10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

þ	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2004
or
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from            to

Commission file number: 1-1969

Arbitron Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 52-0278528
(I.R.S. Employer Identification No.)

142 West 57th Street

New York, New York 10019

(Address of principal executive offices) (Zip Code)

(212) 887-1300

(Registrant’s telephone number, including area code)

     Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Registered	Name of Each Exchange on Which Registered
Common Stock, par value $0.50 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.     Yes x          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in the Exchange Act Rule 12b-2).     Yes x          No o

      The aggregate market value of the registrant’s common stock as of June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter (based upon the closing sale price of Arbitron’s common stock as reported by the New York Stock Exchange on that date), excluding outstanding shares beneficially owned by executive officers and directors of Arbitron, was approximately $1,136,800,000.

      Common stock, par value $0.50 per share, outstanding as of February 28, 2005: 31,219,978 shares

DOCUMENTS INCORPORATED BY REFERENCE

      Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2005 annual meeting of stockholders, which proxy statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2004.

TABLE OF CONTENTS

		Page No.
FORWARD-LOOKING STATEMENTS			5
PART I
ITEM 1.	BUSINESS		6
	Overview		6
	Industry Background and Markets		7
	Radio Audience Measurement Services		8
	Software Applications		11
	Local Market Consumer Information Services		12
	Arbitron Cable Services		13
	Arbitron Outdoor and Out-of-Home Services		14
	Custom Research Services		14
	Arbitron Online Radio Ratings Services		14
	International Operations		14
	Strategy		15
	Customers, Sales and Marketing		15
	Competition		17
	Intellectual Property		17
	Research and Development		18
	Governmental Regulation		18
	Employees		19
	Seasonality		19
	Business Risks		19
	Available Information		27
ITEM 2.	PROPERTIES		27
ITEM 3.	LEGAL PROCEEDINGS		28
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		28
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		28
ITEM 6.	SELECTED FINANCIAL DATA		29
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		30
	Overview		30
	Critical Accounting Policies and Estimates		32
	Results of Operations		34
	Liquidity and Capital Resources		37
	Off-Balance Sheet Arrangements		39
	New Accounting Pronouncements		40
	Seasonality		40

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		Page No.
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		40
	Interest Risk		40
	Foreign Currency Risk		40
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		40
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		66
ITEM 9A.	CONTROLS AND PROCEDURES		66
	Evaluation of Disclosure Controls and Procedures		66
	Management’s Report on Internal Control Over Financial Reporting		66
	Changes in Internal Control Over Financial Reporting		66
ITEM 9B.	OTHER INFORMATION		66
PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		67
ITEM 11.	EXECUTIVE COMPENSATION		67
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		67
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		68
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		68
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		68
SIGNATURES			71

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      Arbitron owns or has the rights to various trademarks, trade names or service marks used in its radio audience measurement business and subsidiaries, including the following: the Arbitron name and logo, RetailDirect®, RADAR®, Tapscan®, Tapscan WorldWide®, LocalMotion®, Maximi$er®, Maximi$er® Plus, Arbitron PD Advantage®, SmartPlus®, Arbitron Portable People Meter™, Marketing Resources Plus^TM, MRP^TM, PrintPlus^TM, MapMAKER Direct^SM, Media Professional^SM, Media Professional Plus^SM, Qualitap^SM, MediaMaster^SM, Prospector^SM, and Schedule-It^SM.

      The trademark Windows® referred to in this Annual Report on Form 10-K is the registered trademark of others.

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FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Arbitron in this document that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,” or comparable terminology, are forward-looking statements based on current expectations about future events, which Arbitron has derived from information currently available to it. These forward-looking statements involve known and unknown risks and uncertainties that may cause our results to be materially different from results implied in such forward-looking statements. These risks and uncertainties include whether we will be able to:

•  renew all or part of contracts with large customers as they expire;

•  successfully execute our business strategies, including implementation of our Portable People Meter services;

•  effectively manage the impact of consolidation in the radio and advertising agency industries;

•  keep up with rapidly changing technological needs of our customer base, including creating new proprietary software systems and new customer products and services that meet these needs in a timely manner;

•  successfully manage the impact on our business of any economic downturn generally and in the advertising market in particular; and

•  successfully manage the impact on costs of data collection due to privacy concerns and/or government regulations.

      Additional important factors known to Arbitron that could cause forward-looking statements to turn out to be incorrect are identified and discussed from time to time in Arbitron’s filings with the Securities and Exchange Commission, including in particular the risk factors discussed under the caption “ITEM 1. BUSINESS — Business Risks” in this Annual Report on Form 10-K.

      The forward-looking statements contained in this document speak only as of the date hereof, and Arbitron undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I

ITEM 1. BUSINESS

      Arbitron Inc., a Delaware corporation, was formerly known as Ceridian Corporation (“Ceridian”). Ceridian was formed in 1957; however, its predecessors began operating in 1912. Arbitron’s audience research business commenced in 1949. Arbitron’s principal executive offices are located at 142 West 57th Street, New York, New York 10019, and the telephone number is (212) 887-1300.

      Prior to March 30, 2001, Ceridian was a publicly traded company whose principal lines of business were the human resource service businesses, the Comdata business, which provided transaction processing and regulatory compliance services for the transportation industry, and the radio audience measurement business.

      On March 30, 2001, Ceridian completed a reverse spin-off, which is referred to as the “spin-off.” In connection with the spin-off, the assets and liabilities associated with the human resource service businesses and Comdata subsidiaries were transferred to a newly formed company named “New Ceridian.” The radio audience measurement business stayed with Ceridian. Ceridian then distributed the stock of New Ceridian to all of Ceridian’s existing stockholders. As a result, New Ceridian is now a separate publicly traded corporation. In connection with the spin-off, Ceridian changed its name to Arbitron Inc. and effected a one-for-five reverse stock split, and New Ceridian changed its name to Ceridian Corporation. Because of the relative significance of the businesses transferred to New Ceridian, New Ceridian was considered the accounting successor to Ceridian for financial reporting purposes.

      The terms “Arbitron” or the “Company” as used in this document refer to Arbitron Inc. and its subsidiaries.

Overview

      Arbitron is an international media and marketing research firm primarily serving radio, cable television, advertising agencies, advertisers, outdoor and out-of-home media and, through its Scarborough joint venture, broadcast television and print media. Arbitron currently has four main services:

•  measuring radio audiences in local markets in the United States and Mexico;

•  measuring national radio audiences and the audience size of network radio programs and commercials;

•  providing application software used for accessing and analyzing media audience and marketing information data; and

•  providing consumer, shopping and media usage information services to radio, cable television, advertising agencies, advertisers, retailers, outdoor and out-of-home media, online industries and, through its Scarborough joint venture, broadcast television and print media.

      Arbitron provides radio audience measurement and related services in the United States to radio stations, advertising agencies and advertisers. Arbitron estimates the size and demographics of audiences of radio stations in local markets in the United States and reports these estimates and related data to its customers. This information is used for advertising transactions in the radio industry. Radio stations use Arbitron’s data to price and sell advertising time, and advertising agencies and advertisers use Arbitron’s data in purchasing advertising time. Arbitron also measures the three largest radio markets in Mexico: Mexico City, Guadalajara and Monterrey.

      Arbitron’s Radio All Dimension Audience Research (“RADAR”) service measures national radio audiences and the audience size of network radio programs and commercials.

      Arbitron also provides software applications that give its customers access to Arbitron’s estimates resident in its proprietary database and that enable them to more effectively analyze and understand that information for sales, management and programming purposes.

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      In addition to its core radio ratings service, which provides primarily quantitative data such as how many people are listening, Arbitron also provides qualitative data on listeners, viewers and readers that contain detailed socioeconomic information and information regarding what the respondents buy, where they shop and what forms of media they use. Arbitron provides these qualitative measurements of consumer demographics, retail behavior and media usage in local markets throughout the United States. Arbitron Cable provides qualitative audience information to the advertising sales organizations of local cable companies. Arbitron Outdoor provides these qualitative measurements to outdoor and out-of-home media sales organizations.

      Arbitron Online Radio Ratings Services measures the audiences of audio on the Internet and offers custom research solutions to the industry. In late 2004, Arbitron and comScore Networks, Inc. began to produce a monthly study of online radio ratings.

      Through its CSW Research Limited (“Continental Research”) subsidiary, Arbitron provides media, advertising, financial, public sector, telecommunications and Internet research services in the United Kingdom and elsewhere in Europe.

      Arbitron’s quantitative radio audience measurement business and related software revenues have historically accounted for a substantial majority of its revenue. The radio audience measurement service and related software revenues represented approximately 85 percent of Arbitron’s total 2004 revenue. Arbitron’s revenue from domestic sources and international sources was 96 percent and four percent, respectively, for the year ended December 31, 2004.

Industry Background and Markets

      Since 1965, Arbitron has delivered to the radio industry reliable and timely radio audience information collected from a representative sample of radio listeners. The presence of credible audience estimates in the radio industry has helped radio stations to price and sell advertising time, and advertising agencies and advertisers to purchase advertising time. The Arbitron ratings have also become a valuable tool for use in radio programming, distribution and scheduling decisions.

      The consolidation of radio station ownership in the United States has tended to intensify competition for advertising dollars both within the radio industry and between radio and other forms of media. At the same time, audiences have become more fragmented. As a result, advertisers have increasingly sought to tailor their advertising strategies to target specific demographic groups through specific media. The audience information needs of radio broadcasters, advertising agencies and advertisers have correspondingly become more complex. Increased competition and more complex information requirements have heightened the need of radio broadcasters for improved information management systems and more sophisticated means to analyze this information. In addition, there is a demand for high-quality radio audience information internationally from global advertisers, United States broadcasters who have acquired broadcasting interests in other countries and an increasing number of private commercial broadcasters in other countries.

      As the importance of reaching niche audiences with targeted marketing strategies increases, broadcasters, publishers, advertising agencies and advertisers increasingly require that information regarding exposure to advertising be provided on a more individualized basis and that this information be coupled with more detailed information regarding lifestyles and purchasing behavior. The need to integrate purchase data information with advertising exposure information may create opportunities for innovative approaches to satisfy these information needs.

      Arbitron provides cable companies with qualitative audience information concerning consumer demographics and retail behavior of cable audiences and software applications.

      Outdoor and out-of-home media advertising companies have indicated a need for audience information to increase their revenues particularly as this industry segment has expanded to introduce “place-based” media in new locations such as malls, airports and cinemas. According to Outdoor Advertising Association of America, Inc., in 2003, advertisers spent $5.5 billion on outdoor and out-of-home media advertising in the United States, but audience information for these advertisers is minimal. In response to this need, Arbitron provides qualitative audience information and software programs that help show advertisers that outdoor and

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out-of-home advertising is an effective way to reach the people who purchase advertisers’ products and services. In addition, Arbitron has been working with the outdoor and out-of-home media industry to help them utilize consumer information services in selling their advertising.

