources available to Nielsen) to fund the merger consideration, Nielsen has agreed to use its reasonable best efforts to arrange and obtain sufficient alternative financing in an amount sufficient to consummate the transactions as promptly as reasonably practicable.

Interests of Executive Officers and Directors in the Merger

In considering the recommendation of our board of directors with respect to the transaction, you should be aware that our executive officers and directors may have interests in the transactions contemplated by the merger agreement that are different from, or in addition to, those of our stockholders generally. Our board was aware of these interests and considered them, among other matters, in reaching its decisions to approve the merger agreement and the merger and the transactions contemplated by the merger agreement, and to recommend that you vote “FOR” the adoption of the merger agreement (Proposal No. 1) and “FOR” the approval, on an advisory (non-binding) basis, of the “golden parachute” compensation arrangements that may be paid or become payable to our named executive officers in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable (Proposal No. 3).

Treatment of Outstanding Stock Options, Deferred Stock Units and Restricted Stock Units

Stock Options

The merger agreement generally provides that each Arbitron stock option that is outstanding immediately before the effective time of the merger, whether vested or unvested, will be converted into the right to receive a cash payment equal to (1) the excess, if any, of $48.00, over the per share exercise price of the stock option, multiplied by (2) the number of shares subject to the stock option. Some stock option agreements that govern outstanding Arbitron stock options additionally require that if the fair value of the stock option, determined at the time of a change in control transaction using a Black-Scholes valuation methodology and assumptions specified in the stock option agreements, exceeds the cashout amount described in the prior sentence, then the excess amount will be paid to the option holder in addition to the cashout amount. Consistent with these stock option agreements, the merger agreement provides for such additional cash payments to be made to the holders of these stock options.

Restricted Stock Units and Deferred Stock Units

The merger agreement also provides that, except for RSU awards granted after the date of the merger agreement, the treatment of which is described separately below, each RSU and each DSU, whether vested or unvested, and whether or not subject to performance-based vesting conditions, that is outstanding immediately before the effective time of the merger will be canceled in exchange for a cash payment of $48.00 for each share of Arbitron common stock subject to the RSU or DSU.

RSUs granted after the date of the merger agreement will be treated differently. With respect to RSUs granted after the date of the merger agreement to any newly-hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case, if granted in accordance with the limitations in the merger agreement relating to RSU grants between the date of the merger agreement and the

 

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effective time of the merger, any portion of the RSU that is not vested as of the effective time of the merger will not vest or be cashed out in connection with the merger, but will, instead, be assumed by Nielsen. Each such assumed RSU will otherwise continue to have, and remain subject to, the same terms and conditions to which the award was subject immediately before the effective time of the merger, including any vesting or forfeiture provisions or repurchase rights, except that the number of shares subject to the award will be adjusted to reflect the difference in Arbitron’s and Nielsen’s common stock values at the time of the merger. Specifically, after being assumed, the RSU will cover a number of whole shares of Nielsen common stock equal to the product of (1) the number of shares of Arbitron common stock subject to the RSU immediately before the effective time of the merger, multiplied by (2) the quotient of (x) $48.00 divided by (y) the closing price for one share of Nielsen common stock on the close of business on the business day immediately before the effective time of the merger, with such resulting number of shares rounded down to the nearest whole number of shares. We refer to this quotient in the following paragraph as the “exchange ratio.”

With respect to all other RSUs granted after the date of the merger agreement, part of the RSU will be cancelled in exchange for a cash payment and part of the RSU will be assumed by Nielsen. Specifically, with respect to 50% of the number of shares of Arbitron common stock subject to the RSU when originally granted, which we refer to as the “assumed portion,” the RSU will be assumed by Nielsen, as described below in this paragraph. With respect to any remaining portion of the RSU that is outstanding at the effective time of the merger, such portion will be canceled in exchange for a cash payment of $48.00 for each share of Arbitron common stock covered by such remaining portion of the award. Except as noted below in this paragraph, the assumed portion of the RSUs will continue to have, and remain subject to, the same terms and conditions to which the award was subject immediately before the effective time of the merger, including any vesting or forfeiture provisions or repurchase rights, except that the number of shares subject to the award will be adjusted to reflect the difference in Arbitron’s and Nielsen’s common stock values at the effective time of the merger. Consistent with the approach described in the prior paragraph, the number of shares of Nielsen common stock to which the assumed awards will relate after being assumed will be determined by multiplying the number of whole shares of Arbitron common stock subject to the assumed portion of the RSU, by the exchange ratio. The number of shares of Nielsen common stock with respect to which the assumed RSU will vest on each subsequent vesting date will be determined by dividing the total number of shares of Nielsen common stock subject to the award by the remaining number of vesting dates under the award after the effective time of the merger.

The merger agreement also provides for the cashout of restricted stock awards outstanding as of the effective time of the merger, but there are currently no restricted stock awards outstanding.

All of the cash payments to be made with respect to Arbitron stock options, RSUs and DSUs will be made within five business days following the effective time of the merger and without interest.

 

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The following table shows the cash payments that each Arbitron director and executive officer is expected to receive pursuant to the merger agreement with respect to his or her vested and unvested stock options, RSUs and DSUs. The amounts in the table are based on the awards held by our executive officers and directors as of March 8, 2013, and the $48.00 per share merger consideration. Mr. Kerr’s awards were granted to him in his capacity as an executive officer. Mr. Kerr retired as our chief executive officer effective on January 1, 2013, but remains a member of our board of directors.

 

Name

   Vested
Stock
Options ($)
     Unvested Stock
Options ($)
     Unvested
Restricted
Stock Units
($)
     Vested
Deferred
Stock Units
($)
     Unvested
Deferred
Stock Units
($)
     Total
Equity
Award
Cancellation
Payment ($)
 

Directors (other than Mr. Creamer)

                 

Shellye L. Archambeau

     1,102,293                 135,360         328,753         133,440         1,699,846   

David W. Devonshire

     769,762                         157,581         268,800         1,196,143   

John A. Dimling

                             417,470         268,800         686,270   

Erica Farber

     211,362                         370,278         286,032         867,672   

Ronald G. Garriques

                     135,360         75,614         144,000         354,974   

Philip Guarascio

     1,165,774                         408,662         268,800         1,843,236   

William T. Kerr

     3,711,582                         3,941,190                 7,652,772   

Larry E. Kittelberger

     227,646                         1,272,404         268,800         1,768,850   

Luis G. Nogales

     672,429                         542,864         268,800         1,484,093   

Richard A. Post

     227,646                         763,325         268,800         1,259,771   

Executive Officers

                 

Sean R. Creamer

     3,931,170         645,058         1,860,336                         6,436,564   

Debra Delman

             219,831         433,296                         653,127   

Timothy T. Smith

     2,390,491         219,578         1,382,400                         3,992,469   

Manish Bhatia

             131,894         559,104                         690,998   

Carol Hanley

     834,550         147,414         523,920                         1,505,884   

Scott Henry

     546,603         205,918         707,232                         1,459,753   

Marilou Legge

     1,004,906         112,333         415,392                         1,532,631   

Gregg Lindner

     114,569         167,491         724,464                         1,006,524   

Steven M. Smith

     527,327         95,614         447,888                         1,070,829   

 

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The following table relates to RSUs granted to our executive officers and directors after the date of the merger agreement that will be assumed by Nielsen if the award is outstanding at the effective time of the merger. The table shows, for each executive officer and director, the number of shares of Arbitron common stock subject to such RSUs, or portion of such RSUs, that are expected to be assumed by Nielsen, as described above, and the number of shares of Nielsen common stock that would be subject to the RSU immediately after the assumption. The information in the table is based on RSUs held by our executive officers and directors as of March 8, 2013, and assumes the closing date occurs between March 8, 2013 and March 31, 2013. If the closing occurs after March 31, 2013, a portion of these awards will have vested in accordance with their regular quarterly vesting schedule and will, therefore, not be assumed. The number of shares of Nielsen common stock reflected in the table was determined by applying the exchange ratio described above, and, in applying the exchange ratio, using a $34.89 per share value for Nielsen’s common stock, which is based on the closing price of Nielsen’s common stock on March 8, 2013. The actual exchange ratio will be based on the closing price of Nielsen’s common stock on the last business day immediately before the effective time of the merger.

Restricted Stock Units to be assumed by Nielsen

 

Name

   Arbitron
Shares
     Nielsen
Shares
 

Directors (other than Mr. Creamer)

     

Shellye L. Archambeau

               

David W. Devonshire

               

John A. Dimling

               

Erica Farber

               

Ronald G. Garriques

               

Philip Guarascio

               

William T. Kerr

               

Larry E. Kittelberger

               

Luis G. Nogales

               

Richard A. Post

               

Executive Officers

     

Sean R. Creamer

     15,532         21,368   

Debra Delman

     2,140         2,944   

Timothy T. Smith

     7,383         10,157   

Manish Bhatia

     2,006         2,760   

Carol Hanley

     4,023         5,534   

Scott Henry

     4,516         6,213   

Marilou Legge

     3,264         4,490   

Gregg Lindner

     4,248         5,844   

Steven M. Smith

     3,478         4,785   

Executive Retention Agreements

Arbitron is party to executive retention agreements with each of the executive officers listed in the tables immediately above. These agreements provide for severance payments and benefits, including accelerated vesting of stock-based awards, upon qualifying terminations of employment that occur within a limited period following a change in control and, solely with respect to Mr. Creamer’s agreement, if the termination is by Arbitron without cause in anticipation of a change in control. These agreements also provide for lesser severance payments and benefits following qualifying terminations not in connection with a change in control. The merger will constitute a change in control for purposes of these agreements, and these agreements will be assumed by Nielsen in connection with the merger.

 

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Except as noted below, the material terms of these agreements are substantially similar. As noted in the following description of these agreements, Mr. Creamer’s agreement, which was entered into on December 13, 2012 in connection with his promotion to president and chief executive officer of Arbitron, contains some terms that differ from the terms of the other executive officers’ agreements, including the window period during which he may receive enhanced change in control severance, as noted above, and how his severance is calculated and paid, which are described below.

These agreements only provide for severance, whether or not in connection with a change in control, if the executive experiences a qualifying termination. For purposes of these agreements, a qualifying termination means a termination by the company without cause, and not due to the executive’s death or disability, or a termination by the executive within specified periods following a constructive termination event. For purposes of these agreements other than Mr. Creamer’s agreement, the constructive termination events, which are referred to in the agreements as “position diminishment” events, include (1) a change in the executive’s reporting responsibilities, titles, duties, or offices, or any removal of executive from, or any failure to re-elect executive to, such positions, that has the effect of materially diminishing executive’s responsibility, duties, or authority, (2) a relocation of the executive’s principal place of employment to a location more than 25 miles from its then current location and that increases the distance from executive’s primary residence by more than 25 miles, and (3) a material reduction in executive’s annual salary.

In Mr. Creamer’s agreement, the constructive termination events, which are referred to in his agreement as “good reason” events, include (1) a material reduction in Mr. Creamer’s authority, duties or responsibilities, (2) a material reduction in Mr. Creamer’s base salary or target bonus, other than reductions that are generally applicable to the senior management team, (3) a relocation of Mr. Creamer’s principal place of employment to a location more than 50 miles from its then current location and that increases the distance from Mr. Creamer’s primary residence by more than 50 miles, (4) failure to obtain the assumption of the agreement by any successor, or (5) any material breach or material violation by Arbitron or any successor to Arbitron of a material provision of the agreement, or of any other material agreement between Mr. Creamer and Arbitron or any successor.

If any of Messrs. Creamer and T. Smith and Mses. Delman and Legge were to terminate his or her employment following the merger, Nielsen has acknowledged the termination would result in a “position diminishment” (and, if applicable, a “good reason” event) for these officers under their respective retention agreements and, as applicable, any Company benefit plan or Company benefit agreement. These executive officers have each separately agreed to remain employed with Nielsen for 90 days following the effective time.

The agreements with Messrs. T. Smith, S. Smith, and Henry and Ms. Hanley provide for enhanced change in control severance payments and benefits if the executive’s qualifying termination occurs within one year following a change in control or, if later, within six months after a constructive termination event that occurs during the one-year period following the change in control. The agreements with Messrs. Lindner and Bhatia and Mses. Delman and Legge provide for enhanced change in control severance payments and benefits if the executive’s qualifying termination occurs within one year following a change in control, with the additional requirement that if the qualifying termination is a termination due to a constructive termination event following a change in control, the executive must complete a post-replacement transition period of the shorter of 90 days or such period as the board of directors requests. Mr. Creamer’s agreement provides for enhanced change in control severance payments and benefits if his employment is terminated either (1) by Arbitron without cause or by Mr. Creamer due to a constructive termination event, in either case, within one year following a change in control, or (2) by Arbitron without cause in anticipation of a change in control.