Radio Audience Measurement Services

      Collection of Listener Data Through Diary Methodology. Arbitron uses listener diaries to gather radio listening data from sample households in 293 U.S. local markets for which it currently provides radio ratings. Participants in Arbitron surveys are selected at random by telephone number. When participants (known as “diarykeepers”) agree to take part in a survey, they are mailed a small pocket-sized diary and asked to record their listening in it over the course of a seven-day period. Participants are asked to report in their diary what station(s) they are listening to, when they are listening and where they are listening, such as home, car, work or other place. Although survey periods are 12 weeks long, no one keeps a diary for more than seven days. Each diarykeeper receives a diary, instructions for filling it out and a small cash incentive. The incentive varies according to markets, and the range is generally $1.00 to $6.00 for each diarykeeper in the household and up to $10.00 in certain incentive programs for returned diaries. Diarykeepers mail the diaries to Arbitron’s operations center in Columbia, Maryland, where Arbitron conducts a series of quality control checks, enters the information into its database and produces periodic audience measurement estimates. Arbitron processes more than 1.4 million diaries every year to produce its audience listening estimates. All markets are measured at least twice each year, and major markets are measured four times per year. Arbitron’s proprietary data regarding radio audience size and demographics are generally then provided to customers through multiyear license agreements.

      One of the challenges in measuring radio listening is to ensure that the composition of survey respondents is representative of the market being measured. Arbitron strives to achieve representative samples. For example, if eight percent of the population of a given market is composed of women aged 18 to 34, Arbitron works to achieve that eight percent of the diarykeepers in the sample are women aged 18 to 34. Therefore, each diarykeeper’s listening should effectively represent not only the diarykeeper’s personal listening but also the listening of the demographic segment in the market overall. In striving to achieve representative samples, Arbitron provides enhanced incentives to certain demographic segments to encourage participation. In markets with high concentrations of Hispanic households, Arbitron also uses Spanish-language interviewers and materials to reach Spanish-speaking households.

      Arbitron invests in quality improvements for its radio audience measurement service. Arbitron’s current quality improvement initiatives include the following:

•  improve ethnic measurement;

•  improve small market ratings services;

•  improve qualitative services for medium and small markets; and

•  accelerate the delivery of audience measurement services for some markets.

      Since the early 1990s, Arbitron has implemented programs designed to:

•  encourage higher survey response rates;

•  increase sample by up to 70 percent in a majority of surveyed markets;

•  improve the sample representation of young men;

•  maintain proportional representation of African-Americans and Hispanics;

•  increase survey frequency so that all markets are measured at least twice each year (Spring and Fall) and major markets are measured four times per year (Spring, Summer, Fall and Winter);

•  add consumer socioeconomic questions to its standard radio diary in all markets;

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•  add consumer and retail questions to its standard radio diary in small markets; and

•  allow smaller markets to further increase their sample.

      Portable People Meter. In response to a growing demand to develop a more efficient method of capturing media exposure information, Arbitron has developed a Portable People Meter system capable of measuring radio, television, cable, Internet broadcasts, satellite radio and television audiences, and retail store video and audio broadcasts. The Portable People Meter is a small mobile phone-sized device that is worn or carried by a survey participant throughout the day. It automatically detects inaudible codes that radio, broadcast television, cable, Internet and satellite radio and satellite television providers embed in the audio portion of their programming using encoders provided by Arbitron. These proprietary codes identify the media that a participant is exposed to throughout the day without the person having to engage in manual recording activities. At the end of each day, the meter is placed into a base station that recharges the device and sends the collected codes to Arbitron for tabulation.

      There are several advantages of the Portable People Meter system. It is simple and easy for respondents to use. It requires no button pushing (which disrupts media use), no recall, and no effort to identify and write down channels or radio stations tuned to by respondents. The Portable People Meter is able to passively detect exposure to encoded media by identifying each source through unique identification codes. The Portable People Meter will help support the media industry’s increased focus on accountability to advertisers for the investments made by advertisers. It will help to shorten the time period between when advertising runs and when audience delivery is reported and will provide multimedia measurement from the same respondent. Since Portable People Meter panels have larger weekly and monthly samples, more stable trends are expected. In addition, the Portable People Meter is capable of measuring new digital platforms, time-shifted broadcasts and retail, sports and music venues.

      Arbitron entered into an agreement on May 31, 2000, with Nielsen Media Research, Inc. (“Nielsen Media Research”), a provider of U.S. television and cable audience measurement services, under which Arbitron granted Nielsen Media Research an option to join Arbitron in the potential commercial deployment of the Portable People Meter in the United States. Nielsen Media Research is a subsidiary of VNU, Inc. In the event Nielsen Media Research exercises the option, the parties would form a joint venture to commercially deploy and operate the business of utilizing the Portable People Meter for the collection of listening and viewing audience data. Recognizing that the commercial deployment of the Portable People Meter is risky and costly, Arbitron believes that a joint venture with Nielsen Media Research creates a significantly greater likelihood of successful commercial deployment than other alternatives.

      Under the terms of the option agreement, Arbitron and Nielsen Media Research would each be licensed to use the data generated by the jointly deployed Portable People Meter in their respective media measurement services. The division of revenues from Internet data remains to be negotiated by the parties. The costs, expenses and capital expenditures for operating a joint venture would be shared by Arbitron and Nielsen Media Research. Arbitron would receive a royalty from Nielsen Media Research.

      Arbitron retains the right under the option agreement at any time to license, test and/or implement a commercial deployment of the Portable People Meter and the technology contained in the Portable People Meter outside of the United States. In the event Nielsen Media Research exercises its option to form the joint venture in the United States, Nielsen Media Research also has the option to purchase from Arbitron, at fair value, a portion of Arbitron’s interest, up to 49 percent, in all audience measurement business activities arising out of the commercial deployment of the Portable People Meter and the technology contained in the Portable People Meter outside of the United States.

      After conducting its first market trial of the Portable People Meter in Manchester, England, in 1999, Arbitron conducted a market trial in Wilmington, Delaware, in 2000 and 2001. In late 2001 through 2003, Arbitron conducted a market trial for the television and radio markets in Philadelphia.

      In the first quarter of 2003, Arbitron and Nielsen Media Research entered into an agreement to expand their relationship to include a number of research initiatives that were supported in part by increased financial involvement and commitment of resources from Nielsen Media Research. In 2003, Arbitron worked with

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Nielsen Media Research regarding response rate issues and a variety of engineering tests. In 2004, Arbitron reported on the outcomes of three collaborative tests of the Portable People Meter that were conducted with Nielsen Media Research in the Philadelphia market. Although Nielsen Media Research’s financial contributions to date for 2004 were lower than in 2003, the full amount of Nielsen Media Research’s financial contributions for 2004 joint activities have not yet been finalized.

      In the third quarter of 2004, Arbitron began recruiting consumers to participate in a market demonstration to be conducted by Arbitron in Houston, Texas, in 2005 and 2006 to confirm the results of previous tests and demonstrate enhancements to the Portable People Meter system that have been made since it was tested in Philadelphia. In addition, Arbitron is participating in a Portable People Meter business impact study that is being led by the Radio Advertising Bureau to research the impact on the radio industry of electronic measurement and the transition from diaries to the Portable People Meter for radio audience measurement. The study should be completed in the second quarter of 2005.

      The Portable People Meter may potentially be used to measure outdoor and out-of-home media, print, commercials, retail store audio, and entertainment audio, such as movies and video games.

Portable People Meter — National Marketing Panel

      Arbitron began testing additional marketing research applications of the Portable People Meter technology in 2003. On September 29, 2004, Arbitron announced that Arbitron and VNU, Inc. have agreed to jointly explore the development of a new national marketing research service. Procter & Gamble is also collaborating with the two companies to help ensure that the service properly addresses the needs of marketers. The option agreement previously discussed also provides VNU, Inc., through its companies Nielsen Media Research and AC Nielsen (US), Inc., with an option to join Arbitron in the proposed national marketing panel.

      This innovative service would consist of a panel of participants, each of whom would receive incentives, to carry Arbitron’s Portable People Meter that would collect the participants’ exposure to multiple media sources. Data on consumer preferences and purchases for a wide range of services and products would also be collected from panelists, electronically and through surveys, with the expectation of using households from AC Nielsen’s Homescan consumer panel, which currently tracks packaged-goods purchases. Data would be collected in aggregate form to provide an understanding of participants’ media interactions and their resulting shopping and purchasing behavior. The ultimate objective would be to provide advertisers with an enhanced ability to determine the return on investment for their marketing efforts.

      Methodology testing in 2004 showed encouraging results in that panelists scanned their purchases, answered lifestyle and attitude questions and carried the Portable People Meter at reasonable rates. In October 2004, Procter & Gamble announced its intention to become the first customer of the proposed service. Since the fourth quarter of 2004, Arbitron and VNU, Inc. have been canvassing the advertiser marketplace to determine if there is an acceptable level of interest to further develop a proposed service which would likely commence in 2006.

Portable People Meter — International

      Arbitron has entered into commercial agreements with a number of international media information services companies in which the companies have been granted a license to use Arbitron’s encoding technology in their audience measurement services in specific countries outside the United States.

      BBM Canada (“BBM”), a Canadian audience measurement service, has a license to use Arbitron’s Portable People Meter audience measurement technology in its service. As of January 1, 2005, BBM, the Canadian industry cooperative for audience ratings, made the Portable People Meter the official ratings system for buying and selling commercial airtime on French-language television in the markets of Quebec and Montreal.

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      Arbitron has also entered into a commercial license with TNS, a United Kingdom company, to use Arbitron’s Portable People Meter system in Belgium and entered into a separate commercial license with TNS to use Arbitron’s Portable People Meter technology and its audio encoding technology for radio and television audience measurement in selected countries in Europe, Asia-Pacific, the Middle East and Africa. In addition, Arbitron has entered into evaluation agreements with other audience measurement companies in various countries.

      Radio Market Report and Other Reports. Arbitron’s listening estimates are provided in a number of different reports that are published and licensed to its customers. The cornerstone of Arbitron’s radio audience measurement services is the Radio Market Report, which is available in all local markets for which Arbitron currently provides radio ratings. The Radio Market Report provides audience estimates for those stations in a market that meet Arbitron’s Minimum Reporting Standards. The estimates cover a wide variety of demographics and dayparts, which are the time periods for which audience estimates are reported. Each Radio Market Report contains estimates to help radio stations, advertising agencies and advertisers understand who is listening to the radio, which stations they are listening to, and the time and location of the listening.

      In addition to the Radio Market Report, Arbitron provides additional services, such as its Radio County Coverage Reports, Hispanic Radio Data and Black Radio Data. Radio County Coverage is an annual study that is published each spring and provides radio audience estimates for almost every county in the contiguous United States, plus metropolitan counties in Alaska and Hawaii. Radio County Coverage Reports are available by the county, by the state or for the whole country. Hispanic Radio Data are available on CDs and are issued twice a year. Information is collected from bilingual diaries placed in Hispanic homes. Black Radio Data provide radio listening estimates for African-American audiences and are available on CDs either once or twice a year, depending on the market.

      RADAR. The RADAR service provides a measurement of national radio audiences and the audience size of network radio programs and commercials. The audience measurements are provided for a wide variety of demographics and dayparts for total radio listening and for 46 separate radio networks.

      Network audience estimates are created by merging the radio listening of selected survey respondents with the actual times that network programs and commercials are aired on each affiliated station. RADAR estimates are delivered through Arbitron’s PC 2010 software application, which includes a suite of products for sophisticated analysis of network audiences. This service is provided to radio networks and advertising agencies and network radio advertisers.

      In 2003, Arbitron completed its conversion from a telephone-based RADAR survey to one based exclusively on a 12-month sample of 50,000 Arbitron diaries. The RADAR survey sample increased to 80,000 Arbitron diaries in March 2005.

Software Applications

      In addition to its reports, Arbitron licenses software applications that provide access to Arbitron audience estimates resident in its proprietary database. These applications enable customers to more effectively analyze and understand that information for sales, management and programming purposes. These services also enable customers to further refine sales strategies and compete more effectively for advertising dollars.

      Arbitron’s Tapscan family of software solutions is used by many radio stations, advertising agencies and advertisers. The Tapscan software is one of the advertising industry’s leading radio analysis applications. It can help create insightful charts and graphs that make complicated information more useful to potential advertisers. Other features include prebuy research including frequency-based tables, cost-per-point analysis, hour-by-hour and trending, use of respondent-level radio data, automatic scheduling and goal tracking, instant access to station format and contact information. Another Tapscan service, Qualitap, is also made available to television and cable outlets in the United States under a licensing arrangement with Marketron International, Inc.

      Arbitron offers other key software applications to its radio clients, including Maximi$er and Maximi$er Plus, which are services for radio stations, and Media Professional and Media Professional Plus, which are

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services for advertising agencies and advertisers. These software applications offer respondent-level database access, which allows radio stations, advertising agencies and advertisers to customize survey areas, dayparts, demographics and time periods to support targeted marketing strategies. The Maximi$er service includes a Windows-based application to access a market’s entire radio diary database on a client’s personal computer. Radio stations use the Maximi$er service to produce information about their station and programming not available in Arbitron’s published Radio Market Reports. The Maximi$er Plus service allows radio stations to access Arbitron’s National Regional Database (“NRD”) to analyze ratings information for customer-defined groupings of stations in multiple markets and counties. The Media Professional service is designed to help advertising agencies and advertisers plan and buy radio advertising time quickly, accurately and easily. The easy-to-use software integrates radio planning and buying into one comprehensive research and media-buying tool. It allows advertising agencies and advertisers to uncover key areas critical to the buying process, including determining the most effective media target, understanding market trends, and identifying potential new business. The Media Professional Plus service allows advertising agencies and advertisers to access Arbitron’s NRD to create custom geographies and trade areas using radio Metro, DMA and/or county information. Media Professional Plus also provides the data on a specific trading area’s cost per point needed to help advertising agencies and advertisers place more efficient media buys. The MapMAKER Direct service analyzes where the radio audience lives and works to provide detailed maps and reports. Program directors can use this service to better understand their listeners and better target their promotional efforts. Arbitron’s PD Advantage service offers radio station program directors the ability to create a variety of reports that help analyze the market, the audience and the competition.

      On March 11, 2004, Arbitron acquired certain assets of Marketing Resources Plus (“MRP”) from Interactive Market Systems, Inc., part of the VNU Media Measurement and Information Group, for $8.9 million in cash. MRP is a provider of media buying software systems to local and regional advertising agencies for broadcast and print media. MRP develops, markets and supports a suite of software services used by approximately 800 advertisers and advertising agencies across the United States.

Local Market Consumer Information Services

      In its core radio ratings service, Arbitron provides primarily quantitative data, such as how many people are listening. Arbitron also provides qualitative data, such as consumer and media usage information, to radio stations, cable companies, television stations, outdoor and out-of-home media, magazine and newspaper publishers, advertising agencies and advertisers. The qualitative data on listeners, viewers and readers provide more detailed socioeconomic information and information on what respondents buy, where they shop and what forms of media they use. Arbitron provides these measurements of consumer demographics, retail behavior and media usage in 271 local markets throughout the United States.

      Arbitron provides four qualitative services tailored to fit a customer’s specific market size and marketing requirements:

•  Scarborough Report, which is offered in larger markets;

•  RetailDirect, which is available in medium markets; and

•  Qualitative Diary Service and LocalMotion, which are offered in smaller markets.

      Each service profiles a market, the consumers and the media choices in terms of key characteristics. These four services cover the major retail and media usage categories. Arbitron provides training and support services that help its customers understand and use the local market consumer information Arbitron provides them.

      Scarborough Report. The Scarborough service is provided through a joint venture between Arbitron and SRDS, Inc., a subsidiary of VNU, Inc. Although Arbitron’s interest in the Scarborough Research joint venture is 49.5 percent, partnership voting rights and earnings are divided equally between Arbitron and SRDS, Inc. The Scarborough service provides detailed information about media usage, retail and shopping habits, demographics and lifestyles in 75 large United States markets, utilizing a sample of consumers in the relevant markets. Scarborough data features more than 500 retail and lifestyle characteristics, which can help

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radio stations, television stations, cable companies, advertising agencies and advertisers, newspaper and magazine publishers, and outdoor and out-of-home media companies provide an in-depth profile of their consumers. Examples of Scarborough categories include retail shopping (e.g., major stores shopped or purchases during the past 30 days), auto purchases (e.g., plan to buy new auto or truck), leisure activities (e.g., attended sporting event) and personal activities (e.g., golfing). Media information includes broadcast and cable television viewing, radio listenership, newspaper readership by section, magazine readership and yellow pages usage. This information is provided twice each year to newspapers and magazines, radio and television broadcasters, cable companies, outdoor and out-of-home media, advertising agencies and advertisers in the form of the Scarborough Report. Arbitron is the exclusive marketer of the Scarborough Report to radio broadcasters, cable companies, and outdoor and out-of-home media. Arbitron also markets the Scarborough Report to advertising agencies and advertisers on a shared basis with Scarborough Research. Scarborough Research markets the Scarborough Report to newspapers, magazines and online service providers. Nielsen Media Research, a subsidiary of VNU, Inc., markets the Scarborough Report to television broadcasters.

      RetailDirect. Arbitron’s RetailDirect service is a locally oriented, purchase data and media usage research service provided in 24 mid-sized United States markets. This service, which utilizes diaries and telephone surveys, provides a profile of the audience in terms of local media, retail and consumer preferences so that local radio and television broadcasters, outdoor and out-of-home media, and cable companies have information to help them develop targeted sales and programming strategies. Retail categories include automotive, audio-video, furniture and appliances, soft drinks and beer, fast food, department stores, grocery stores, banks and hospitals. Media usage categories include local radio, broadcast television, cable networks, outdoor and out-of-home media, newspapers, yellow pages and advertising circulars.

      Qualitative Diary Service. Arbitron’s Qualitative Diary Service collects consumer and media usage information from Arbitron radio diarykeepers in 172 smaller United States markets. The same people who report their radio listenership in the market also answer more than 23 product and service questions. Consumer behavior information is collected for key local market retail categories, such as automotive sales, grocery, fast food, furniture and bedding stores, beer, soft drinks and banking. The Qualitative Diary Service also collects information about other media, such as television news viewership, cable television viewing, outdoor and out-of-home media exposure and newspaper readership. The qualitative service for cable companies, known as LocalMotion, is available in 172 markets. This service provides detailed information about demographics, retail and shopping habits, and lifestyles of cable subscribers. Offering personal viewing information on 24 different cable networks, LocalMotion provides such information as what percentages of a retailer’s customers and prospects have cable television, what cable networks its customers are watching and other socioeconomic data.

Arbitron Cable Services

      Arbitron provides its local market consumer information services to media other than radio, including cable television. Feedback from Arbitron’s cable customers suggests that the cable industry is in need of improved local measurement systems because current quantitative measurement methods, such as diaries and television meter-based measurement systems, have not provided adequate depth of demographic information on the audiences of cable networks. Without solid measures of demographic audiences at the local market level, cable may not be achieving its full potential of local and national advertising revenues. In response to this need, Arbitron Cable provides cable companies with qualitative audience information and software programs concerning consumer demographics and retail behavior of cable audiences.

      Arbitron believes that its Portable People Meter technology is well suited for the cable industry. Arbitron expects that its Portable People Meter will provide a reliable, accepted local audience measurement service for the cable industry. Arbitron also envisions that the Portable People Meter data could be linked to consumer/client databases to optimize cable campaigns to enhance local/ national spot sales efforts; validate audiences of national cable networks, regional sports and entertainment channels and local origination channels; provide valuable insights into local audience size and demographics of cable networks; deliver targeted schedule recommendations for cross-channel promotional campaigns; maximize the promotional and advertising sales power of local cable channels; and provide in-depth information on the electronic media

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usage of cable subscribers for media planning. If a joint venture with Nielsen Media Research is formed, it is anticipated that Nielsen Media Research would be licensed to use the Portable People Meter data to provide audience measurement services to cable companies in the United States.

Arbitron Outdoor and Out-of-Home Services

      Arbitron provides its local market consumer information services to outdoor and out-of-home media companies. This industry segment has expanded to introduce “placed-based” media in new locations such as malls, airports and cinemas. Arbitron is working with the outdoor and out-of-home media industry to help them utilize consumer information services in selling their advertising. Arbitron seeks to use the expertise and resources from its many years of audience measurement to assist outdoor and out-of-home media companies and their advertisers to identify and reach their audiences.

Custom Research Services

      Arbitron is in the process of expanding its custom research efforts to serve emerging advertising media. For example, Arbitron has contracts to produce audience listening estimates for Chinese-language radio and to produce custom research studies for satellite radio providers and out-of-home/place-based media.