The executive officers’ agreements other than Mr. Creamer’s provide the following enhanced change in control severance payments and benefits:

 

   

a lump-sum cash payment equal to two years of the executive’s base salary, plus two times the executive’s target bonus for the year of termination;

 

   

a prorated annual bonus, based on the target annual bonus for the year in which the termination occurs, prorated for the partial year of service;

 

   

up to $50,000 for outplacement service;

 

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in the case of Messrs. T. Smith, S. Smith, and Henry and Ms. Hanley, up to 24 months of 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 the executive was entitled to on the day before termination of employment;

 

   

in the case of Messrs. Lindner and Bhatia and Mses. Delman and Legge, up to 18 months of employer-equivalent premiums for continuation of health coverage under COBRA to the extent permitted by applicable laws;

 

   

vesting of outstanding stock-based awards; and

 

   

accrued but unpaid salary, vacation pay, unreimbursed business expenses and other amounts owed under the Company’s benefit plans and arrangements.

Mr. Creamer’s agreement provides for the following enhanced change in control severance payments and benefits:

 

   

severance payments, payable in equal installments over 12 months, equal to the sum of (1) twenty-four months of base salary, determined at a rate equal to the greater of (x) Mr. Creamer’s base salary in effect immediately before the change in control, (y) Mr. Creamer’s base salary in effect at the time of the termination, and (z) $580,000, which is Mr. Creamer’s current base salary and (2) an amount equal to Mr. Creamer’s target annual bonus for the year in which the termination occurs, prorated for the partial year of service;

 

   

a lump sum payment equal to two times the greater of Mr. Creamer’s target annual bonus for the year in which the termination occurs or $580,000, which is Mr. Creamer’s current target annual bonus;

 

   

payment by the Company of group health plan continuation coverage premiums for Mr. Creamer and his family for up to 18 months, provided Mr. Creamer elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA;

 

   

vesting of outstanding stock-based awards; and

 

   

accrued but unpaid salary, vacation pay, unreimbursed business expenses and other amounts owed under the Company’s benefit plans and arrangements.

The severance payments and benefits, including vesting of stock-based awards, under the agreements are contingent upon the executive executing, and not revoking, a release of claims. The agreements also include confidentiality, non-competition, non-recruitment, and non-disparagement obligations on the part of the executive. The non-competition and non-recruitment provisions continue for 24 months after a qualifying termination in connection with a change in control for Messrs. S. Smith, T. Smith, Henry and Creamer, and Ms. Hanley and for either 12 or 18 months following other terminations. The non-competition and non-recruitment provisions in the other executive officers’ agreements continue for 12 months after any termination of employment.

To the extent the aggregate payments and benefits paid to the executives, whether under the executive retention agreements or otherwise, constitute “excess parachute payments” for purposes of Sections 280G and 4999 of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the Code, the executive will either have his or her payments and benefits reduced to the highest amount that could be paid without triggering these tax code sections or, if the after-tax amount of the payments and benefits that would be received by the executive if no reduction occurs—taking into account the excise tax imposed on excess parachute payments and all other applicable federal, state and local taxes—would be greater than the amount that would be received if the reduction occurred, the executive will receive all of the payments and benefits without reduction. In no event will the executive be entitled to a tax gross up or other reimbursement for taxes imposed on these payments and benefits.

Performance Cash Award Program

Messrs. Creamer, S. Smith, T. Smith and Henry, and Mses. Hanley and Legge were granted performance-based awards under our long-term performance-based cash incentive program, which we refer to as our performance cash award program, in 2011, each with a three-year performance period. On the date of the merger, these

 

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performance-based awards will convert to time-based awards that will vest and be paid on the third anniversary of the award date, subject to the continued employment of the executive. The value of these awards will be based on performance measured as of the date of the merger, if performance is measurable as of that date, with a maximum value equal to 200% of the target grant amount. If performance is not measurable as of the date of the merger, the value of these awards will be equal to the target grant amount. If the executive is terminated without cause or resigns due to a “good reason” or “position diminishment” event, as each term is used in the executive’s executive retention agreements, discussed in “Proposal No. 1—Adoption of the Merger Agreement—Interests of Executive Officers and Directors in the Merger—Executive Retention Agreements” above, during the twenty four month period following the merger, the unvested cash awards held by the executive will vest and be paid.

Amount of Payments and Benefits

For an estimate of the payments and benefits that would be made under the executive retention agreements and the performance cash award program to our named executive officers, which are Messrs. Creamer, T. Smith, Kerr, Lindner and Surratt and Mses. Delman and Hanley, assuming a change in control and qualifying termination on March 8, 2013, see “Proposal No. 3 — Advisory Vote Regarding Certain Executive Compensation — Golden Parachute Compensation — Amount of Payments and Benefits to Named Executive Officers” below. We estimate that the aggregate amount of the cash payments and benefits that would be made under the executive retention agreements and the performance cash award program to the other executive officers, in the aggregate, assuming a change in control and qualifying termination on March 8, 2013, would be approximately $5,189,893 million.

New Arrangements with Nielsen

Prior to the effective time of the merger, Nielsen may in its discretion initiate negotiations of agreements, arrangements and understandings with our executive officers regarding compensation and benefits and may enter into definitive agreements with our executive officers regarding employment with Nielsen.

Indemnification; Exculpation

The merger agreement provides that certain exculpation, indemnification and advancement of expenses arrangements (or comparable substitutes for such arrangements or a “tail policy”) for Arbitron’s current officers and directors will be continued for six years after the effective time of the merger. In addition, prior to the effective time of the merger, Arbitron may purchase a six-year prepaid “tail” policy on terms and conditions providing substantially equivalent benefits and coverage levels as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by Arbitron and its subsidiaries with respect to matters arising at or prior to the effective time of the merger, so long as the aggregate coverage limit over the term of such policy will not exceed the annual aggregate coverage limit under the Company’s existing directors’ and officers’ liability policy. However, Nielsen will not be required to expend in any one year an amount in excess of 300% of the last annual premium paid by the Company under the directors’ and officers’ insurance prior to the date of the merger agreement, and if the annual premium payable for such insurance coverage exceeds 300% of such amount, Nielsen will maintain the most favorable policies of directors’ and officers’ liability insurance obtainable for an annual premium equal to 300% of such amount.

Section 145 of the DGCL provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may also indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the

 

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corporation by reason of the fact that such person was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition may be paid by the corporation upon receipt of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such officer or director is not entitled to be indemnified by the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director actually and reasonably has incurred. The Company’s Third Amended and Restated Bylaws provide for the indemnification of the Company’s directors and officers to the maximum extent permitted under the law.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:

 

   

transaction from which the director derives an improper personal benefit;

 

   

act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

   

unlawful payment of dividends or redemption of shares; or

 

   

breach of a director’s duty of loyalty to the corporation or its stockholders.

The Company’s certificate of incorporation provides for such limitation of liability to the fullest extent permitted by the DGCL. In addition, the Company has entered into indemnification agreements with certain of its current and former directors and executive officers to, among other things, provide them with the maximum indemnification and advancement of expenses permitted under applicable law, including, to the extent permitted by applicable law, indemnification for expenses, judgments, fines and amounts paid as a result of any lawsuit in which such person is named as a defendant by reason of being a director, officer, employee or agent of the Company.

Appraisal Rights

Under the DGCL, any holder of Arbitron common stock who does not wish to accept the merger consideration provided for in the merger agreement, does not vote in favor of the adoption of the merger agreement, who properly demands appraisal of his, her or its shares and who otherwise complies with the requirements of Section 262 of the DGCL, which we refer to as Section 262, will be entitled to have the “fair value” of his, her or its shares (exclusive of any element of value arising from the accomplishment or expectation of the merger) judicially determined by the Delaware Court of Chancery and paid to the holder in cash (together with interest, if any) in the amount judicially determined by the Delaware Court of Chancery to be the fair value, provided that the holder strictly complies with the provisions of Section 262. The “fair value” of a holder’s shares of Arbitron common stock as determined by the Delaware Court of Chancery may be more or less than, or the same as, the $48.00 per share that such holder is otherwise entitled to receive under the terms of the merger agreement if the merger is completed. These rights are known as appraisal rights. If a holder of shares of Arbitron common stock fails to follow precisely any of the statutory requirements regarding appraisal rights, he, she or it will lose his, her or its appraisal rights.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by the full text of Section 262, which is provided in its entirety as Annex C to this proxy statement . The following summary does not constitute any legal or other advice nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262. All references in this summary to a “holder” or “stockholder” are to the record holder of the shares of Arbitron common

 

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stock as to which appraisal rights are asserted. A person having a beneficial interest in shares of Arbitron common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow properly the steps set forth in Section 262 and summarized below in a timely manner to perfect appraisal rights.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, as in the case of our special meeting, Arbitron, not less than 20 days before the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in such notice a copy of Section 262. This proxy statement constitutes such notice and the applicable statutory provisions of the DGCL are attached to this proxy statement as Annex C, in compliance with the requirements of Section 262. Any stockholder who wishes to exercise appraisal rights or who wishes to preserve the right to do so should carefully review the following discussion and Annex C to this proxy statement. Failure to strictly comply with the procedures specified in Section 262 timely and properly will result in the loss of appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of Arbitron common stock, we believe that stockholders who consider exercising such appraisal rights should seek the advice of legal counsel.

Any holder of Arbitron common stock wishing to exercise appraisal rights under Section 262 must satisfy each of the following conditions:

 

   

as more fully described below, the holder must deliver to us a written demand for appraisal of the holder’s shares of Arbitron common stock before the vote on the adoption of the merger agreement at our special meeting, which demand will be sufficient if it reasonably informs us of the identity of the holder and the holder’s intention to demand the appraisal of the holder’s shares under the DGCL;

 

   

the holder must not vote the holder’s shares of Arbitron common stock in favor of adoption of the merger agreement; a validly submitted proxy which does not contain voting instructions with respect to Proposal No. 1 will, unless revoked, be voted in favor of adoption of the merger agreement and it will constitute a waiver of the stockholder’s right of appraisal and nullify any previously delivered written demand. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must vote against adoption of the merger agreement or abstain from voting on adoption of the merger agreement; and

 

   

the holder must continuously hold the shares of Arbitron common stock from the date of making the demand through the effective time of the merger; a stockholder who is the record holder of shares of Arbitron common stock on the date the written demand for appraisal is made but who thereafter transfers those shares before the effective time of the merger will lose any right to appraisal in respect of those shares.

Neither voting (in person or by proxy) against, abstaining from voting on nor failing to vote on the proposal to adopt the merger agreement will constitute a written demand for appraisal within the meaning of Section 262. The written demand for appraisal must be in addition to and separate from any such proxy or vote.

If a holder of shares of Arbitron common stock fails to comply with these conditions and the merger is completed, he, she or it will be entitled to receive payment for his, her or its shares of Arbitron common stock as provided for in the merger agreement, but he, she or it will have no appraisal rights with respect to his, her or its shares of Arbitron common stock.

Only a holder of record of shares of Arbitron common stock is entitled to assert appraisal rights for the shares in that holder’s name. A demand for appraisal should be executed by or on behalf of the stockholder of record, fully and correctly, as the stockholder’s name appears on our stock records, and should specify the stockholder’s name and mailing address, the number of shares of Arbitron common stock owned and that the stockholder intends to demand appraisal of the “fair value” of the stockholder’s common stock. If a stockholder of record transfers his, her or its shares of Arbitron common stock prior to the effective time, he, she or it will lose any right to appraisal in respect of such shares. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the proposal to adopt the merger agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote against the proposal to adopt the merger agreement or abstain from voting on the proposal to adopt the merger agreement. If the shares are owned of record in a fiduciary capacity, such as

 

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by a trustee, guardian or custodian, execution of the demand should be made in that capacity. If the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a stockholder; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as agent for such owner or owners. A record holder such as a bank or broker who holds shares as nominee for several beneficial owners may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising appraisal rights with respect to the shares held for one or more other beneficial owners. In such case, the written demand should set forth the number of shares as to which appraisal is sought, and where no number of shares is expressly mentioned the demand will be presumed to cover all shares held in the name of the record owner. Stockholders who hold their shares in bank or brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their banks, brokers or nominees to determine appropriate procedures for the making of a demand for appraisal by the nominee.

A stockholder who elects to exercise appraisal rights under Section 262 should mail or deliver a written demand to:

Arbitron Inc.

9705 Patuxent Woods Drive

Columbia, Maryland 21046

Attention: Secretary

Such demands must be delivered before the vote is taken to approve the proposal to adopt the merger agreement at the special meeting, and must be executed by, or on behalf of, the record holder of the shares of Arbitron common stock. The demand must reasonably inform Arbitron of the identity of the stockholder and the intention of the stockholder to demand appraisal of the “fair value” of his, her or its shares of Arbitron common stock. A stockholder’s failure to make such written demand prior to the taking of the vote on the adoption of the merger agreement at the special meeting will constitute a waiver of appraisal rights.