Arbitron Online Radio Ratings Services

      Arbitron Online Radio Ratings Services measures the audiences of audio on the Internet. In late 2004, Arbitron and comScore Networks, Inc. began to produce a monthly study of online radio ratings.

International Operations

CSW Research Limited (“Continental Research”)

      Through its Continental Research subsidiary, Arbitron provides media, advertising, financial, public sector, telecommunications and Internet research services in the United Kingdom and elsewhere in Europe.

      Media. Continental Research’s media clients cover the full spectrum of traditional and new media, with particular strength in the television and radio markets. Its media services include measuring audiences, evaluating existing services and building forecasting models.

      Advertising. Continental Research evaluates every stage of the advertising process: from strategy development, creative development, pre-campaign testing, pre- and post-advertising and tracking, and on-air coincidental studies, to analysis of those responding to the campaign, and consumers who purchased the advertised products.

      Financial. Continental Research’s experience in business-to-business financial research ranges from new product development to market measurement to advertising tracking. When conducting financial research and other business and consumer studies, Continental Research uses The Million Plus Panel, which comprises a pool of approximately 3.7 million United Kingdom residents and holds up to 3,000 demographic, lifestyle and purchasing details for each resident.

      Public Sector. Continental Research’s public sector services provide surveys for central and local governments and individual government departments and regulatory bodies. Continental Research designs cost-effective, targeted studies that provide government departments with information regarding their initiatives to become more customer-focused.

      Telecommunications and Internet. Continental Research’s telecommunications and Internet projects have ranged from local area markets to multinational markets and have examined pricing, promotion, billing, product differentiation, advertising effectiveness, distribution systems, customer satisfaction, market estimation and new product development research.

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Mexico

      The Arbitron syndicated radio audience measurement service provides audience estimates covering a wide variety of demographics and dayparts for the three largest radio markets in Mexico: Mexico City, Guadalajara and Monterrey. This service also provides qualitative information concerning consumer and media usage in Mexico.

Strategy

      Arbitron’s objectives are to grow its radio audience measurement business and to expand its audience measurement services to a broader range of media types, including broadcast television, cable, outdoor and out-of-home media, satellite radio and television and Internet broadcasts. Key elements of Arbitron’s strategy to pursue these objectives include:

•  Continue to invest in quality improvements in its radio audience measurement services and to develop new revenue sources. Additionally, Arbitron believes that a growth opportunity exists in the advertiser market and intends to seek to expand its customer base of advertisers by developing and marketing new information services designed to assist corporate advertisers in implementing targeted marketing strategies.

•  Build on Arbitron’s experience in the radio audience measurement industry and its Portable People Meter technology to expand into measurement services for other types of media. Arbitron is testing methodologies to measure outdoor and out-of-home media advertising. In some cases, the Company plans to enter into agreements with third parties to assist with the marketing, technical and financial aspects of expanding into measurement services for other types of media.

•  Develop and commercialize the next-generation data collection and processing techniques. Arbitron’s businesses require sophisticated data collection and processing systems, software and other technology. The collection of Arbitron’s survey respondent information is dependent on individuals keeping track of their listening, viewing and reading activities in diaries. The technology underlying the media measurement industry is undergoing rapid change, and Arbitron will need to continue to develop its data collection, processing and software systems to accommodate these changes. The development of Arbitron’s Portable People Meter is in response to a growing demand for higher quality and more efficient methods for measuring audiences. Arbitron plans to use the Portable People Meter technology to develop an integrated measurement service that will measure multimedia from a single source, enabling media buyers to make multimedia decisions in an integrated fashion.

•  Expand international business. Arbitron continues to explore opportunities that would further expand the licensing of its Portable People Meter technology internationally into selected international regions, such as Europe and the Asia/Pacific regions. Arbitron believes there is a demand for quality audience information internationally from global advertisers and media.

•  Provide multimedia exposure data combined with single-source sales data that will help support the media industry’s pursuit of increased accountability to advertisers for their return on investments made in media. Increased accountability relies on demonstrating that the advertisement ran as ordered, that the commercial audience was delivered as expected and that product sales were linked to such advertisements.

Customers, Sales and Marketing

      Arbitron’s customers are primarily radio stations, radio networks, cable companies, advertising agencies and corporate advertisers. As of December 31, 2004, Arbitron provided its radio audience measurement and related services to approximately 4,600 radio stations and 2,000 advertising agencies and advertisers nationwide under contracts that generally vary in length from one to seven years. As a result of the consolidation of United States radio broadcasters in the 1990s, Clear Channel Communications, Inc. and Infinity Broadcasting Corp. represented approximately 21 percent and 10 percent, respectively, of Arbitron’s revenue in 2004. Although the industry consolidation that has led to the increased concentration of Arbitron’s

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customer base could put pressure on the pricing of Arbitron’s radio ratings service, it has also contributed to an increase in the number of stations subscribing to the ratings service, as stations have become Arbitron customers upon their acquisition by larger broadcasting groups. It has also been Arbitron’s experience that stations that are part of larger broadcasting groups are somewhat more likely to purchase Arbitron’s analytical software applications and other services in addition to its core ratings service. Furthermore, Arbitron believes that it is well positioned to provide new products and services to meet the emerging needs of broadcasting groups.

      Through Arbitron’s Portable People Meter technology, Arbitron is seeking to expand its constituency beyond traditional broadcasters, such as radio stations, to new media, such as cable television, satellite radio and television, and the Internet. As of December 31, 2004, Arbitron provided its qualitative measurement and related services to 141 local cable systems and 80 outdoor and out-of-home media plants.

      Arbitron markets its products and services in the United States through a direct sales force that consisted of 65 sales account managers and 32 training specialists, as of December 31, 2004.

      Arbitron has entered into a number of agreements with third parties to assist in marketing and selling its products and services in the United States. For example, Marketron International, Inc. distributes, on an exclusive basis, Arbitron’s Qualitap software to television and cable outlets in the United States.

      Arbitron supports its sales and marketing efforts through the following:

•  Gathering and publishing studies, which are available for no charge on Arbitron’s Web site, on emerging trends in the radio, Internet broadcasting, outdoor and out-of-home and other media industries, as well as the media habits of radio listeners and television, cable and Internet viewers;

•  Advertising in a number of key industry print and Web-based publications, including Inside Radio, Radio & Records, RBR, Mediaweek, Broadcasting & Cable, Multichannel News, Outdoor Advertising and, in Mexico, Neo and MercaDos;

•  Conducting direct-marketing programs directed toward radio stations, cable companies, advertising agencies and corporate advertisers;

•  Promoting Arbitron and the industries Arbitron serves through a public relations program aimed at the trade press of the broadcasting, outdoor and out-of-home media, Internet, advertising and marketing industries, as well as select local and national consumer and business press;

•  Participating in key industry forums and interest groups, such as the Advertising Research Foundation, the American Association of Advertising Agencies, National Association of Broadcasters, Association of National Advertisers, Radio Advertising Bureau, European Society for Opinion Marketing Research, the Television Bureau of Advertising, Cable Advertising Bureau, American Women in Radio and Television, Women in Cable Television, Cable & Telecommunications Association for Marketing and the Outdoor Advertising Association of America, as well as Internet roundtables and many state and local advertising and broadcaster associations;

•  Maintaining a significant presence at major industry conventions, such as those sponsored by the National Association of Broadcasters, the Radio Advertising Bureau, the American Association of Advertising Agencies, the Cable Advertising Bureau and the Outdoor Advertising Association of America; and

•  Being a founding member of the Radio Advertising Effectiveness Lab, an industry not-for-profit organization providing information about the effectiveness of radio advertising.

      Internationally, Arbitron markets services through approximately 16 research executives operating through Continental Research’s office in the United Kingdom.

      Arbitron has also continued its international sales and marketing efforts in other areas, such as Mexico, Europe and the Asia/Pacific regions.

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Competition

      Arbitron believes that the principal competitive factors in its markets are the credibility and reliability of its audience research, the ability to provide quality analytical services for use with the audience information and the end-user experience with services and price.

      Arbitron is a leader in the radio audience measurement business. Arbitron competes in the radio audience measurement business in some small markets with Eastlan Resources. In Mexico, Arbitron competes in the radio audience measurement business with INRA International Research Mexico. Arbitron is also aware of at least four companies, The PreTesting Company, Inc., Telecontrol AG (a GfK AG company), Eurisko S.p.a. (a member of the international network NOP World) and Navigauge, that are developing technologies that compete with Arbitron’s Portable People Meter.

      Arbitron competes with a large number of other providers of applications software, qualitative data and proprietary qualitative studies used by broadcasters, cable companies, advertising agencies, advertisers, and outdoor and out-of-home media companies. These competitors include STRATA Marketing Inc., Telmar Information Services Corp. , Marketron Inc. and Wicks Broadcast Solutions, LLC in the area of applications software, and The Media Audit (a division of International Demographics, Inc.), Mediamark Research Inc. (a NOP World company, a wholly owned subsidiary of United Business Media plc) and Simmons Market Research Bureau in the area of qualitative data.

      Arbitron also competes with a number of companies in the Internet audience measurement industry, including Nielsen/NetRatings.

      Arbitron’s Continental Research subsidiary operates in a highly competitive custom research market in the United Kingdom.

Intellectual Property

      Arbitron’s intellectual property is, in the aggregate, of material importance to its business. Arbitron relies on a combination of patents, copyrights, trademarks, service marks and trade secret laws, license agreements and other contractual restrictions to establish and protect its proprietary rights in its products and services. As of December 31, 2004, in the United States, Arbitron had been granted 21 patents and had 26 patent applications pending. Internationally, Arbitron had been granted 100 patents and had 125 patent applications pending as of December 31, 2004. Arbitron’s patents primarily relate to its data collection and processing systems and software and its Portable People Meter. Several patents relating to the Portable People Meter, which expire at various times beginning in 2012, when viewed together are of material importance to the Company’s business.

      Arbitron’s audience listening estimates are original works of authorship and are copyrightable under the federal copyright laws in the United States. The Radio Market Report is published either quarterly or semiannually, depending on the Arbitron market surveyed, while the Radio County Coverage Report is published annually. Arbitron seeks copyright registration for each Radio Market Report and for each Radio County Coverage Report published in the United States. Arbitron also seeks copyright protection for its proprietary software and for databases comprising the Radio Market Report and other services containing its audience estimates and respondent-level data. Prior to the publication of the printed Arbitron reports and release of the software containing the respondent-level data, Arbitron registers its databases under the United States federal copyright laws. Arbitron’s proprietary data regarding audience size and demographics are provided to customers generally through multiyear license agreements.