Within 10 days after the effective time of the merger, we, as the surviving company, must send a notice as to the effectiveness of the merger to each former stockholder who has made a written demand for appraisal in accordance with Section 262 and who has not voted to adopt the merger agreement. Within 120 days after the effective time of the merger, but not thereafter, either we or any dissenting stockholder who has complied with the requirements of Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Arbitron common stock held by all dissenting stockholders. Upon the filing of any such petition by a stockholder, service of a copy of such petition shall be made upon the surviving company. We are under no obligation to and have no present intention to file a petition for appraisal, and stockholders seeking to exercise appraisal rights should not assume that we will file such a petition. Accordingly, stockholders who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262. Inasmuch as we have no obligation to file such a petition, the failure of a stockholder to do so within the period specified could nullify the stockholder’s previous written demand for appraisal.

Within 120 days after the effective time of the merger, any stockholder who has complied with the provisions of Section 262 to that point in time will be entitled to receive from the surviving company, upon written request, a statement setting forth the aggregate number of shares not voted in favor of adoption of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The surviving company must mail that statement to the stockholder within 10 days after receipt of the request or within 10 days after expiration of the period for delivery of demands for appraisals under Section 262, whichever is later. A person who is the beneficial owner of shares of Arbitron common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition or may request from us the statement described in this paragraph.

A stockholder timely and duly filing a petition for appraisal with the Delaware Court of Chancery must deliver a copy of the petition to us. We will then be obligated within 20 days to file with the Delaware Register in

 

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Chancery a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares and with whom we have not reached agreements as to the value of their shares. After notice to those stockholders, as required by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine which stockholders have complied with Section 262 and who have become entitled to the appraisal rights provided by Section 262. The Register in Chancery, if so ordered by the Delaware Court of Chancery, will give notice of the time and place fixed for the hearing of such petition by registered or certified mail to us and to the stockholders shown on the list at the addresses stated therein. Such notice will also be given by one or more publications at least one week before the date of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Delaware Court of Chancery deems advisable. The Delaware Court of Chancery may require stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the requirement, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

After the Delaware Court of Chancery determines the holders of Arbitron common stock entitled to appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through this proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Arbitron common stock as of the effective time of the merger after taking into account all relevant factors, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the fair value has been determined, the Delaware Court of Chancery will direct the payment of such value upon surrender by those stockholders of the certificates representing their shares of Arbitron common stock. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment. The costs of the action (which do not include attorneys’ fees and the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable. Upon application of a dissenting stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all of the shares entitled to appraisal. In the absence of such determination, each party bears its own expenses. If no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder otherwise fails to perfect, successfully withdraws or loses such holder’s right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder’s shares will be deemed to have been converted at the effective time of the merger into the right to receive the $48.00 per share cash payment (without interest) pursuant to the merger agreement. A stockholder will fail to perfect, or effectively lose, the right to appraisal if, among other things, no petition for appraisal is filed within 120 days after the effective time of the merger. Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined under Section 262 could be more than, the same as or less than the value of cash they would receive under the merger agreement if they did not seek appraisal of their shares. Neither Nielsen nor we anticipate offering more than the applicable merger consideration to any stockholder exercising appraisal rights, and each of Nielsen and us reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Arbitron common stock is less than the applicable merger consideration. The Delaware courts have stated that the methods which are generally considered acceptable in the financial community and otherwise admissible in court may be considered in the appraisal proceedings. In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy. Stockholders should be aware that opinions regarding fairness, such as the Signal Hill opinion and the Guggenheim Securities opinion, or otherwise described herein, are not opinions as to fair value under Section 262.

In determining fair value, the Delaware Court of Chancery is to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in

 

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determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider “market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of the merger and which throw any light on future prospects of the merged corporation.” Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger , the Delaware Supreme Court stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Any stockholder who has duly demanded an appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote the shares subject to that demand for any purpose or be entitled to the payment of dividends or other distributions on those shares (except dividends or other distributions payable to holders of record of shares as of a record date before the effective time of the merger).

At any time within 60 days after the effective time of the merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the merger consideration by delivering to the surviving company a written withdrawal of the stockholder’s demand for appraisal. However, any such attempt to withdraw made more than 60 days after the effective time of the merger will require written approval of the surviving company. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw its demand for appraisal and accept the merger consideration offered pursuant to the merger agreement within 60 days after the effective time of the merger. If the surviving company does not approve a stockholder’s request to withdraw a demand for appraisal when that approval is required or, except with respect to a stockholder that withdraws its right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder would be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be more than, the same as or less than the value of the consideration being offered pursuant to the merger agreement.

This summary does not purport to be complete and is qualified in its entirety by reference to the full text of Section 262, a copy of which is attached to this proxy statement as Annex C and which is incorporated herein by reference.

Failure to strictly comply with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise appraisal rights.

Regulatory Approvals

In connection with the merger, we are required to make certain filings with, and comply with certain laws of, various federal and state governmental agencies, including:

 

   

filing the certificate of merger with the Secretary of State of the State of Delaware in accordance with the DGCL after the adoption of the merger agreement by our stockholders and the satisfaction of all other conditions to the consummation of the merger contained in the merger agreement; and

 

   

complying with U.S. federal securities laws.

In addition, under the HSR Act, and the related rules and regulations that have been issued by the U.S. Federal Trade Commission, which we refer to as the FTC, certain transactions having a value above specified

 

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thresholds may not be consummated until specified information and documentary material have been furnished to the FTC and the U.S. Department of Justice, which we refer to as the DOJ, and certain waiting period requirements have been satisfied. The requirements of the HSR Act apply to the acquisition of shares of Company common stock in the merger. The Company and Nielsen filed the notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ on January 4, 2013. The Company and Nielsen agreed that Nielsen would voluntarily withdraw and refile the HSR notification and report form for the merger in order to give the FTC additional time to review the proposed transaction. The HSR notification and report form was withdrawn effective as of February 4, 2013, and Nielsen refiled on February 6, 2013. On March 8, 2013, the Company received a request for additional information and documentary materials (a “Second Request”) from the FTC regarding the merger. Nielsen also received a similar Second Request. The Second Requests were issued under the notification requirements of the HSR Act. The effect of the Second Requests is to extend the waiting period imposed by the HSR Act until 30 days after the Company and Nielsen have substantially complied with the Second Requests, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.

At any time before or after consummation of the merger, notwithstanding the expiration or termination of required waiting periods and the receipt of any other required approvals, the Antitrust Division of the DOJ, the FTC or state or foreign antitrust and competition authorities could take such action under applicable antitrust or competition laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the merger or seeking divestiture or licensing of substantial assets and businesses, including assets and businesses of the Company and/or Nielsen. Private parties may also seek to take legal action under the antitrust and competition laws under certain circumstances.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a summary of the material U.S. federal income tax consequences of the merger to “U.S. holders” and “non-U.S. holders” (each, as defined below) who receive cash pursuant to the merger in exchange for their shares of Arbitron common stock. The discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to holders of Arbitron common stock. The discussion is based on the Code, applicable current and proposed U.S. Treasury regulations, judicial authority and administrative rulings and practice, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretations, possibly with retroactive effect. Any change could alter the tax consequences of the merger to U.S. holders and non-U.S. holders.

This discussion applies only to U.S. holders and non-U.S. holders who beneficially own shares of Arbitron common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to particular U.S. holders and non-U.S. holders of Arbitron common stock in light of their particular circumstances, or that may apply to persons that are subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, cooperatives, traders in securities who elect to mark their securities to market, mutual funds, regulated investment companies, real estate investment trusts, S corporations, persons subject to the alternative minimum tax, U.S. holders whose functional currency is not the U.S. dollar, persons who validly exercise appraisal rights, partnerships or other passthrough entities and persons holding shares of Arbitron common stock through a partnership or other pass-through entity, persons who acquired shares of Arbitron common stock in connection with the exercise of employee stock options or otherwise as compensation, U.S. expatriates, “passive foreign investment companies,” “controlled foreign corporations,” persons who hold shares of Arbitron common stock as part of a hedge, straddle, constructive sale or conversion transaction and persons who hold any equity interest, directly or indirectly through constructive ownership or otherwise, in Nielsen after the merger). This discussion does not address any aspect of state, local or foreign tax laws or U.S. federal tax laws other than U.S. federal income tax laws.

The summary set forth below is for general information purposes only. It is not intended to be, and should not be construed as, legal or tax advice to any particular beneficial owner of Arbitron common stock. The summary is not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each beneficial owner should consult its tax advisor regarding the applicability of the rules discussed below to the beneficial owner and the particular tax effects of the merger to the beneficial owner, including the application of state, local and foreign tax laws.

 

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For purposes of this summary, a “U.S. holder” is a person that is a beneficial owner of shares of Arbitron common stock and is for U.S. federal income tax purposes any of the following:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state of the United States or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

   

a trust if (a) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (b) it has a valid election in place to be treated as a domestic trust for U.S. federal income tax purposes.

A “non-U.S. holder” is a beneficial owner of shares of Arbitron common stock other than a U.S. holder or any partnership or other entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes).

If shares of Arbitron common stock are held by a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes), the U.S. federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partnerships that hold shares of Arbitron common stock and partners in such partnerships are urged to consult their tax advisors regarding the tax consequences to them of the merger.

U.S. Holders.    The receipt of cash for shares of Arbitron common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder who exchanges shares of Arbitron common stock for cash pursuant to the merger will recognize capital gain or loss equal to the difference, if any, between the amount of cash received in exchange for such shares and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the holder’s purchase price for the shares. If a U.S. holder acquired different blocks of Arbitron common stock at different times or different prices, such holder must determine its tax basis and holding period separately with respect to each block of Arbitron common stock. Such gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than one year at the time of completion of the merger. Long-term capital gains for non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of U.S. federal income taxation. There are limitations on the deductibility of capital losses.

Cash payments made pursuant to the merger agreement will be reported to holders of Arbitron common stock and the U.S. Internal Revenue Service to the extent required by the Code and applicable U.S. Treasury regulations. Under the Code, a U.S. holder of Arbitron common stock (other than a corporation or other exempt recipient) may be subject, under certain circumstances, to information reporting on the cash received in the merger. Backup withholding of tax at the applicable statutory rate (currently 28%) also may apply with respect to the amount of cash received pursuant to the merger, unless the U.S. holder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under the backup withholding rules is generally applied as a credit to the U.S. federal income tax liability of the person subjected to backup withholding. If backup withholding results in an overpayment of such person’s U.S. federal income tax, a refund may be obtained, provided the required documents are timely filed with the U.S. Internal Revenue Service.

Non-U.S. Holders.    Any gain realized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable U.S. income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign corporation, such corporation may be subject to an additional branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable U.S. income tax treaty); or

 

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the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the merger, and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax on the non-U.S. holder’s net gain realized in the merger, which may be offset by U.S. source capital losses of the non-U.S. holder, if any; or

 

   

the non-U.S. holder owned (directly, indirectly or constructively) more than 5% of Arbitron’s outstanding common stock at any time during the five years preceding the merger, and Arbitron was a “United States real property holding corporation” for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the merger and the non-U.S. holder’s holding period with respect to the Arbitron common stock. Although there can be no assurances in this regard, Arbitron does not believe that it is, or within the last five years has been, a “United States real property holding corporation” for U.S. federal income tax purposes.

Cash received by non-U.S. holders pursuant to the merger also will be subject to information reporting, unless an exemption applies. Moreover, backup withholding of tax at the applicable statutory rate (currently 28%) may apply to cash received by a non-U.S. holder in the merger, unless the holder or other payee establishes an exemption and otherwise complies with the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under the backup withholding rules is generally applied as a credit to the U.S. federal income tax liability of the person subjected to backup withholding. If backup withholding results in an overpayment of such person’s U.S. federal income tax, a refund may be obtained, provided the required documents are timely filed with the Internal Revenue Service.

Litigation Relating to the Merger

On January 24, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware regarding the proposed merger. The complaint (“Complaint”) was purportedly filed on behalf of the public shareholders of the Company, and names as defendants, the Company, each of the Company’s directors, Merger Sub, and Nielsen. The Complaint alleges, among other things, that the Company’s directors breached their fiduciary duties by failing to maximize shareholder value in a proposed sale of the Company. The Complaint further alleges that the Company’s preliminary proxy statement fails to provide material information and provides materially misleading information relating to the merger and that the Company and Nielsen aided and abetted the alleged breaches by the Company’s directors. The plaintiff seeks, among other things, class action status, an injunction preventing the completion of the merger (or, if the merger is completed, rescinding the merger or awarding rescissory damages), and the payment of attorneys’ fees and expenses.