      A number of Arbitron’s services are marketed under United States federally registered trademarks that are helpful in creating recognition in the marketplace. Some of Arbitron’s registered trademarks and service marks include: the Arbitron name and logo, Maximi$er, RetailDirect and RADAR. The Arbitron name and logo is of material importance to the Company’s business. Arbitron has a trademark application pending for Arbitron PPM. Arbitron also has a number of common law trademarks, including Media Professional, Qualitap, MediaMaster and Prospector. Arbitron has registered its name as a trademark in the United

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Kingdom, Mexico, the European Community, Australia, Singapore, Chile and Japan and is exploring the registration of its marks in other foreign countries.

      The laws of some countries might not protect Arbitron’s intellectual property rights to the same extent as the laws of the United States. Effective patent, copyright, trademark and trade secret protection may not be available in every country in which Arbitron markets or licenses its products and services.

      Arbitron believes its success depends primarily on the innovative skills, technical competence, customer service and marketing abilities of its personnel. Arbitron enters into confidentiality and assignment of inventions agreements with substantially all of its employees and enters into nondisclosure agreements with its suppliers and customers to limit access to and disclosure of its proprietary information.

      Arbitron must guard against the unauthorized use or misappropriation of its audience estimates, databases and technology by third parties. There can be no assurance that the copyright laws and other statutory and contractual arrangements Arbitron currently depends upon will provide it sufficient protection to prevent the use or misappropriation of its audience estimates, databases and technology in the future. The failure to protect Arbitron’s proprietary information, intellectual property rights and, in particular, its audience estimates and databases, could severely harm Arbitron’s business.

      In addition, claims by third parties that Arbitron’s current or future products or services infringe upon their intellectual property rights may harm Arbitron’s business. Intellectual property litigation is complex and expensive, and the outcome of this litigation is difficult to predict. Arbitron has in the past been involved in litigation relating to the enforcement of its copyrights covering its radio listening estimates. Although Arbitron has generally been successful in these cases, there can be no assurance that the copyright laws and other statutory and contractual arrangements Arbitron currently depends upon will provide it sufficient protection to prevent the use or misappropriation of its audience estimates, databases and technology in the future. Any future litigation, regardless of outcome, may result in substantial expense to Arbitron and significant diversion of its management and technical personnel. Any adverse determination in any litigation may subject Arbitron to significant liabilities to third parties, require Arbitron to license disputed rights from other parties, if licenses to these rights could be obtained, or require Arbitron to cease using the technology.

Research and Development

      Arbitron’s research and development activities have related primarily to the design and development of its data collection and processing systems, its software applications and its Portable People Meter service. Arbitron expects that it will continue research and development activities on an ongoing basis, particularly in light of the rapid technological changes affecting its business. The majority of the investment effort and spending will be dedicated to improving the quality and efficiency of Arbitron’s data collection and processing systems, developing new software applications that will assist Arbitron’s customers in realizing the full potential of Arbitron’s audience measurement services, developing Arbitron’s Portable People Meter technology and developing a single-source service that will be able to measure audience and other information from a number of different forms of media. As of December 31, 2004, Arbitron employed approximately 240 people dedicated to research and development. Research and development expenses during fiscal years 2004, 2003 and 2002 totaled $33.3 million, $25.8 million and $24.7 million, respectively.

Governmental Regulation

      Arbitron’s Portable People Meter has been certified to meet Federal Communications Commission requirements relating to emissions standards and standards for modem connectivity. Additionally, all Portable People Meter equipment has been certified to meet the safety standards of Underwriters Laboratories Inc. (commonly referred to as UL), as well as Canadian and European safety standards.

      Arbitron’s media research activities are regulated by the United States Federal Trade Commission in accordance with a Decision and Order issued in 1962 to CEIR, Inc., a predecessor company. This order originally arose in connection with the television ratings business, and Arbitron believes that today it applies to Arbitron’s radio measurement services. The order requires full disclosure of the methodologies used by

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Arbitron and prohibits Arbitron from making representations in selling or offering to sell an audience measurement service without proper qualifications and limitations regarding probability sample, sampling error and accuracy or reliability of data. It prohibits Arbitron from making statements that any steps or precautions are taken to ensure the proper maintenance of diaries unless such steps or precautions are in fact taken. It also prohibits Arbitron from making overly broad statements regarding the viewing a diary reflects. The order further prohibits Arbitron from representing the data as anything other than estimates and from making a statement that the data are accurate to any precise mathematical value. The order requires that Arbitron make affirmative representations in its reports regarding nonresponse by survey participants and the effect of this nonresponse on the data, the hearsay nature of a survey participant’s response, the fact that projections have been made, and the limitations and deficiencies of the techniques or procedures used. Arbitron believes that it has conducted and continues to conduct its radio audience measurement services in compliance with the order.

      Arbitron’s Radio Market Report Service is accredited by and subject to the review of the Media Rating Council (“MRC”). The MRC is an industry organization created to ensure high ethical and operational standards in audience measurement research. Arbitron’s Radio Market Report Service has been accredited by the MRC since 1968. Additional Arbitron services that are accredited by the MRC are: RADAR, Maximi$er and Media Professional software, the Custom Survey Area Report (“CSAR”) and the Radio County Coverage services. To merit continued accreditation of its services, Arbitron must: (1) adhere to the MRC’s Minimum Standards for Media Rating Research; (2) supply full information to the MRC regarding details of its operations; (3) conduct its media measurement services substantially in accordance with representations to its subscribers and the MRC; and (4) submit to, and pay the cost of, thorough annual audits of accredited Arbitron services by certified public accounting firms engaged by the MRC.

Employees

      As of December 31, 2004, Arbitron employed approximately 889 people on a full-time basis and 456 people on a part-time basis in the United States and approximately 40 people on a full-time basis and 326 people on a part-time basis internationally. None of Arbitron’s employees are covered by a collective bargaining agreement. Arbitron believes its employee relations are good.

Seasonality

      Arbitron recognizes revenue for products and services over the terms of license agreements as products and services are delivered, and expenses are recognized as incurred. Arbitron gathers radio-listening data in approximately 293 United States local markets. All markets are measured at least twice per year (April-May-June for the “Spring Survey,” and October-November-December for the “Fall Survey”). In addition, all major markets are measured two additional times per year (January-February-March for the “Winter Survey,” and July-August-September for the “Summer Survey”). Arbitron’s revenue is generally higher in the first and third quarters as a result of the delivery of the Fall Survey and Spring Survey, respectively, to all markets, compared to revenue in the second and fourth quarters, when delivery of the Winter Survey and Summer Survey, respectively, is only made to major markets. Arbitron’s expenses are generally higher in the second and fourth quarters as the “Spring Survey” and “Fall Survey” are being conducted.

Business Risks

Risk Factors Relating to Arbitron’s Businesses and the Industry in Which Arbitron Operates

      Arbitron’s business, financial position and operating results are dependent on the performance of its radio audience measurement business.

      Arbitron’s quantitative radio audience measurement service and related software sales represented approximately 85 percent of Arbitron’s total revenue for 2004. Arbitron expects that sales of its radio audience measurement service and related software will continue to represent a substantial portion of Arbitron’s revenue for the foreseeable future. Any factors adversely affecting the pricing of, demand for or market acceptance of Arbitron’s radio audience measurement service and related software, such as competition, technological

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change or further consolidation in the radio industry, could adversely affect Arbitron’s business, financial position and operating results.

      Technological change may render Arbitron’s products and services obsolete.

      Arbitron expects that the market for its products and services will be characterized by changing technology, evolving industry standards, frequent new product and service announcements and enhancements, and changing customer demands. The introduction of new products and services embodying new technologies and the emergence of new industry standards could render existing products and services obsolete and/or challenge current accepted levels of precision of data measurement. In addition, advertising-supported media may be challenged by new technologies that could have an effect on the advertising industry, Arbitron’s customers and Arbitron’s products and services. Arbitron’s continued success will depend on its ability to adapt to changing technologies and to improve the performance, features and reliability of its products and services in response to changing customer and industry demands. Arbitron may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of its products and services. Arbitron’s new products and services, or enhancements to its existing products and services, such as its proposed Portable People Meter service, may not adequately meet the requirements of its current and prospective customers or achieve any degree of significant market acceptance.

      Consolidation in the radio broadcasting industry has led to Arbitron’s increasing dependence on key customers. The loss of a key customer would significantly reduce Arbitron’s revenue and operating results.

      The consolidation in the radio broadcasting industry has led to Arbitron’s increasing dependence on a limited number of key customers. The loss of a key customer would significantly reduce Arbitron’s revenue and operating results. In 2004, Clear Channel Communications, Inc. and Infinity Broadcasting Corp. represented approximately 21 percent and 10 percent, respectively, of Arbitron’s revenue.

      Arbitron’s agreements with these customers are not exclusive and contain no renewal obligations. Arbitron cannot give any assurances that it could replace the revenue that would be lost if a key customer failed to renew all or part of its agreements with Arbitron. The loss of a key customer would materially impact Arbitron’s business, financial position and operating results.

      Consolidation in the radio broadcasting industry may put pressure on the pricing of Arbitron’s radio audience measurement service and related software sales, thereby leading to decreased earnings.

      Consolidation in the radio broadcasting industry could put pressure on the pricing of Arbitron’s radio audience measurement service and related software sales, from which Arbitron derives a substantial portion of its total revenue. Arbitron prices its radio audience measurement service and related software applications on a per radio station, per service or product basis, negotiating licenses and pricing with the owner of each radio station or group of radio stations. Consolidation in the radio broadcasting industry could have the effect that the greater the number of radio stations owned and the greater the number of services and applications purchased by a radio station owner, the more likely the owner is to seek price concessions from Arbitron. While Arbitron has experienced some success in offsetting the revenue impact of any pricing pressure through effective negotiations and by providing radio audience measurement services and additional software applications and other services to additional stations within a radio group, there can be no assurance as to the degree to which Arbitron will be able to continue to do so, which could adversely affect its business, financial position and operating results.

      Arbitron’s agreements with its customers are not exclusive and contain no renewal obligations.

      Arbitron’s customers are not prohibited from entering into agreements with any other competing service provider, and once the term of the agreement (usually one to seven years) expires, there is no automatic renewal feature in the contract. Because the Arbitron Radio Market Report is delivered on a quarterly or semiannual basis, it is common for Arbitron’s customer contracts to expire before renewal negotiations are concluded. Therefore, there may be significant uncertainty as to whether a particular customer will renew all or part of its contract and, if so, on what terms. If a customer(s) owning stations in a significant number of

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markets does not renew its contracts, this could have an adverse effect on Arbitron’s business, financial position and operating results.

      Arbitron is currently enhancing its service for small markets. Arbitron’s failure to successfully enhance this service in a timely manner could adversely affect Arbitron’s operating results.