On March 7, 2013, the parties to the litigation entered into a memorandum of understanding (the “MOU”) providing for a settlement, subject to court approval, of the action on behalf of the named plaintiff and a class of the shareholders affected by the transaction (the “Settlement”). The Settlement will be submitted to the Court of Chancery for approval. If approved by the Court of Chancery, the Settlement will resolve all of the allegations and claims asserted by the plaintiff and the class against all defendants in connection with the merger and will further provide for the release and settlement by the class of the Company’s shareholders of all claims against all of the defendants and their affiliates in connection with the merger. As part of the MOU, all of the defendants deny all allegations of wrongdoing and deny that the disclosures made by the Company in the Company’s preliminary proxy statement on Schedule 14A as filed on January 18, 2013 were inadequate, but the Company has agreed to provide certain additional disclosures relating to the merger and to waive the “no-ask, no-waiver” provision in the existing confidentiality agreements. The Settlement will not affect the form or amount of consideration to be paid to the Company’s shareholders in the merger.

Delisting and Deregistration of the Company’s Common Shares

If the merger is completed, the shares of Company common stock will be delisted from the NYSE and deregistered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and shares of Company common stock will no longer be publicly traded, and the Company will no longer be required to file reports with the SEC.

 

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The Merger Agreement

The following is a summary of material provisions of the merger agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the merger agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated herein by reference. Copies of the merger agreement and the proxy statement, and any other filings that we make with the SEC with respect to the merger, may be obtained in the manner set forth in “Where You Can Find Additional Information.” Stockholders and other interested parties should read the merger agreement for a more complete description of the provisions summarized below.

The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement and described in this summary. The representations, warranties and covenants made in the merger agreement by the Company, Nielsen and Merger Sub were qualified and subject to important limitations agreed to by the Company, Nielsen and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing the circumstances in which a party to the merger agreement may have the right not to close the merger if the representations and warranties of the other party prove to be untrue, due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and in some cases were qualified by private disclosure schedules that were delivered by Arbitron to Nielsen, which disclosure schedules are not reflected in the copy of the merger agreement attached to this proxy statement as Annex A. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement. The Company’s stockholders are not third-party beneficiaries under the merger agreement.

The Merger

The closing of the merger, which we refer to as the closing, will take place no later than the third business day following the satisfaction (or, to the extent permitted by law, waiver by all parties thereto) of the conditions to effecting the merger (other than those that by their terms are to be satisfied or waived at the closing) (such date we refer to as the “original date”), or at such other time and date as will be agreed upon in writing among Nielsen and the Company except if the marketing period (as defined below) has not ended on or prior to the original date and Nielsen requests, in writing, an extension of the original date, the closing will occur on the date following the satisfaction or waiver of such condition that is the earlier to occur of (a) such date during the marketing period specified by Nielsen on no fewer than three business days’ written notice to the Company, and (b) the first business day following the end of the marketing period. The date on which the closing occurs is referred to in this proxy statement as the “closing date.” On the closing date, the Nielsen, Merger Sub and Arbitron will file a certificate of merger with the Secretary of State of the State of Delaware and the merger will become effective at the time the certificate of merger is so filed or at such other time as Nielsen and Arbitron specify in the certificate of merger (the date and time the merger becomes effective is referred to this in proxy statement as the “effective time”).

For purposes of this proxy statement, the term “marketing period” means the first period of ten consecutive business days following the date on which specified conditions to effecting the merger have been satisfied (other than those conditions that by their terms are to be satisfied or waived at the closing) and nothing has occurred and no condition exists that would cause any such conditions to fail to be satisfied assuming closing were to be scheduled for any time during such ten consecutive business day period; provided that in no event will the marketing period extend beyond the date that is one business day prior to the Outside Date (as defined below).

 

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At the effective time, Merger Sub will be merged with and into the Company, with the Company being the surviving corporation in the merger (which we refer to as the “Surviving Corporation”), after which the separate corporate existence of Merger Sub will cease, and the Company will continue as the Surviving Corporation and an indirect wholly-owned subsidiary of Nielsen. The directors of Merger Sub immediately prior to the effective time will be the initial directors of the Surviving Corporation. The officers of the Company immediately prior to the effective time will be the initial officers of the Surviving Corporation. Upon the consummation of the merger, the certificate of incorporation of the Company will be amended in the form of an exhibit to the merger agreement and, as so amended, will be the certificate of incorporation of the Surviving Corporation. Upon the consummation of the merger, the bylaws of the Company will be amended so as to read in their entirety in the form of the bylaws of Merger Sub and, as so amended, will be the initial bylaws of the Surviving Corporation.

Per Share Merger Consideration

Pursuant to the merger agreement, each share of Arbitron common stock issued and outstanding immediately prior to the effective time will be automatically converted into the right to receive an amount equal to $48.00 per share, in cash and without any interest, less any required withholding taxes, except for (i) shares of Arbitron common stock owned by the Company, Nielsen or Merger Sub, which will be automatically cancelled and cease to exist and (ii) shares of Arbitron common stock owned by the Company’s stockholders who perfect their appraisal rights under the DGCL.

Treatment of Equity Awards and Other Equity Based Compensation

Pursuant to the merger agreement, as soon as practicable following the date of the merger agreement, the board of directors (or, if appropriate, any committee administering the plans) is required to adopt such resolutions or take such other actions as are required so that:

 

  (a) all Company stock options, whether or not vested as of the effective time, will be canceled at the effective time and will be automatically converted into the right to receive a cash payment equal to (1) the excess, if any, of (x) the per share merger consideration over (y) the exercise price per share of Company common stock subject to the stock option, multiplied by (2) the number of shares of Company common stock subject to the stock option as of the effective time;

 

  (b) all Company stock options, whether or not vested as of the effective time, granted under the Company’s 1999 Stock Incentive Plan that, by their terms, provide for payment within 15 days following a change of control of an amount equal to the sum of (1) the in-the-money value of the option, and (2) the option’s “Black-Scholes Termination Value,” which is a term defined in the option award agreements to mean the excess, if any, of the Black-Scholes value of the option determined at the time of the transaction using assumptions set forth in the option award agreements, over the in-the-money value of the option, will be canceled at the effective time and will be converted automatically into the right to receive a cash payment equal to the sum of the in-the-money value of the option, determined in the same manner described in paragraph (a) immediately above, and the “Black-Scholes Termination Value,” if any, of the option;

 

  (c) except as described below, all Company restricted stock, RSUs and DSUs, whether vested or unvested, and whether or not subject to performance-based vesting conditions, outstanding immediately prior to the effective time will be canceled in exchange for a cash payment equal to (1) the merger consideration, multiplied by (2) the number of shares to which the award relates; and

 

  (d) (1) the Company’s employee stock purchase plan will terminate as of immediately prior to the effective time, (2) any open offering period during which stock purchases may be made under the plan will end on the earlier of its scheduled date or a date prior to the closing date that is selected by the board of directors or the committee administering the plan, and no new offering period will commence after the date of the merger agreement, (C) each option to purchase Company shares under the plan during the final offering period will be deemed to be exercised on the last trading day on or before the last day of the offering period, and (D) the holders of the shares of Company common stock purchased under the Plan will receive the merger consideration with respect to such shares of Company common stock in accordance with the merger agreement.

 

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As an exception to the treatment of RSUs described above, the merger agreement provides that with respect to each outstanding RSU that is granted after the date of the merger agreement and that is outstanding at the effective time, such grants to be in accordance with the terms and conditions set forth in the merger agreement, will (1) with respect to fifty percent (50%) of the number of shares of Company common stock to which the award was originally granted, be assumed by Nielsen, the “assumed portion,” and (2) with respect to any remaining outstanding portion be canceled in exchange for a cash payment equal to (A) the merger consideration, multiplied by (B) the number of shares of Company common stock to which such remaining outstanding portion relates. The assumed portion of the RSUs will be assumed by Nielsen and will continue to have, and be subject to, the same terms and conditions set forth in the applicable Company RSU award agreement or other document evidencing the RSU immediately prior to the effective time, including any vesting or forfeiture provisions or repurchase rights, except that (1) the Company RSU award agreement governing the assumed RSUs will cover a number of whole shares of Nielsen common stock equal to the product of (A) the number of shares of Company common stock subject to the assumed portion of such RSU multiplied by (B) the quotient of (x) the per share merger consideration divided by (y) the closing price for one share of common stock of Nielsen on the close of business on the business day immediately preceding the effective time, rounded down to the nearest whole number of shares, the “exchange ratio,” and (2) the number of shares of Nielsen common stock with respect to which the award will vest on each subsequent vesting date will be determined by dividing the total number of shares of Nielsen common stock subject to the award by the remaining number of vesting dates under the award after the effective time.

Any RSU that is outstanding at the effective time and is granted after the date of the merger agreement to any newly hired employees or to employees in the context of promotions based on job performance or workplace requirements that has not vested as of the effective time will be assumed by Nielsen. Each such RSU so assumed by Nielsen will continue to have, and be subject to, the terms and conditions set forth in the applicable Company RSU award agreement or other document evidencing such RSU immediately prior to the effective time, including any vesting or forfeiture provisions or repurchase rights, except that each Company RSU agreement will cover the number of whole shares of Nielsen common stock equal to the product of (1) the number of shares of Company common stock subject to the Company RSU award agreement immediately prior to the effective time multiplied by (2) the exchange ratio.

Payment for the Shares

Prior to the effective time, Nielsen will select a bank or trust company reasonably acceptable to the Company to act as paying agent for the payment of the merger consideration. At or prior to the effective time, Nielsen will, or will cause the Surviving Corporation to, deposit with such paying agent the funds necessary to pay the aggregate merger consideration to the Company’s stockholders. Promptly after the effective time (and in any event within two business days), the paying agent will mail to each holder of shares a letter of transmittal and instructions for effecting the surrender of the shares of Arbitron common stock in exchange for the merger consideration. Upon the surrender of certificates representing the shares of Arbitron common stock to the paying agent for cancellation, together with such letter of transmittal, duly completed and validly executed, and such other documents as may reasonably be required by the paying agent, the holder of such shares of Arbitron common stock will be entitled to receive the merger consideration. No interest will be paid or accrue on the cash payable upon surrender of any shares of Arbitron common stock.

If any cash deposited with the paying agent is not claimed within twelve months following the effective time, such cash will be returned to Nielsen upon demand, and any holder of shares of Arbitron common stock who has not complied with the exchange procedures in the merger agreement prior to such time shall thereafter look only to Nielsen and the Surviving Corporation as general creditors with respect to the payment of its claim for merger consideration (subject to abandoned property, escheat or similar laws).

Recommendation

The Company has represented in the merger agreement that the board of directors, at a meeting duly called and held, duly adopted resolutions by a unanimous vote of all directors (i) approving and declaring advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement, (ii) determining

 

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that the terms of the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of the stockholders of the Company, (iii) directing the Company to submit the adoption of the merger agreement to a vote by the Company’s stockholders at a special meeting, (iv) recommending that the Company’s stockholders adopt the merger agreement (which we refer to as the “Company Recommendation”) and (v) approving the merger agreement and the merger for purposes of Section 203 of the DGCL.

Representations and Warranties

The merger agreement contains representations and warranties of the Company, Nielsen and Merger Sub.

Some of the representations and warranties in the merger agreement made by the Company are qualified by “materiality” or “Company Material Adverse Effect.” For purposes of the merger agreement, “Company Material Adverse Effect” means any change, development, event, effect or occurrence (each, an “Event”) that (i) has a material adverse effect on the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or (ii) prevents or materially delays the ability of the Company to consummate the merger. However, none of the following will be deemed either alone or in combination to constitute, and none of the following will be taken into account in determining whether there has been or would be, a Company Material Adverse Effect:

 

  (a) any Event generally affecting (1) the geographic regions or industry in which the Company primarily operates (including changes in the use, adoption or non-adoption of industry standards) or (2) the economy, or financial, credit, foreign exchange, securities or capital markets, including any disruption thereof, in the United States or elsewhere in the world, but (in each case of clauses (1) and (2)) only to the extent that the Company and its subsidiaries taken as a whole are not materially and disproportionately affected relative to other participants in the regions or industries in which the Company and its subsidiaries operate; or

 

  (b) any Event, to the extent arising or resulting from:

 

  (1) changes after the date of the merger agreement in applicable law or applicable accounting regulations or principles or interpretations thereof (in each case, to the extent the Company and its subsidiaries taken as a whole are not materially and disproportionately affected relative to other participants in the regions or industries in which the Company and its subsidiaries operate);

 

  (2) any Events directly or indirectly attributable to the announcement or pendency of the merger agreement or the anticipated consummation of the merger and the other transactions contemplated by the merger agreement;

 

  (3) national or international political conditions, any outbreak or escalation of hostilities, insurrection or war, whether or not pursuant to declaration of a national emergency or war, acts of terrorism, sabotage, strikes, freight embargoes or similar calamity or crisis (in each case, to the extent the Company and its subsidiaries taken as a whole are not materially and disproportionately affected relative to other participants in the regions or industries in which the Company and its subsidiaries operate);

 

  (4) fires, epidemics, quarantine restrictions, earthquakes, hurricanes, tornados or other natural disasters;

 

  (5) any decline in the market price, or change in trading volume, of the capital stock of the Company or any failure to meet publicly announced revenue or earnings projections or predictions or internal projections (except that the underlying reasons for such decline, change or failure will be taken into account in determining whether there has been or would be a Company Material Adverse Effect);

 

  (6) any proceeding by any of the Company’s stockholders arising out of, concerning or related to the merger agreement or any of the transactions contemplated by the merger agreement, in each case initiated after the date of the merger agreement;

 

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  (7) any Events directly or indirectly attributable to any submissions, or proceedings with any governmental entity under the HSR Act or any other antitrust law; or

 

  (8) any Event that has been cured prior to the closing.

In the merger agreement, the Company has made customary representations and warranties to Nielsen and Merger Sub with respect to, among other things:

 

   

corporate matters related to the Company and its subsidiaries, such as organization, standing and corporate power;

 

   

its subsidiaries;

 

   

its capital structure;

 

   

no conflicts and consents;

 

   

authority to execute and deliver the merger agreement and the enforceability of the merger agreement;

 

   

its SEC filings and financial statements;

 

   

the absence of undisclosed liabilities;

 

   

information supplied by the Company;

 

   

the absence of certain changes or events;

 

   

tax matters;

 

   

labor relations;

 

   

employee benefits;

 

   

absence of litigation;

 

   

compliance with laws;

 

   

environmental matters;

 

   

title to properties;

 

   

intellectual property;

 

   

contracts;

 

   

insurance;

 

   

interested party transactions;

 

   

brokers and other advisors;

 

   

opinions of its financial advisors as to the fairness, from a financial point of view, of the merger consideration to be received by the Company’s stockholders; and

 

   

absence of state anti-takeover statutes or regulations or takeover-related provisions in the Company’s certificate of incorporation or bylaws that would prohibit or restrict the consummation of exemption of the merger or the other transactions.

In the merger agreement, Nielsen and Merger Sub have made customary representations and warranties to the Company, including representations relating to: organization; standing and corporate power; formation and purpose of Merger Sub; authority, non-contravention and enforceability; information supplied; absence of litigation; brokers and other advisors; ownership of Company common stock; financing; and absence of certain agreements.

Reasonable Best Efforts; Antitrust Covenant

In the merger agreement, each of Nielsen, Merger Sub and the Company agreed to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the

 

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other parties in doing, all things necessary to fulfill all conditions applicable to such party pursuant to the merger agreement and to consummate and make effective, in the most expeditious manner practicable, the merger and the other transactions contemplated by the merger agreement. The merger agreement further provides that Nielsen and Merger Sub will use their reasonable best efforts to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as practicable.

Nielsen’s obligations under the merger agreement will not include taking any action, and Nielsen is not required to accept (and the Company and its subsidiaries will not accept without Nielsen’s prior written consent) any undertaking or condition, to enter into any consent decree, to make any divestiture, to accept any operational restriction, or take any other action (each, which we refer to as a “Regulatory Requirement”) that would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, financial condition or results of operations of (i) Nielsen and its subsidiaries, taken as a whole (excluding the Company and the Company subsidiaries) or (ii) the Company and its subsidiaries, taken as a whole. For purposes of this determination, one or more Regulatory Requirements will be deemed to constitute a “material adverse effect” if one or more of such Regulatory Requirements (x) would reasonably be expected to, individually or in the aggregate, have a Gross Economic Value (as defined below), assuming the consummation of such Regulatory Requirement, equal to or greater than $131.0 million or (y) would require Nielsen or its subsidiaries to license or otherwise make available television or online measurement data to any third party who intends to offer a service to customers incorporating such television or online measurement data to customers who do not also subscribe to the services provided by Nielsen or its subsidiaries related to such data.

For purposes of the merger agreement, the term “Gross Economic Value” of each Regulatory Requirement will be the Reduced EBITDA (as defined below) of either (a) Nielsen or the Company or (b) both Nielsen and the Company if any businesses, services or assets of both Nielsen and the Company (or their respective subsidiaries) are subject to such Regulatory Requirement, (x) in the case of clause (a), multiplied by the Parent Multiple (as defined in the merger agreement) or the Company Multiple (as defined merger agreement) (as the case may be) and (y) in the case of clause (b), multiplied by the Parent Multiple or the Company Multiple, as the case may be.

For purposes of the merger agreement, the term “Reduced EBITDA” refers to the amount resulting from a Regulatory Requirement, which is equal to the product of (x) any reduction in annual revenue for the fiscal year ended December 31, 2012 associated with any business, service or asset subject to a Regulatory Requirement under consideration that would have resulted from the action proposed under such Regulatory Requirement had such proposed action been effective on January 1, 2012 and in effect until December 31, 2012, multiplied by (y) the EBITDA Margin for such business, service or asset.

For purposes of this proxy statement and the merger agreement, the term “EBITDA” means earnings before interest, taxes depreciation and amortization and after deducting stock based compensation expense, calculated in accordance with the past reporting practices of either Nielsen or the Company, as the case may be. For purposes of this proxy statement and the merger agreement, the term “EBITDA Margin” means the percentage resulting from dividing EBITDA for the fiscal year ended December 31, 2012 by the GAAP revenues for the fiscal year ending December 31, 2012. EBITDA Margin for a business, service or asset will be (a) if Nielsen or the Company track for internal reporting purposes the EBITDA for the fiscal year ending December 31, 2012 associated with the business, service or asset, the percentage determined by dividing EBITDA for the fiscal year ending December 31, 2012 by the GAAP revenues for such business, service or asset, or otherwise (b) the EBITDA Margin for the fiscal year ending December 31, 2012 for Nielsen or the Company.

Our Conduct of Business Pending the Merger

Except (a) as required by law or (b) as expressly permitted under the merger agreement, from the date of the merger agreement until the effective time, the business of the Company and its subsidiaries will be conducted in the ordinary course of business consistent with past practice and, to the extent consistent with such conduct, the Company will, and will cause each of its subsidiaries to, use reasonable best efforts to preserve intact its current business organization and goodwill, keep available the services of its current officers, key employees and consultants, and keep and preserve its present relationships with customers, suppliers, licensors, licensees, distributors and others having material business dealings with it.

 

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In addition, except (a) as required by law or (b) as expressly permitted under the merger agreement, from the date of the merger agreement until the effective time, the Company and its subsidiaries are subject to customary operating covenants and restrictions, including, but not limited to, restrictions relating to (subject to specified exceptions in the merger agreement):

 

   

declaring or paying dividends on or making other distributions in respect of the Company’s capital stock other than regular quarterly cash dividends on the Company’s common stock equal to the rate paid during the fiscal quarter ended September 30, 2012 and payment dates consistent with past practice (provided, however, that any such dividend for the quarter during which the closing occurs will be prorated based on the number of days from the immediately preceding dividend record date to the closing date);

 

   

any stock split, reverse stock split or reclassification of any of its capital stock;

 

   

purchasing, redeeming or otherwise acquiring any shares of capital stock of the Company or any of its subsidiaries or any other securities thereof;

 

   

issuing, delivering, selling, pledging or granting any shares of capital stock or other voting securities, including any option, warrant, call or right to acquire any shares of capital stock of the Company or other voting securities, or any securities convertible into or exchangeable for any shares of capital stock of the Company or other voting securities;

 

   

amending the Company’s certificate of incorporation or bylaws or other comparable organizational documents of any of its subsidiaries;

 

   

acquiring, by merging or consolidating with, or by purchasing a substantial equity interest in or portion of the assets of, or by any other manner, any business corporation or other entity or division thereof or any assets that are material to the Company and its subsidiaries, taken as a whole, except in the ordinary course of business consistent with past practice;

 

   

increasing the compensation or benefits of, or paying any bonus to, any current or former executive officer or director;

 

   

establishing or amending any employee benefit plan or employee agreement, or accelerating, amending or waiving any rights or other benefits thereunder;

 

   

except as required by generally accepted accounting principles, changing any methods of accounting or accounting practices materially affecting the reported consolidated assets, liabilities or results of operations of the Company;

 

   

selling, transferring, abandoning, leasing (as lessor), licensing, selling and leasing back or mortgaging or otherwise disposing of or subjecting to any lien any properties, rights (including intellectual property) or assets that are material to the Company and its subsidiaries, except for sales, transfers, abandonments, leases, license, sales and lease backs, mortgages or other dispositions of properties, rights (including intellectual property) or assets in the ordinary course of business consistent with past practice and specified permitted liens;

 

   

incurring, redeeming, repurchasing, prepaying, defeasing, cancelling, acquiring or modifying in any material respect any indebtedness for borrowed money or guaranteeing any such indebtedness of another person, except for advances under the Company’s existing credit facilities in the ordinary course of business and indebtedness solely involving the Company or any of its subsidiaries;

 

   

issuing or selling any debt securities or warrants or other rights to acquire any debt securities of the Company or its subsidiaries or guaranteeing any debt securities of another person;

 

   

making any loans, advances or capital contributions to, or investments in, any other person, other than to the Company’s subsidiaries or advances to employees and officers and directors in the ordinary course of business consistent with past practice;

 

   

making, revoking or changing any material tax election, settling or compromising any material tax liability or refund, changing any accounting method for tax purposes, filing any material amended tax return or entering into any material tax contractual obligation with any governmental entity, other than in the ordinary course of business or as required by law;

 

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paying, discharging, settling or satisfying any material action, litigation, claim or arbitration for an amount in excess of $100,000 individually (except for settlements that are fully paid by insurance proceeds) or waiving any claims or rights of material value;

 

   

entering into, materially amending, materially modifying, cancelling or terminating any material contract or material intellectual property contract, or waiving, releasing or assigning any material rights or claims under any material contract or material intellectual property contract;

 

   

making or committing to make any capital expenditure or expenditures in excess of $30 million in the aggregate;

 

   

adopting or entering into, or modifying, amending or terminating, any collective bargaining agreement or other labor union contract applicable to the employees of the Company or its subsidiaries;

 

   

authorizing, recommending, proposing or announcing an intention to or adopting a plan of complete or partial liquidation or dissolution of the Company or any of its subsidiaries; or

 

   

authorizing, agreeing or committing to take any of the actions described above.

Restrictions on Solicitations of Other Offers and Changes in Recommendation

No Solicitation

The Company and its subsidiaries and their respective directors and officers will not, and the Company will use its reasonable best efforts to cause its and its subsidiaries’ other representatives not to, directly or indirectly through another person: (i) solicit, initiate or knowingly encourage, or knowingly facilitate, any Company Takeover Proposal (as defined below) or the making or consummation thereof, (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any information in connection with, or otherwise knowingly cooperate in any way with, any Company Takeover Proposal, (iii) take any action to make the provisions of any anti-takeover statute or regulation (including any transaction under, or a third party becoming an “interested shareholder” under, Section 203 of the DGCL), or any restrictive provision of any applicable anti-takeover provision in the Company’s certificate of incorporation or bylaws, inapplicable to any transactions contemplated by a Company Takeover Proposal or (iv) resolve, publicly propose or agree to do any of the foregoing.

The Company will, and will cause the Company subsidiaries and its and their directors and officers to, and will use its reasonable best efforts to cause its and its subsidiaries’ other representatives to, immediately cease all existing discussions or negotiations with any person conducted prior to the date of the merger agreement with respect to any Company Takeover Proposal and request the prompt return or destruction of all confidential information previously furnished to any such party.

At any time prior to obtaining the stockholder adoption of the merger agreement, in response to an unsolicited bona fide written Company Takeover Proposal (which was made after the date of the merger agreement, has not been withdrawn and did not result from a breach in any material respect of the non-solicitation provisions of the merger agreement), if the Company Board determines in good faith, after consultation with its outside legal counsel and financial advisors, that such Company Takeover Proposal constitutes or could reasonably be expected to lead to a Superior Company Proposal (as defined below), the Company may (x) furnish information with respect to the Company and its subsidiaries to the person making such Company Takeover Proposal (and its representatives) pursuant to an acceptable confidentiality agreement entered into in accordance with the non-solicitation provisions of the merger agreement (provided that all such information has previously been provided to Nielsen or is provided to Nielsen prior to or substantially concurrent with the time it is provided to such person), and (y) participate in discussions or negotiations with the person making such Company Takeover Proposal (and its representatives) regarding such Company Takeover Proposal, if (and only if) and only to the extent that before taking any of the actions described in clauses (x) and (y) above, the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that failure to take such action could reasonably be determined to be inconsistent with its fiduciary duties under applicable law.