      Arbitron is currently enhancing its service for small markets. This service will be tailored to meet the special needs of small market broadcasters. The failure of Arbitron to successfully enhance this service in a timely manner to meet the needs of its small market customers could adversely affect Arbitron’s ability to retain these small market customers. This would adversely affect Arbitron’s operating results.

      Arbitron expects to invest in the continued development and commercialization of its Portable People Meter services, which may not be successfully developed or commercialized. The utilization of Arbitron’s resources on these services could adversely affect Arbitron’s operating results.

      Arbitron expects to continue to invest in the development of its Portable People Meter, which is a technology that measures radio, broadcast television, cable television, Internet broadcasts, satellite radio and television audiences, and retail store video and audio broadcasts. The Portable People Meter services may not be successfully developed or commercialized.

      The continuing development of the Portable People Meter services will require both significant capital resources and operating costs over the next several years. In the event Arbitron decides to commercialize either a Portable People Meter ratings service or a Portable People Meter marketing application service, there could be significant start-up expenses that could adversely affect Arbitron’s financial position and operating results.

      In addition, clients may not support Arbitron’s conversion to a Portable People Meter-based audience measurement service, which may include refusing to encode their broadcasts and not licensing the Portable People Meter service.

      Nielsen Media Research, Inc. may decide not to exercise its option to join Arbitron and share in the potential deployment of the Portable People Meter on a nationwide basis, which could adversely affect the commercial success of the Portable People Meter.

      On May 31, 2000, Arbitron entered into an agreement with Nielsen Media Research, Inc., a provider of United States television and cable audience measurement services, under which Arbitron granted Nielsen Media Research an option to join Arbitron in the potential commercial deployment of the Portable People Meter in the United States. In 2003, Arbitron worked with Nielsen Media Research on response rate issues and a variety of engineering tests. In 2004, Arbitron reported on the outcomes of three collaborative tests of the Portable People Meter that were conducted with Nielsen Media Research. Arbitron continues to work with Nielsen Media Research to resolve outstanding issues and to negotiate business terms for a potential Portable People Meter joint venture. The commercialization of the Portable People Meter could be slowed if Arbitron does not form a joint venture. In that event, Arbitron would revise its business and financial plans and assumptions relating to the timing of the Portable People Meter commercialization, which could include developing a Portable People Meter plan as a radio ratings service without syndicated television ratings. While Arbitron has other strategies to commercialize the Portable People Meter technology without a joint venture with Nielsen Media Research, the failure to form a joint venture could adversely affect the degree of risk and the speed with which the Portable People Meter can be developed.

      The success of Arbitron’s commercialization of the Portable People Meter is dependent on suppliers of Portable People Meter equipment, manufacturing parts and certain software applications.

      Arbitron will need to purchase equipment used in the Portable People Meter service and to obtain certain software reporting applications to use with the Portable People Meter data. The equipment must be produced by the manufacturer in a timely manner, in the quantities needed and with the quality necessary to appropriately function in the market. Certain specialized parts used in the Portable People Meter equipment may impact the manufacturing and the timing of the delivery of the equipment to Arbitron. The software applications will also need to be developed in a timely manner. The failure of Arbitron to obtain, in a timely

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manner, sufficient quantities of quality equipment and the necessary software applications to meet Arbitron’s needs could adversely affect the commercial deployment of the Portable People Meter and therefore could adversely affect Arbitron’s operating results.

      The success of Arbitron’s radio audience measurement business depends on diarykeepers who record their listening habits in diaries and return these diaries to Arbitron. The failure of Arbitron to recruit participants and to collect these diaries could adversely affect Arbitron’s business.

      Arbitron uses listener diaries to gather radio listening data from sample households in the United States local markets for which it currently provides radio ratings. A representative sample of the population in each local market is randomly selected for each survey. This sample is recruited by telephone to keep a diary of their radio usage for one week. Participants are asked to designate in their diary what station(s) they are listening to, when they are listening and where they are listening, such as home, car, work or other place. To encourage their participation in the survey, Arbitron gives diarykeepers a modest cash incentive. Arbitron processes more than 1.4 million diaries every year to produce its audience listening estimates. It is increasingly difficult and more costly to obtain consent from the phone sample to participate in the surveys. Arbitron must achieve response rates sufficient to maintain confidence in its ratings, the support of the industry and accreditation by the Media Rating Council. The failure of Arbitron to successfully recruit participants and to convince diarykeepers to record their listening habits and mail in their diaries could adversely affect Arbitron’s radio audience measurement business.

      Arbitron’s ability to recruit participants for its surveys could be adversely affected by governmental regulations.

      There is an increasing concern among the American public regarding privacy issues. Federal and state governmental regulations restrict telemarketing to individuals who request to be included on a do-not-call list. Currently these regulations do not apply to survey research. If the laws are extended to include survey research, Arbitron’s ability to recruit participants for its surveys could be adversely affected. Arbitron is evaluating alternatives to its current methodology, including using panels for its surveys and recontacting previous consenters. In addition, federal regulations ban calls made by auto-dialers to wireless lines where there is no consent from the party. Effective November 24, 2003, consumers were able to take their wireless number to their wireline carrier, and, likewise, a wireline number may be taken to a wireless carrier. This makes it more difficult for Arbitron to identify wireless numbers in advance of placing an auto-dialed call and could adversely affect Arbitron’s business. Arbitron is working with industry associations to reconcile the wireless phone prohibition with the new local phone number portability rules. Arbitron is also using the services of companies that track wireless numbers.

      It may become more difficult for Arbitron to reach and recruit participants for its audience measurement services, which could adversely affect Arbitron’s business, financial position and operating results.

      Arbitron’s success will depend on its ability to reach and recruit participants and to achieve response rates sufficient to maintain its radio audience measurement services. As consumers adopt modes of telecommunication other than telephone land lines, such as mobile phones and cable or Internet calling, it may become more difficult for Arbitron to reach and recruit participants, which could adversely affect Arbitron’s business, financial position and operating results.

      Arbitron’s success will depend on its ability to protect its intellectual property rights.

      Arbitron believes that the success of its business will depend, in part, on:

•  obtaining patent protection for its technology, products and services, in particular its Portable People Meter;

•  defending its patents once obtained;

•  preserving its trade secrets;

•  defending its copyrights for its data services and audience estimates; and

•  operating without infringing upon patents and proprietary rights held by third parties.

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      Arbitron relies on a combination of contractual provisions, confidentiality procedures and patent, copyright, trademark, service mark and trade secret laws to protect the proprietary aspects of its technology, data and estimates. These legal measures afford only limited protection, and competitors may gain access to Arbitron’s intellectual property and proprietary information. Litigation may be necessary to enforce Arbitron’s intellectual property rights, to protect its trade secrets and to determine the validity and scope of Arbitron’s proprietary rights. Arbitron has in the past been involved in litigation relating to the enforcement of its copyrights covering its radio listening estimates. Although Arbitron has generally been successful in these cases, there can be no assurance that the copyright laws and other statutory and contractual arrangements Arbitron currently depends upon will provide it sufficient protection in the future to prevent the use or misappropriation of its audience estimates, databases and technology. Any future litigation, regardless of outcome, could result in substantial expense and diversion of resources with no assurance of success and could adversely impact Arbitron’s business, financial position and operating results.

      One of Arbitron’s strategies is to expand its international business, which involves unique risks and, if unsuccessful, may impede the growth of Arbitron’s business.

      Arbitron continues to explore opportunities that would facilitate licensing its Portable People Meter technology into selected international markets in Europe and the Asia/Pacific regions. Arbitron believes there is a demand for quality audience information internationally from global advertisers.

      International business is subject to various additional risks, which could adversely affect Arbitron’s business, including:

•  costs of customizing services for foreign customers;

•  difficulties in managing international operations;

•  reduced protection for intellectual property rights in some countries;

•  longer sales and payment cycles;

•  the burdens of complying with a wide variety of foreign laws;

•  exposure to local economic conditions;

•  exposure to local political conditions, including the risks of an outbreak of war, the escalation of hostilities, acts of terrorism and seizure of assets by a foreign government; and

•  exposure to foreign currency exchange rate fluctuation.

      Audience estimates are used as the basis for advertising transactions when they achieve credibility and trust in the eyes of the media marketplace. In some countries, there is little confidence in the historical measurement services due to the perception of tampering and fraud. In expanding its international scope, Arbitron could be at possible risk from potential tampering and fraud by broadcasters or other third parties with Arbitron’s methodology.

      In countries where there has not been a historical practice of using audience measurement information in the buying and selling of advertising time, it may be difficult for Arbitron to maintain subscribers as the market transitions to using Arbitron’s audience measurement service as the basis for conducting advertising transactions.

      Arbitron is dependent on its proprietary software systems for data collection, processing and reporting.

      Arbitron’s success in collecting, processing and reporting data for its media information services is dependent on the ability of its proprietary software systems to support current and future business requirements. The current systems do not have the capability to accommodate all additional product enhancements requested by Arbitron clients. Arbitron is engaged in a major effort to replace its internal processing software and its client software. Significant delays in the planned completion of these systems, cost overages and/or inadequate performance of the systems once they are completed could adversely affect Arbitron’s business, financial position and operating results.

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      The expansion of services into new areas could be adversely affected by the customer’s inability to organize sales efforts and utilize ratings in the advertising buy-sell process.

      The expansion of Arbitron’s services into new areas could be adversely affected by the inability of the new advertising media, such as Internet and outdoor and out-of-home media, to organize sales efforts and effectuate advertising sales.

      Criticism of the Arbitron audience measurement service by various industry groups and market segments could adversely affect Arbitron’s business.

      Due to the high-profile nature of the Arbitron service in the media and marketing information service industry, Arbitron could become the target of criticism by various industry groups and market segments. Although Arbitron strives to be fair, reasonable and impartial in the production of its audience measurement service, criticism of Arbitron by special interest groups could adversely affect Arbitron’s business.

      Arbitron’s future growth and success will depend on its ability to successfully compete with companies that may have financial, marketing, distribution, technical and other advantages over Arbitron.

      Arbitron competes in the radio audience measurement business in some small markets with Eastlan Resources. In Mexico, Arbitron competes in the radio audience measurement business with INRA International Research Mexico. Arbitron is also aware of at least four companies, The PreTesting Company, Inc., Telecontrol AG (a GfK AG company), Eurisko S.p.a. (a member of the international network NOP World) and Navigauge, that are developing technologies that compete with Arbitron’s Portable People Meter. Furthermore, certain companies are developing narrow applications of technology to measure niche audiences of radio and outdoor and out-of-home media.