 

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The merger agreement also provides that the Company will, as promptly as practicable (and in any event within 24 hours after the receipt thereof) advise Nielsen orally and in writing of any Company Takeover Proposal or request for information or inquiry that contemplates, or that the Company believes could reasonably be expected to lead to, a Company Takeover Proposal. Such notice is required to include the identity of the person making such Company Takeover Proposal and a copy of such Company Takeover Proposal, including draft agreements or term sheets submitted in connection therewith (or, where no such copy is available, a description of the material terms of such Company Takeover Proposal), including any modifications thereto. The Company will keep Nielsen reasonably informed in all material respects of the status and details (including any change to the terms thereof) of any Company Takeover Proposal.

For purposes of this proxy statement and the merger agreement, the term “Company Takeover Proposal” means any inquiry, proposal or offer (whether or not in writing) from any third party relating to or contemplating (1) any direct or indirect acquisition or purchase, in one transaction or a series of related transactions, of assets (including equity securities of any of the Company’s subsidiaries) or businesses that constitute 20% or more of the revenues, net income or assets of the Company and its subsidiaries, taken as a whole, or 20% or more of any class of equity securities of the Company or any of its subsidiaries, (2) any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of the Company or (3) any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, share exchange or similar transaction involving the Company or any of its subsidiaries, in each case, pursuant to which any person or the stockholders of any person would own 20% or more of any class of equity securities of the Company or of any resulting parent company of the Company, in each case other than the transactions contemplated by the merger agreement.

For purposes of this proxy statement and the merger agreement, the term “Superior Company Proposal” means any bona fide written offer that was made after the date of the merger agreement and did not result from a material breach of the non-solicitation provision of the merger agreement that, if consummated, would result in such person’s (or in the case of a direct merger between such person and the Company, such person’s stockholders’) acquiring, directly or indirectly, 50% or more of the outstanding shares of the Company common stock (or of the shares of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or all or substantially all of the assets of the Company, and which offer the board of directors of the Company determines in good faith, after consultation with its outside legal counsel and financial advisors, to be more favorable to the holders of the Company common stock than the transactions contemplated by the merger agreement after giving effect to any changes to the terms of the merger agreement proposed by Nielsen in response to such offer or otherwise and taking into account all financial, regulatory, legal and other aspects of such proposal (including any break-up fee, expense reimbursement, closing conditions, likelihood and timing of consummation and financing terms) as the board of directors of the Company determines in good faith to be relevant.

No Adverse Recommendation Change

Except as set forth below, the board of directors of the Company and any committee thereof are prohibited from (i) (A) withdrawing, qualifying or modifying in any manner adverse to Nielsen or Merger Sub, or proposing publicly to withdraw, qualify or modify in any manner adverse to Nielsen or Merger Sub, the Company Recommendation or (B) approving, recommending or otherwise declaring advisable, or proposing publicly to approve, recommend or otherwise declare advisable, any Company Takeover Proposal or resolve or agree to take any such action (any action described in this clause (i) being referred to as an “Adverse Recommendation Change”) or (ii) approving, adopting or resolving to recommend, or publicly proposing to approve, adopt or recommend or cause or permit the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, option agreement, asset purchase agreement, share purchase agreement, share exchange agreement, merger agreement, joint venture agreement, partnership agreement or other similar agreement relating to, or that contemplates or that would reasonably be expected to lead to, any Company Takeover Proposal (other than an acceptable confidentiality agreement entered into in accordance with the non-solicitation provisions of the merger agreement) (which we refer to as an “Alternative Acquisition Agreement”) or any tender offer providing for, with respect to, or in connection with, any Company Takeover Proposal.

 

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At any time prior to obtaining the stockholder adoption of the merger agreement, the board of directors of the Company may (x) affect an Adverse Recommendation Change in response to an Intervening Event (as defined below) if the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that the failure to take such action could reasonably be determined to be inconsistent with its fiduciary duties under applicable law and (y) affect an Adverse Recommendation Change and/or cause the Company to terminate the merger agreement in accordance with and subject to compliance with the termination provisions of the merger agreement if (a) an unsolicited bona fide written Company Takeover Proposal is made to the Company and such Company Takeover Proposal was made after the date of the merger agreement, has not been withdrawn and did not otherwise result from a breach in any material respect of the non-solicitation provisions of the merger agreement, (b) the board of directors of the Company determines in good faith, after consultation with its financial advisors and outside legal counsel, that such Company Takeover Proposal constitutes a Superior Company Proposal and (c) the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that the failure to take such action could reasonably be determined to be inconsistent with its fiduciary duties under applicable law; provided that (1) the Company has complied in all material respects with the non-solicitation provisions of the merger agreement, (2) the Company has promptly notified Nielsen, in writing, at least four business days before taking any such action, of its intention to do so, (3) if the Adverse Recommendation Change is in response to an Intervening Event, during such four-business day period, if requested by Nielsen, the Company engages in good faith negotiations with Nielsen to amend the merger agreement in such a manner that eliminates the need for an Adverse Recommendation Change as a result of the Intervening Event, or (4) if the Adverse Recommendation Change is in response to a Superior Company Proposal, during such four-business day period, if requested by Nielsen, the Company engages in good faith negotiations with Nielsen to amend the merger agreement in such a manner that such Company Takeover Proposal is no longer determined to be a Superior Company Proposal. Any amendment to the financial terms or other material terms of such Superior Company Proposal will require a new written notification from the Company and an additional two-business-day period that satisfies the requirements described above.

For purposes of this proxy statement and the merger agreement, the term “Intervening Event” means, with respect to the Company, a material event or circumstance that was not known to the board of directors of the Company on the date of the merger agreement (or if known, the consequences of which are not known to or reasonably foreseeable by such board of directors as of the date of the merger agreement), which event or circumstance, or any material consequences thereof, becomes known to the board of directors of the Company prior to the time at which the stockholders of the Company adopt the merger agreement; provided, however, that in no event will the receipt, existence or terms of a Company Takeover Proposal or any matter relating thereto or consequence thereof constitute an Intervening Event.

Certain Standstill Waivers

Provided that the Company and the board of directors of the Company are in compliance with their obligations not to solicit alternate transactions as described above, the Company may grant a waiver or release under, or determine not to enforce, any standstill agreement if (i) the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that the failure to take such action could reasonably be determined to be inconsistent with its fiduciary duties under applicable law and (ii) if applicable, in connection with granting such waiver or release, the Company grants the same waiver or release under the confidentiality agreement with Nielsen. On March 8, 2013, with Nielsen’s consent, the Company sent letters to Financial Party A, Financial Party B, Financial Party D, Financial Party E, Financial Party G, Strategic Party M, Financial Party N and Financial Party P (as described in “Proposal No. 1 — Adoption of the Merger Agreement — Background of the Merger”) waiving the “no-ask, no-waiver” provision in the confidentiality agreements with such parties.

Stockholders Meeting

The Company will, as soon as practicable after the date of the merger agreement, (i) duly call, establish a record date for, give notice of, convene and hold a meeting of its stockholders for the purpose of seeking the adoption of the merger agreement by its stockholders, and will use reasonable best efforts to take all lawful action to solicit the adoption of the merger agreement by such stockholders, and (ii) through the board of directors of the Company, subject to an Adverse Recommendation Change, recommend to its stockholders that they approve the proposal to adopt the merger agreement.

 

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Employee Benefit Matters

The merger agreement provides that, for a period of at least one year immediately following the effective time, Nielsen will, and will cause the Surviving Corporation to, provide to those individuals who are employed by the Company or its subsidiaries immediately prior to the effective time, which we refer to as the “Company Employees” (i) base salary and incentive compensation opportunities that are no less favorable in the aggregate to each Company Employee than the aggregate base salary and incentive compensation opportunities provided to such Company Employee by the Company immediately prior to the effective time; and (ii) employee benefits that, taken as a whole, are no less favorable to such employees in the aggregate than those provided to such employees under all plans and arrangements sponsored, maintained or contributed to by the Company or any of its subsidiaries for the benefit of employees of the Company or any of its subsidiaries prior to the merger. Such compensation and employee benefits may be provided through the Surviving Corporation’s continuation of one or more of the Company’s employee benefit plans, through the admission of the Company Employees to any one or more employee benefit policies, plans or programs maintained by Nielsen or its affiliates from time to time, or through a combination of the foregoing alternatives, as determined in Nielsen’s sole and absolute discretion. Nothing in the merger agreement requires that Nielsen grant equity of Nielsen to any Company Employee or continue to maintain any particular Company benefit plan or form of incentive or benefit after the effective time in order to satisfy its obligations thereunder.

The merger agreement provides that the Company will be permitted to establish the terms and conditions of the cash incentive awards relating to calendar year 2013 (the “2013 Incentives”). If the closing occurs before the payment of the 2013 Incentives, the Company will be permitted to finally and conclusively determine, in good faith and consistent with the terms and conditions of the applicable Company incentive plans (and, to the extent based on business results, based on the most recent forecast available as of the closing date) the amount of the 2013 Incentives earned by each Company Employee through the closing date (prorated, if the closing occurs in 2013, for the portion of the year elapsed between January 1, 2013 and the closing date) or through December 31, 2013 if the closing date occurs on or after December 31, 2013 (the “Earned Portion”). Nielsen will pay or cause to be paid to each Company Employee, whether or not such employee remains employed following the closing, the Earned Portion at the same time 2013 annual bonuses are paid to other Nielsen employees in the United States, but in all events no later than March 15, 2014. If the closing occurs in 2013, for the balance of the 2013 calendar year following the closing date, Nielsen will, or will cause its affiliates to, determine the incentive opportunities in accordance with the incentive and benefit plan requirements described in the immediately preceding paragraph.

The merger agreement further provides that, for a period of at least one year following the effective time, Nielsen will, and will cause the Surviving Corporation to, provide severance payments and benefits to Company Employees who are terminated by the Surviving Corporation other than for cause (as determined based on the Company’s policies as of the date of the merger agreement). Such severance payments will be no less favorable than the greater of (1) the severance payments and benefits based on the Company’s current policies and (2) the severance payments and benefits provided by Nielsen and its subsidiaries to similarly situated employees of Nielsen and its subsidiaries, provided that Nielsen may condition such payments and benefits upon execution by the applicable Company Employee of a commercially standard release of claims in a form reasonably satisfactory to Nielsen.

Nielsen will, or will cause the Surviving Corporation to, assume and honor the obligations of the Company and its subsidiaries under any individual employment, retention, severance, change in control or termination agreement and any consulting, retirement and other compensation contracts, arrangements, commitments or understandings, in accordance with their terms, subject to the right to make amendments or modifications to the extent permitted by such terms. Nielsen acknowledges that (i) the merger will constitute a “change in control” (or concept of similar import) under the Company’s benefit plans and benefit arrangements and (ii) as a result of the merger, certain individuals will be deemed to have experienced a “position diminishment” or “good reason” event (or concept of similar import), as applicable, for all purposes under their Company benefit arrangements. Nielsen will, and will cause the Surviving Corporation to, give each Company Employee full credit, for purposes of eligibility, vesting, benefit accrual and determination of the level of benefits under any employee benefit plans or arrangements that such employees may be eligible to participate in after the effective time, for such Company

 

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Employee’s service with the Company or any of its subsidiaries to the same extent recognized by the Company or any of its subsidiaries immediately prior to the effective time. The foregoing will not apply (1) for benefit accrual purposes under any defined benefit pension plan, (2) as would result in the duplication of benefits for the same period of service or (3) to any newly established plan of Nielsen for which similarly situated employees of Nielsen do not receive past service credit.

In addition, Nielsen will, and will cause the Surviving Corporation to, use commercially reasonable efforts to (1) waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Company Employees under any welfare benefit plans that such employees may be eligible to participate in after the effective time, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the effective time under any welfare plan maintained for the Company Employees immediately prior to the effective time, and (2) provide each Company Employee with credit for any co-payments and deductibles paid in the plan year in which the effective time occurs in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans in which employees are eligible to participate after the effective time.

The provisions of the merger agreement described in this Employee Benefit Matters section apply only to Company Employees who are covered under Company benefit plans that are maintained primarily for the benefit of employees employed in the United States, including Company Employees regularly employed outside the United States to the extent they participate in such Company benefit plans. With respect to Company Employees who are not described in the preceding sentence, Nielsen will, and will cause the Surviving Corporation and its subsidiaries to, comply with all applicable laws, directives and regulations relating to employees and employee benefits matters applicable to such employees.

Financing

Nielsen will use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the financing on the terms and conditions described in the commitment letter and in a timely manner, including (i) maintaining in effect the commitment letter, (ii) negotiating and entering into definitive agreements with respect to the commitment letter on terms and conditions contemplated by the commitment letter and (iii) satisfying on a timely basis all conditions to the funding of the financing on the closing date applicable to Nielsen in the commitment letter and the definitive agreements with respect thereto and complying with its obligations thereunder. Nielsen has the right to amend, replace, supplement or otherwise modify, or waive any of its rights under, the commitment letter and/or substitute other debt or equity financing for all or any portion of the financing from the same and/or alternative financing sources, provided that any such amendment, replacement, supplement or other modification to or waiver of any provision of the commitment letter and the definitive agreements with respect thereto that amends the financing and/or substitution of all or any portion of the financing will not impose additional conditions precedent to the financing as set forth in the commitment letter that could reasonably be expected to prevent or materially delay the consummation of the merger. Nielsen will be permitted to reduce the amount of financing under the commitment letter in its sole discretion, provided that Nielsen will not reduce the financing to an amount committed below the amount that is required, together with the financial resources of Nielsen and Merger Sub, including cash on hand of Nielsen and the Company, to consummate the merger.

If any portion of the financing becomes unavailable in the manner or from the sources contemplated in the commitment letter and such portion is reasonably required (taking into account cash on hand and other financial resources available to Nielsen) to fund the merger consideration, Nielsen will use its reasonable best efforts to arrange and obtain alternative financing in an amount sufficient to consummate the merger as promptly as reasonably practicable following the occurrence of such event. Nielsen will promptly provide the Company with the documentation evidencing such alternative sources of financing, and shall give the Company prompt notice (but in any event within five business days) of any material breach by any party to the commitment letter that becomes known to Nielsen or any termination of the commitment letter. For the avoidance of doubt, if Nielsen fails to obtain the financing contemplated by the commitment letter or any alternative financing, Nielsen will continue to be obligated to perform its obligations under the merger agreement and to consummate the merger on the terms contemplated under the merger agreement.

 

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In connection with the financing, the Company will use its commercially reasonable efforts to obtain, at Nielsen’s expense, an accountant’s comfort letter with respect to financial information relating to the Company that may be included in any offering memorandum used by Nielsen in connection with the financing. For the avoidance of doubt, the failure of the Company to obtain a comfort letter will not be deemed to be a breach of the merger agreement and Nielsen will continue to be obligated to perform its obligations under the merger agreement, including its obligation to consummate the merger on the terms and subject to the conditions contained in the merger agreement.

Indemnification of Officers and Directors

All rights to indemnification and exculpation by the Company and its subsidiaries in favor of the current or former directors or officers of the Company and its subsidiaries for their acts and omissions occurring at or prior to the effective time under the certificate of incorporation and bylaws of the Company, the respective comparable organizational documents of its subsidiaries and any indemnification agreements of the Company (in each case, as in effect on the date of the merger agreement) will survive the merger and will continue in full force and effect in accordance with their terms until the sixth anniversary of the effective time with respect to any claims against such directors or officers arising out of such acts or omissions (and until such later date as such claims and proceedings arising therefrom are finally disposed of).

The merger agreement also provides that, from the effective time until the sixth anniversary of the effective time (and until such later date as any proceedings commenced during such period are finally disposed of), Nielsen will cause the existing policies of directors’ and officers’ insurance maintained by the Company as of the date of the merger agreement (the “D&O Insurance”) to be maintained for all persons who were covered by the D&O Insurance as of such date or provide substitute policies or a six-year “tail policy”, in each case, the material terms of which, including coverage and amount, are no less favorable than the existing policies. However, Nielsen will not be required to expend in any one year an amount in excess of 300% of the last annual premium paid by the Company under the D&O Insurance prior to the date of the merger agreement, and if the annual premium payable for such insurance coverage exceeds 300% of such amount, Nielsen will maintain the most favorable policies of directors’ and officers’ liability insurance obtainable for an annual premium equal to 300% of such amount.

From and after the effective time until the sixth anniversary of the effective time, to the fullest extent permitted by law, Nielsen will indemnify, defend and hold harmless, and provide advancement of expenses to, the present and former officers and directors of the Company and its subsidiaries and any employee of the Company or any of its subsidiaries who acts as a fiduciary under any Company benefit plan (each, an “Indemnified Party”) against all losses relating to any actual or threatened action, suit, proceeding or investigation, in respect of actions or omissions occurring at or prior to the effective time in connection with such person’s duties as an officer or director of the Company or any of its subsidiaries, including in respect of the merger agreement, the merger and the other transactions contemplated by the merger agreement (except for losses arising out of actions or omissions (i) constituting a material breach of the merger agreement or criminal conduct or (ii) losses for which such Indemnified Party would not be entitled to indemnification or advancement of expenses under the certificate of incorporation and bylaws of the Company or the respective comparable organizational documents of its subsidiaries (in each case, as in effect on the date of the merger agreement)).

In the event that, Nielsen or the Surviving Corporation (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys substantially all of its assets to any person, or if Nielsen dissolves or dissolves the Surviving Corporation then, and in each such case, Nielsen will cause the successors and assigns of Nielsen or the Surviving Corporation, as applicable, to assume the obligations of Nielsen or the Surviving Corporation provided for in the provisions described in the three paragraphs above.

 

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Conditions to the Merger

The respective obligations of each party to consummate the merger are subject to the satisfaction or waiver of the following conditions:

 

   

the merger agreement has been adopted by (i) assuming the Ownership Condition (as defined below) is satisfied, the affirmative vote of the holders of two-thirds of the outstanding shares of Arbitron common stock on the record date for the determination of stockholders entitled to vote at the special meeting or (ii) if the Ownership Condition is not satisfied, the affirmative vote required under Article VIII of the Company’s certificate of incorporation;

 

   

any waiting period (and any extension thereof) applicable to the merger under the HSR Act will have been terminated or will have expired; and

 

   

no federal, state, local or foreign judgment, injunction, order, writ, ruling or decree will have been issued by any governmental entity and no other law preventing the consummation of the merger will be in effect; provided that prior to asserting this condition, each of the parties to the merger agreement has complied with its covenants in the merger agreement to use reasonable best efforts to effect the merger.

For purposes of this proxy statement and the merger agreement, the term “Ownership Condition” means that neither Nielsen nor Merger Sub “beneficially owns” (as defined in the Company’s certificate of incorporation) 10% or more of the outstanding shares of Company common stock entitled to vote at the special meeting.

The obligations of Nielsen and Merger Sub to effect the merger are subject to the satisfaction or waiver of the following additional conditions:

 

   

(i) each representation and warranty of the Company (other than the representations and warranties regarding the Company’s and its subsidiaries’ capitalization) that is qualified by reference to a Company Material Adverse Effect will be true and correct as of the closing date, except to the extent such representation and warranty is expressly made as of an earlier date (in which case on and as of such earlier date) and each representation and warranty of the Company that is not qualified by reference to a Company Material Adverse Effect will be true and correct as of the closing date, except to the extent that any such representation or warranty is expressly made as of earlier date (in which case on and as of such earlier date), other than for such failures to be so true and correct (without giving effect to any limitation as to materiality, Company Material Adverse Effect or similar qualification set forth therein) that would not reasonably be expected to have a Company Material Adverse Effect, (ii) each of the representations and warranties regarding the Company’s and its subsidiaries’ capitalization will be true and correct in all respects as of the closing date as if made on and as of the closing date (other than any such representation and warranty made as of a specific earlier date, which will have been true and correct in all respects as of such earlier date), except for inaccuracies that are de minimis relative to the capitalization of the Company as of the close of business on December 12, 2012, and (iii) Nielsen will have received a certificate signed by an executive officer of the Company to the effect of clauses (i) and (ii); and

 

   

the Company will have performed or complied with in all material respects all obligations required to be performed or complied with by it under the merger agreement at or prior to the closing date, and Nielsen will have received a certificate signed by an executive officer of the Company to such effect.

For purposes of the preceding two paragraphs, if the closing occurs after the original date (as defined above), all references to the closing date will be deemed references to the original date, except, with respect to the second paragraph above, for any Willful Breach (as defined below) of a covenant which occurs following the original date.

The obligations of the Company to effect the merger are subject to the satisfaction or waiver of the following additional conditions:

 

   

(i) each representation and warranty of the Nielsen or Merger Sub that is qualified by reference to a Parent Material Adverse Effect (as defined in the merger agreement) will be true and correct as of the closing date, except to the extent such representation and warranty is expressly made as of an earlier date (in which case on and as of such earlier date) and each representation and warranty of Nielsen or Merger Sub

 

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that is not qualified by reference to a Parent Material Adverse Effect will be true and correct as of the closing date, except to the extent that any such representation or warranty is expressly made as of earlier date (in which case on and as of such earlier date), other than for such failures to be so true and correct (without giving effect to any limitation as to materiality or Parent Material Adverse Effect set forth therein) that would not reasonably be expected to have a Parent Material Adverse Effect, and (ii) Company will have received a certificate signed by an executive officer of Nielsen to such effect; and

 

   

Nielsen or Merger Sub will have performed or complied with in all material respects all obligations required to be performed or complied with by them under the merger agreement at or prior to the closing date, and the Company will have received a certificate signed by an executive officer of Nielsen to such effect.

Effect of Termination.

If the merger agreement is terminated (as described below), the merger agreement will become void and have no effect without any liability or obligation on the part of Nielsen, Merger Sub or the Company, other than obligations for payment of the Termination Fee or Reverse Termination Fee (each as defined below), obligations related to the protection of the Company’s confidential information, liability for damages incurred or suffered by a party (other than in circumstances when the Termination Fee or Reverse Termination Fee is paid) to the extent such damages were the result of fraud or the Willful Breach by another party of any of its representations, warranties, covenants or other agreements set forth in the merger agreement, and certain general provisions.

Termination

The merger agreement may be terminated at any time prior to the effective time (whether before or after the time Arbitron stockholders adopt the merger agreement) (except as otherwise provided below):

 

   

by mutual written consent of Nielsen and the Company;

 

   

by either Nielsen or the Company:

 

   

if the merger will not have been consummated on or before October 1, 2013 (which is referred to as the Outside Date, as it may be extended in the manner described below), unless the failure to consummate the merger is the result of a material breach of the merger agreement by the party seeking to terminate it,

 

   

if there will be any law or any federal, state, local or foreign judgment, injunction, order, writ, ruling or decree permanently enjoining, restraining or prohibiting the consummation of the merger that will have become final and nonappealable, unless a material breach of the merger agreement by the party seeking to terminate it is the principal cause of such action, or

 

   

if, upon a vote taken at the special meeting (or any adjournment or postponement thereof), the Company’s stockholders fail to adopt the merger agreement;

 

   

by Nielsen, if the Company breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement such that the conditions to Nielsen’s obligation to consummate the merger would not be satisfied if the date of such termination was the Outside Date, which breach or failure to perform is incapable of being cured by the Company by the Outside Date or, if capable of being cured by the Company by the Outside Date, has not been cured prior to the earlier of (x) 30 days after the delivery of written notice to the Company of such breach and (y) the Outside Date;

 

   

by Nielsen, prior to (but not after) the time at which the Company’s stockholders adopt the merger agreement, if (i) an Adverse Recommendation Change will have occurred, (ii) the Company will have breached or failed to perform in any material respect its obligations or agreements contained in the no solicitation or preparation of proxy statement/special meeting provisions of the merger agreement (excluding breaches or failures that are capable of being cured and that are cured within two business days following receipt of written notice of such breach or failure from Nielsen if Nielsen provides such notice), (iii) the Company failed to reconfirm, after a Company Takeover Proposal has been publicly announced, the Company Recommendation within the Response Period following the receipt of a written request from Nielsen to do

 

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so (provided that if such Company Takeover Proposal is subsequently modified within the Response Period, then the board of directors will be required to again reconfirm the Company Recommendation within the Response Period) or (iv) if any tender offer or exchange offer is commenced by any third party with respect to the outstanding Company common stock prior to the time at which the Company’s stockholders adopt the merger agreement, and the board of directors of the Company will not have recommended that the Company’s stockholders reject such tender offer or exchange offer and not tender their Company common stock into such tender offer or exchange offer within the Response Period, unless the Company has issued a press release that expressly reaffirms the Company Recommendation within the Response Period (for purposes of this proxy statement and the merger agreement, the “Response Period” means the period of ten business days from the date of commencement of a tender offer or exchange offer or announcement; provided that such period will not extend beyond one business day before the Company’s stockholder meeting);

 

   

by the Company, if Nielsen or Merger Sub breaches or fails to perform any of its representations, warranties or covenants contained in the merger agreement such that the conditions to the Company’s obligation to consummate the merger would not be satisfied if the date of such termination was the Outside Date, which breach or failure to perform is incapable of being cured by Nielsen or Merger Sub by the Outside Date or, if capable of being cured by Nielsen or Merger Sub by the Outside Date, has not been cured prior to the earlier of (x) 30 days after the delivery of written notice to Nielsen or Merger Sub of such breach and (y) the Outside Date; or

 

   

by the Company, prior to (but not after) the time at which the Company’s stockholders adopt the merger agreement, if (i) the Company has not breached or failed to perform in any material respect its obligations or agreements contained in the no solicitation or preparation of proxy statement/special meeting provisions of the merger agreement (excluding breaches or failures that are capable of being cured and that are cured within two business days following receipt of written notice of such breach of failure from Nielsen if Nielsen provides such notice), (ii) the board of directors of the Company authorizes the Company, subject to complying with the terms of the merger agreement, to enter into a binding definitive Alternative Acquisition Agreement providing for a Superior Company Proposal, (iii) the Company prior to or concurrently with such termination pays to Nielsen in immediately available funds the Termination Fee and (iv) the Company enters into such Alternative Acquisition Agreement substantially concurrently with such termination.