      Arbitron competes with a large number of other providers of applications software, qualitative data and proprietary qualitative studies used by broadcasters, cable companies, advertising agencies, advertisers, and outdoor and out-of-home media companies. These competitors include STRATA Marketing Inc., Telmar Information Services Corp., Marketron Inc. and Wicks Broadcast Solutions, LLC in the area of applications software, and The Media Audit (a division of International Demographics, Inc.), Mediamark Research Inc. (a NOP World company, a wholly owned subsidiary of United Business Media plc) and Simmons Research Bureau in the area of qualitative data.

      Arbitron also competes with a number of companies in the Internet audience measurement industry, including Nielsen//NetRatings.

      Arbitron believes that its future growth and success will be dependent on its ability to successfully compete with other companies that provide similar services in the same markets, some of which may have financial, marketing, technical and other advantages, and its ability to design, develop and commercialize new products and services that address the industry needs for more efficient methods of data collection and processing and broader media measurement techniques. Arbitron cannot provide any assurance that it will be able to compete successfully, and the failure to do so could have a material adverse effect on Arbitron’s business, financial position and operating results.

      The media research industry is exploring options to achieve greater influence over the providers of audience measurement.

      The media research industry is exploring options to achieve greater influence over and accountability from the providers of audience measurement. Some of the options could include forming an industry research consortium or a joint industry committee. A research consortium could potentially conduct independent research and development on ratings and audience measurement systems and make recommendations to the provider of audience measurement research. A joint industry committee could potentially result in the establishment of a cooperative media ratings service or an industry committee which would award contracts for media research. Currently, these efforts are being primarily directed at television; however, if these efforts to establish a research consortium or a joint industry committee are directed at radio, Arbitron’s business, financial position and operating results could be adversely affected.

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      An economic downturn generally and in the advertising industry in particular could adversely impact Arbitron’s revenue.

      Arbitron’s clients derive most of their revenue from the sale or purchase of advertising. During challenging economic times, advertisers may reduce advertising expenditures, impacting advertising agencies and media. As a result, advertising agencies and media may be less likely to purchase Arbitron’s media information services, which could adversely affect Arbitron’s business, financial position and operating results.

      Advertisers are pursuing increased accountability from the media industry for their return on investments made in media.

      Advertisers are pursuing increased accountability from the media industry for their return on investments made in media. Advertisers may shift advertising expenditures away from less accountable media, such as radio. As a result, advertising agencies and radio stations may be less likely to purchase Arbitron’s media information services, which could have an adverse effect on Arbitron’s business, financial position and operating results.

      Arbitron may need to enter into agreements with third parties to assist with the marketing, technical and financial aspects of expanding its services for other types of media. Arbitron’s inability to enter into agreements with third parties could adversely affect the growth of Arbitron’s business.

      In order for Arbitron to build on its experience in the radio audience measurement industry and expand into measurement for other types of media, Arbitron may need to enter into agreements with third parties. These third parties could provide the marketing, technical and financial aspects that Arbitron requires in order to be able to expand into other types of media. Arbitron’s inability to enter into these agreements with third parties, when necessary, could adversely affect Arbitron’s growth and business.

      Long-term disruptions in the mail, telecommunication infrastructure and air service could adversely affect Arbitron’s business.

      Arbitron’s business is dependent on the use of the mail, telecommunication infrastructure and air service. Long-term disruptions in these services caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, and/or acts of terrorism (particularly involving cities in which Arbitron has offices, including Columbia, Maryland, which is in close proximity to Washington, DC, and government agencies) could adversely affect Arbitron’s business, financial position and operating results.

Risk Factors Relating to Arbitron’s Indebtedness

      As of December 31, 2004, Arbitron had $50.0 million of indebtedness outstanding in senior secured notes that mature on January 31, 2008. The senior secured notes bear interest at a fixed rate of 9.96 percent per annum.

      These notes contain noninvestment-grade financial terms, covenants and operating restrictions that increase Arbitron’s cost of financing its business, restrict its financial flexibility and could adversely impact its ability to conduct its business. These include:

•  the grant of security interests in most of the assets of Arbitron and its subsidiaries;

•  the guarantees of Arbitron’s debt by Arbitron’s subsidiaries;

•  the requirement of Arbitron to maintain certain leverage and coverage ratios; and

•  the ability of Arbitron to buy and sell assets, incur additional indebtedness, grant or incur liens on its assets, repay senior indebtedness, pay cash dividends over a certain amount, make certain investments or acquisitions, repurchase or redeem capital stock and engage in certain mergers or consolidations.

      These restrictions could hinder Arbitron’s ability to finance its future operations or capital needs or make acquisitions that otherwise may be important to the operation of Arbitron’s business. In addition, Arbitron’s ability to comply with these financial requirements and other restrictions may be affected by events beyond its control, and its inability to comply with them could result in a default under the senior secured notes.

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      If a default occurs under the borrowings, either because Arbitron is unable to generate sufficient cash flow to service the debt or because Arbitron fails to comply with one or more of the restrictive covenants, the holders of its notes could elect to declare all of the outstanding borrowings, as well as accrued interest and fees, to be due and payable and require Arbitron to apply all of its available cash to repay those borrowings. The lenders under Arbitron’s senior secured notes could also proceed against the lenders’ collateral, which includes a first-priority lien on substantially all of the assets of Arbitron and its domestic subsidiaries and a pledge of the capital stock of all of its domestic subsidiaries and of 65 percent of the capital stock of its foreign subsidiaries. In addition, a default may result in higher rates of interest and the inability to obtain additional capital.

Risk Factors Relating to Owning Arbitron’s Common Stock

      Variability of quarterly operating results may cause Arbitron’s stock price to decrease or fluctuate.

      The market price of Arbitron’s common stock may decrease or fluctuate because, among other factors, Arbitron’s revenue, gross profit, operating income and net income or net loss may vary substantially from quarter to quarter. Many factors may contribute to fluctuations in Arbitron’s operating results, including:

•  changes in pricing policies by Arbitron or its competitors;

•  increases in investment in the Portable People Meter services;

•  introduction and acceptance of new products and services by Arbitron or its competitors;

•  the market for qualified personnel and the timing and number of personnel hired;

•  the timing and acquisition of new businesses;

•  the efficiency with which employees are utilized;

•  the effectiveness of Arbitron’s disaster recovery plan;

•  cancellation or delay of contract renewals by customers;

•  lack of or timing of new-business contracts;

•  changes in technology and Arbitron’s successful utilization of technology;

•  economic conditions as they relate to Arbitron’s industry and customers;

•  ability to enter into third-party agreements for data and service;

•  Nielsen Media Research’s decision regarding its option to join Arbitron in the potential commercial deployment of the Portable People Meter;

•  potential long-term disruptions in mail, telecommunication infrastructure and/or air service;

•  the outbreak of war, the escalation of hostilities, and/or acts of terrorism that could occur in cities in which Arbitron has offices, including Columbia, Maryland, which is in close proximity to Washington, DC, and government agencies; and

•  a change in government regulations regarding privacy.

      It may be difficult for a third party to acquire Arbitron, which could depress the stock price of Arbitron.

      Delaware corporate law and Arbitron’s Amended and Restated Certificate of Incorporation and Bylaws contain provisions that could have the effect of delaying, deferring or preventing a change in control of Arbitron or its management that stockholders may consider favorable or beneficial. These provisions could discourage proxy contests and make it more difficult for stockholders to elect directors not nominated by Arbitron’s Board of Directors and take other corporate actions. These provisions could also limit the price that

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investors might be willing to pay in the future for shares of Arbitron’s common stock. These provisions include:

•  a stockholders’ rights plan, which likely will limit, through November 21, 2012, the ability of a third party to acquire a substantial amount of Arbitron’s common stock without prior approval by the Board of Directors;

•  restriction from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder under Section 203 of the Delaware General Corporation Law;

•  authorization to issue “blank check” preferred stock, which is preferred stock that can be created and issued by the Board of Directors without prior stockholder approval, with rights senior to common stockholders;

•  advance notice requirements for the submission by stockholders of nominations for election to the Board of Directors and for proposing matters that can be acted upon by stockholders at a meeting; and

•  a supermajority vote of 80 percent of the stockholders to exercise the stockholders’ right to amend the Bylaws.

      Arbitron’s Amended and Restated Certificate of Incorporation also contains the following provisions:

•  a supermajority vote of two-thirds of the stockholders to approve some mergers and other business combinations; and

•  restriction from engaging in a “business combination” with a “controlling person” unless either a modified supermajority vote is received or the business combination will result in the termination of ownership of all shares of Arbitron’s common stock and the receipt of consideration equal to at least “fair market value.”

Available Information

      Arbitron’s Web site address is www.arbitron.com, and interested persons may obtain, free of charge, copies of filings (including Arbitron’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form  8-K, and any amendments to those reports) that Arbitron has made with the Securities and Exchange Commission (as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission) through a hyperlink at this site to a third-party Securities and Exchange Commission filings Web site. Also available on Arbitron’s Web site are its Corporate Governance Policies and Guidelines, Code of Ethics for the Chief Executive Officer and Financial Managers, Code of Ethics and Conduct, the Audit Committee Charter, the Nominating and Board Governance Committee Charter and the Compensation and Human Resources Committee Charter. Copies of these documents are also available in print for any stockholder who requests a copy by contacting Arbitron’s treasury manager.

ITEM 2. PROPERTIES

      Arbitron’s primary locations are in Columbia, Maryland, and its headquarters are located at 142 West 57th Street, New York, New York. Arbitron’s New York City office serves as its home base for sales and marketing, while its survey research, technology and data collection/production operations are located in its Columbia, Maryland, facility. In addition, Arbitron has five regional sales offices located in the metropolitan areas of Atlanta, Georgia; Washington, D.C.,/ Baltimore, Maryland; Chicago, Illinois; Dallas, Texas; and Los Angeles, California; and operations offices in Houston, Texas; Cranford, New Jersey; Birmingham, Alabama, and Indianapolis, Indiana. Arbitron’s Continental Research subsidiary is located in London, England. Arbitron conducts all of its operations in leased facilities. Most of these leases contain renewal options and require payments for taxes, insurance and maintenance in addition to base rental payments. Arbitron believes that its facilities are sufficient for their intended purposes, are adequately maintained and are reasonably necessary for current and anticipated business purposes.