Termination Fees

Termination Fee

The Company will pay to Nielsen a termination fee equal to $32.7 million (which we refer to as the “Termination Fee”):

 

   

if the Company terminates the merger agreement to enter into an Alternative Acquisition Agreement;

 

   

if Nielsen terminates the merger agreement due to an Adverse Recommendation Change; or

 

   

(X) prior to the termination of the merger agreement, a Company Takeover Proposal is publicly proposed or announced or otherwise becomes publicly known, or any person will have publicly announced an intention (whether or not conditional and whether or not withdrawn) to make a Company Takeover Proposal, (Y) thereafter the merger agreement is terminated pursuant to termination rights in the event that (i) the transaction fails to close by the Outside Date, (ii) a vote of the Company stockholders is taken and the Company’s stockholders do not adopt the merger agreement, (iii) the Company breaches or fails its representations, warranties or covenants (and is unable to cure such breaches or failures) contained in the merger agreement such that the conditions to Nielsen’s obligation to consummate the merger would not be satisfied if the date of such termination was the Outside Date, (iv) the Company breaches or fails to perform in any material respect its obligations or agreements contained in the no solicitation or preparation of proxy statement/special meeting provisions of the merger agreement, (v) the Company fails to reconfirm the Company Recommendation following a Company Takeover Proposal, or (vi) a tender or exchange offer is commenced by a third party and the board of directors of the Company does not recommend that

 

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the Company’s stockholders reject such tender offer or exchange offer and not tender their Company common stock into such tender offer or exchange offer, and (Z) within twelve months following such termination the Company enters into a definitive agreement to consummate, or consummates, the transactions contemplated by such Company Takeover Proposal (solely for purposes of this provision, the term “Company Takeover Proposal” will have the meaning set forth in the definition of Company Takeover Proposal contained in the non-solicitation covenant except that all references to 20% will be deemed references to 50%).

Notwithstanding the above, in the event the Reverse Termination Fee (as defined below) is paid (or required to be paid) by Nielsen in accordance with the terms described below in “— Reverse Termination Fee”, the Company will not be required to pay a Termination Fee.

Reverse Termination Fee

Nielsen will pay to the Company a termination fee in the amount of $131.0 million (the “Reverse Termination Fee”):

 

   

if Nielsen or the Company terminates the merger agreement (A) at the Outside Date or as a result of a breach by the Company of its representations, warranties or covenants and, at the time of such termination, (1) either the antitrust approval or injunction closing condition has not been satisfied (due to any antitrust law or judgment issued by any governmental entity under any antitrust law) or (2) litigation with any governmental agency of the U.S. federal government that is challenging the consummation of the merger under any antitrust law has been commenced or threatened in writing or such litigation could reasonably be expected, or (B) as a result of any judgment or law preventing the consummation of the merger (due to any antitrust law or judgment issued by any governmental entity under any antitrust law); or

 

   

if the Company terminates the merger agreement due to Nielsen’s or Merger Sub’s material breach of its obligation to use reasonable best efforts to obtain antitrust approval (and such breach is unable to be cured) such that the conditions to the Company’s obligation to consummate the merger would not be satisfied if the date of such termination was the Outside Date.

Nielsen is not required to pay the Reverse Termination Fee if (X) there has been a Willful Breach by the Company of its interim operation covenants, which breach, individually or in the aggregate with any other such breaches, has resulted or would reasonably be expected to result in a Company Material Adverse Effect or (Y) there has been a Willful Breach by the Company of certain of its other obligations under the merger agreement, including the Company’s covenants regarding no solicitation, preparation of the proxy statement, stockholders’ meeting, access to information, confidentiality, reasonable best efforts and certain covenants regarding the Company’s treatment of equity compensation. Notwithstanding that there has been a Willful Breach by the Company, Nielsen will be required to pay the Reverse Termination Fee unless Nielsen has promptly asserted, in a prior written notice delivered to the Company, any such Willful Breach and the Company has not cured such Willful Breach prior to the earliest of (1) thirty days after delivery of such written notice, (2) termination of the merger agreement by the Company and (3) the Outside Date. Nielsen will not deliver any notice of Willful Breach after either party delivers a notice of termination of the merger agreement.

For purposes of this proxy statement and the merger agreement “Willful Breach” means a material breach that is a consequence of an act undertaken, or a failure to act, which the breaching party knew, or reasonably should have known, would, or would reasonably be expected to, result in a breach of the merger agreement.

Extension of the Outside Date

The Outside Date is October 1, 2013, which may be extended no more than two times in the aggregate, each time by a period of 38 calendar days, upon the request of Nielsen or the Company and with the written consent of the other party (which consent will not be unreasonably withheld). A party may only request such an extension if (x) the conditions relating to antitrust approvals are not satisfied or litigation with any governmental entity that is challenging the consummation of the merger under the HSR Act or any other antitrust laws has been commenced or threatened and (y) such party reasonably believes, after consultation with outside legal counsel, that approvals

 

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necessary to satisfy the conditions relating to antitrust approval are reasonably likely to be obtained during such extension period or a subsequent permitted extension period. Further, Nielsen may only request an extension if (1) to the extent that Nielsen has asserted or is was aware of a Willful Breach by the Company of a covenant that would allow Nielsen to avoid payment of the Reverse Termination Fee, Nielsen has agreed in writing to waive such breach, and (2) Nielsen has paid to the Company $15 million for each such extension, which amount will be credited against the payment of the Reverse Termination Fee (if applicable), or, if no Reverse Termination Fee is payable to the Company, refunded to Nielsen by the Company as of, and subject to, the closing or within two business days following the termination of the merger agreement under circumstances when the Reverse Termination Fee is not payable.

Fees and Expenses

Except with respect to the Termination Fee or Reverse Termination Fee as described above, all fees and expenses incurred in connection with the merger agreement, the merger and the other transactions contemplated by the merger agreement will be paid by the party incurring such fees or expenses, whether or not the merger is consummated.

Amendment

The merger agreement may be amended by the parties thereto at any time before or after receipt the Company’s stockholders adopt the merger agreement; provided, however, that after the Company stockholder’s stockholders adopt the merger agreement, there will be made no amendment or waiver that by law requires further approval by the stockholders of the Company without the further approval of such stockholders.

Governing Law

The merger agreement is governed by Delaware law.

Specific Performance

The parties will have the right to seek specific performance of the terms of the merger agreement, in addition to any other remedy in law or equity to which they may be entitled; provided that if the Termination Fee or Reverse Termination Fee is paid pursuant to the merger agreement, such payment will be the sole and exclusive remedy of the non-paying party under the merger agreement.

 

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MARKET PRICE OF ARBITRON COMMON STOCK

The Company’s common stock is currently publicly traded on the NYSE under the symbol “ARB.” The following table sets forth the high and low sales prices per common share on the NYSE and the dividends declared per share for the periods indicated.

 

Fiscal Year

   High      Low      Cash
Dividends
Declared
Per Share
 

2011:

        

First Quarter

   $ 44.95       $ 35.29       $ 0.10   

Second Quarter

   $ 43.03       $ 35.23       $ 0.10   

Third Quarter

   $ 44.61       $ 30.46       $ 0.10   

Fourth Quarter

   $ 42.69       $ 32.42       $ 0.10   

2012:

        

First Quarter

   $ 38.00       $ 32.92       $ 0.10   

Second Quarter

   $ 39.98       $ 32.34       $ 0.10   

Third Quarter

   $ 38.91       $ 33.83       $ 0.10   

Fourth Quarter

   $ 47.20       $ 34.64       $ 0.10   

2013:

        

First Quarter (through March 12, 2013)

   $ 47.17       $ 46.56       $ 0.10   

On December 17, 2012, the last full trading day prior to the announcement of the merger agreement, the high and low sales prices per share for our common stock as reported on the NYSE were $38.30 and $37.42, respectively. On March 12, 2013, the most recent practicable trading day before this proxy statement was printed, the high and low sales prices per share for our common stock as reported on the NYSE were $46.93 and $46.88, respectively. We had 2,742 stockholders of record at the close of business on March 8, 2013, the record date for the special meeting.

Arbitron has historically paid regular quarterly cash dividends on its common stock. Pursuant to the merger agreement, without the prior written consent of Nielsen, Arbitron may not pay any dividends or distribution with respect to Arbitron capital stock, other than regular quarterly cash dividends on the Company common stock equal to the rate paid during the full fiscal quarter immediately preceding the date of the merger agreement with record and payment dates consistent with past practice or dividends and distributions by a direct or indirect Company subsidiary to its parent.

The market price of our common stock is subject to fluctuation. As a result, stockholders are urged to obtain current market quotations before making any decision with respect to the merger. No assurance can be given concerning the market price for our common stock before the effective time.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our common stock on March 8, 2013 for the following: (a) each of our directors and named executive officers; (b) all of our directors and executive officers as a group; and (c) each person known by us to own more than 5% of our common stock. Except as otherwise indicated below, the address of the stockholders listed below is 9705 Patuxent Woods Drive, Columbia, Maryland 21046.

 

                Other(2)        

Name of Beneficial Owner

  Shares
Beneficially
Owned(1)
    Percentage
Beneficially
Owned(1)
    Deferred
Stock Units
    Dividend
Equivalents
    Total  

Directors and Certain Executive Officers:

         

Shellye L. Archambeau(3)

    58,926        *        3,509        170        65,605   

David W. Devonshire(3)(4)

    38,413        *        3,102        92        41,607   

John A. Dimling(4)

    974        *        6,860        189        8,023   

Erica Farber(3)

    17,207        *        2,320        81        19,608   

Ronald G. Garriques

    50        *                      50   

Philip Guarascio(3)(4)

    72,182        *        3,102        219        75,503   

William T. Kerr

    257,155        *                      257,155   

Larry E. Kittelberger(3)(4)

    32,476        *        8,118        520        41,114   

Luis G. Nogales(3)(4)

    53,653        *        3,102        286        57,041   

Richard A. Post(3)(4)

    25,022        *        6,162        323        31,507   

Debra Delman

    44        *                      44   

Sean R. Creamer(3)

    278,230        1.03                   278,230   

Gregg Lindner(3)

    20,793        *                      20,793   

Timothy T. Smith(3)

    148,496        *                      148,496   

Carol Hanley(3)

    58,759        *                      58,759   

All directors and executive officers as a group (19 persons)(3)(4)

    1,221,094        4.38      

5% Stockholders:

         

BlackRock, Inc.

         

BlackRock Institutional Trust Company, N.A.

         

BlackRock Fund Advisors

         

BlackRock Asset Management Canada Limited

         

BlackRock Asset Management Australia Limited

         

BlackRock Advisors, LLC

         

BlackRock Asset Management Ireland Limited

         

BlackRock Investment Management, LLC

         

BlackRock Advisors (UK) Limited

         

BlackRock Investment Management (UK) Limited

         

BlackRock International Limited(5)
40 East 52nd Street
New York, New York 10022

    3,142,921        11.78      

Wellington Management Company, LLP(6)
280 Congress Street
Boston, Massachusetts 02210

    1,838,924        6.89      

Wellington Trust Company, NA(7)
280 Congress Street
Boston, Massachusetts 02210

    1,645,360        6.29      

Morgan Stanley (8)
1585 Broadway
New York, New York 10036

    1,617,429        6.20      

The Vanguard Group, Inc.

         

Vanguard Investments Australia, Ltd.

         

Vanguard Fiduciary Trust Company(9)
100 Vanguard Blvd.,
Malvern, Pennsylvania 19355

    1,572,904        6.01      

Morgan Stanley Capital Services LLC (8)
1585 Broadway
New York, New York 10036

    1,537,241        5.90      

 

  * Represents less than 1%

 

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