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ITEM 3. LEGAL PROCEEDINGS

      Arbitron and its subsidiaries are involved from time to time in a number of judicial and administrative proceedings considered ordinary in the nature of their current and past operations, including employment-related disputes, contract disputes, government proceedings, customer disputes and tort claims. In some proceedings, the claimant seeks damages as well as other relief, which, if granted, would require substantial expenditures on the part of Arbitron. Some of these matters raise difficult and complex factual and legal issues, and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular action, and the jurisdiction, forum and law under which each action is pending. Because of this complexity, final disposition of some of these proceedings may not occur for several years. As such, Arbitron is not always able to estimate the amount of its possible future liabilities. There can be no certainty that Arbitron may not ultimately incur charges in excess of presently or future established accruals or insurance coverage. Although occasional adverse decisions (or settlements) may occur, it is the opinion of management that the final disposition of these proceedings will not, considering the merits of the claims, have a material adverse effect on Arbitron’s financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of Arbitron’s stockholders during the fourth quarter of 2004.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

      Arbitron’s common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “ARB.” As of February 28, 2005, there were 31,219,978 shares outstanding and approximately 7,200 stockholders of record of Arbitron common stock.

      The following table sets forth the high and low sale prices of Arbitron common stock as reported on the NYSE Composite Tape for each quarterly period for the past two years ended December 31, 2004.

2004	1Q		2Q		3Q		4Q		Full Year
High	$	45.90	$	41.26	$	39.70	$	39.78	$	45.90
Low	$	39.01	$	35.96	$	31.29	$	35.52	$	31.29

2003	1Q		2Q		3Q		4Q		Full Year
High	$	34.51	$	37.36	$	38.30	$	43.73	$	43.73
Low	$	28.97	$	30.75	$	34.01	$	34.38	$	28.97

      During the periods presented, Arbitron did not pay any dividends on its common stock.

      The transfer agent and registrar for the Arbitron common stock is The Bank of New York.

      On September 9, 2004, the Company announced that its Board of Directors authorized a stock repurchase program under which the Company could purchase up to $25.0 million of its outstanding common stock through December 31, 2004. The shares were purchased from time to time in either open market or private transactions at then prevailing market prices. In 2004, Arbitron purchased an aggregate of

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666,100 shares of common stock for an aggregate purchase price of $25.0 million. The following table outlines the stock repurchase activity during the three months ended December 31, 2004.

Arbitron Purchases of Equity Securities

						Total
						number of		Maximum
						shares		dollar value
						purchased		of shares that
		Total				as part of a		may yet be
		number		Average price		publicly		purchased
		of shares		paid per		announced		under the
Period		purchased		share		program		program
October 1 – 31			217,500	$	36.05		217,500	$	7,254,837
November 1 – 30			193,600	$	37.48		193,600	$	7,462
December 1 – 31			—	$	—		—	$	—
	Total		411,100	$	36.73		411,100	$	—

ITEM 6. SELECTED FINANCIAL DATA

      The selected financial data set forth below should be read together with the information under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Arbitron’s consolidated financial statements and related notes included in this Form 10-K. This financial data is not necessarily indicative of the results of operations or financial position that would have occurred if Arbitron had been a separate, independent company during the periods presented in which Arbitron was a division of Ceridian Corporation, nor is it indicative of its future performance. Arbitron was a division of Ceridian Corporation prior to March 30, 2001.

      The Company’s statements of income for the years ended December 31, 2004, 2003, and 2002 and balance sheet data as of December 31, 2004, and 2003 set forth below are derived from audited consolidated financial statements included elsewhere in this Form 10-K. The statement of income data for the years ended December 31, 2001 and 2000, and balance sheet data as of December 31, 2002, 2001 and 2000 are derived from audited consolidated financial statements of Arbitron not included in this Form 10-K.

		As of and for the Years Ended December 31,
		2004		2003		2002		2001		2000
		(In thousands, except per share data)
Statement of Income Data
Revenue		$	296,553	$	273,550	$	249,757	$	227,534	$	206,791
Costs and expenses			205,669		187,613		169,645		156,273		135,373
Operating income			90,884		85,937		80,112		71,261		71,418
Equity in net income of affiliate			7,552		6,754		5,627		4,285		3,397
Income before interest and income tax expense			98,436		92,691		85,739		75,546		74,815
Interest expense, net			6,810		11,597		16,219		15,279		—
Income before income tax expense			91,626		81,094		69,520		60,267		74,815
Income tax expense			31,061		31,221		26,765		23,805		29,552
Net income		$	60,565	$	49,873	$	42,755	$	36,462	$	45,263
Net Income and Pro Forma Net Income Per Weighted Average Common Share(1)
	Basic	$	1.96	$	1.66	$	1.45	$	1.25	$	1.56
	Diluted	$	1.92	$	1.63	$	1.42	$	1.24	$	1.54

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		As of and for the Years Ended December 31,
		2004		2003			2002			2001			2000
		(In thousands, except per share data)
Weighted average and pro forma weighted average common shares used in calculations
	Basic		30,972		30,010			29,413			29,164			29,046
	Diluted(2)		31,471		30,616			30,049			29,483			29,347
Balance Sheet Data
	Current assets	$	120,161	$	116,857		$	86,422		$	67,658		$	60,344
Total assets			196,121		184,194			156,038			126,841			107,876
Long-term debt			50,000		105,000			165,000			205,000			—
Stockholders’ equity (deficit)			45,380		(18,073	)		(100,579	)		(169,109	)		33,222

      During the years presented, Arbitron did not pay any dividends on its common stock.

      The Company adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002, with the exception of a provision for acquisitions occurring after June 30, 2001, which was adopted on July 1, 2001. Goodwill amortization expense for both 2001 and 2000 was $2.2 million.

(1)

For the year ended December 31, 2001, the computations of pro forma net income per weighted average common share are based upon Ceridian’s weighted average common shares and potentially dilutive securities outstanding through March 31, 2001, adjusted for the one-for-five reverse stock split, and Arbitron’s weighted average common shares and potentially dilutive securities for the remainder of the year. For the year ended December 31, 2000, the pro forma net income per weighted average common share computations are based upon Ceridian’s weighted average common shares and potentially dilutive securities, adjusted for the one-for-five reverse stock split.

(2)

The diluted pro forma weighted average common shares assumes that all of Ceridian’s historical dilutive securities were converted into Arbitron securities for the three months ended March 31, 2001, and for the year ended December 31, 2000.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with Arbitron’s consolidated financial statements and the notes thereto that follow in this Form 10-K.

Overview

      Arbitron is an international media and marketing research firm primarily serving radio, cable television, advertising agencies, advertisers, outdoor and out-of-home media and, through its Scarborough joint venture, broadcast television and print media. Arbitron currently has four main services:

•  measuring radio audiences in local markets in the United States and Mexico;

•  measuring national radio audiences and the audience size of network radio programs and commercials;

•  providing application software used for accessing and analyzing media audience and marketing information data; and

•  providing consumer and media usage information services to radio, cable television, advertising agencies, advertisers, retailers, outdoor and out-of-home media, online industries and, through its Scarborough joint venture, broadcast television and print media.

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      Arbitron’s quantitative radio audience measurement business and related software sales accounted for approximately 85% of its revenue for both 2004 and 2003. Consolidation in the radio broadcasting industry has led to Arbitron’s dependence on a limited number of key customers. In 2004, Clear Channel Communications, Inc. (“Clear Channel Communications”) and Infinity Broadcasting Corp. (“Infinity Broadcasting”) represented approximately 21% and 10%, respectively, of Arbitron’s revenue. Arbitron’s agreements with these customers are not exclusive and contain no renewal obligations. In August 2004, Arbitron entered into license agreements with Infinity Broadcasting, effective April 1, 2004, to provide audience estimates, software and other ancillary services to Infinity Broadcasting’s radio stations through the Company’s Winter 2008 survey. Certain of Clear Channel Communication’s existing license agreements with Arbitron were scheduled to expire on December 31, 2004. On December 27, 2004, the Company entered into new license agreements with Clear Channel Communications to provide radio ratings and software services for Clear Channel Communication’s radio stations and networks through the Company’s Fall 2008 survey.

      Arbitron cannot give any assurances that it could replace the revenue that would be lost if a key customer failed to renew all or part of its agreements with Arbitron. The loss of a key customer would materially impact Arbitron’s business, financial position and operating results.

      Due to the slow economic growth of the radio industry as well as the high penetration of current services in the core radio station business, Arbitron expects that its annual organic rate of revenue growth will be slower than historical trends for the foreseeable future.

      Arbitron entered into an agreement on May 31, 2000, with Nielsen Media Research, Inc. (“Nielsen Media Research”), a provider of U.S. television and cable audience measurement services, under which Arbitron granted Nielsen Media Research an option to join Arbitron in the potential commercial deployment of the Portable People Meter (“Portable People Meter” or “PPM^sm”) in the United States. In the event Nielsen Media Research exercises the option, the parties would form a joint venture to commercially deploy and operate the business of utilizing the Portable People Meter for the collection of listening and viewing audience data. In 2003, Arbitron worked with Nielsen Media Research on response rate issues and a variety of engineering tests. In 2004, Arbitron reported on the outcomes of three collaborative tests of the PPM that were conducted with Nielsen Media Research. Arbitron continues to work with Nielsen Media Research to resolve outstanding issues and to negotiate business terms for a potential Portable People Meter joint venture.

      In third quarter 2004, Arbitron began recruiting consumers to participate in a market demonstration to be conducted in Houston, Texas in 2005 and 2006 to confirm the results of previous tests and demonstrate enhancements to the Portable People Meter system that have been made since it was tested in Philadelphia. In addition, Arbitron is participating in a Portable People Meter business impact study that is being led by the Radio Advertising Bureau to research the impact on the radio industry of electronic measurement and a move from diaries to the Portable People Meter for radio audience measurement. The study should be completed in 2005.

      As of January 1, 2005, BBM, the Canadian industry cooperative for audience ratings, made the Portable People Meter the official ratings system for buying and selling commercial airtime on French-language television in the markets of Quebec and Montreal.

      Separate from the proposed joint venture with Nielsen Media Research, Arbitron began testing additional marketing research applications of the Portable People Meter technology in 2003. One application that Arbitron began testing was the use of the Portable People Meter as the media collection tool for a national marketing-oriented panel designed to correlate advertising with shopping behavior and sales. The objective is to provide multimedia exposure data combined with sales data from a single source to produce a measure of advertising effectiveness for advertisers, agencies and broadcasters.

      On September 29, 2004, Arbitron announced that Arbitron and VNU, Inc. have agreed to jointly explore the development of a new national marketing research service which collects multi-media and purchase information from a common sample of consumers. Procter & Gamble is also collaborating with the two companies to ensure that the service properly addresses the needs of marketers. This would be a new type of service for which market acceptance is not yet known.

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      The continuing development and anticipated rollout of PPM services will require significant capital resources and will increase Arbitron’s operating costs over the next several years. In the event Arbitron decides to commercialize either a PPM ratings service or a PPM marketing application service, there could be significant start-up expenses that could adversely affect Arbitron’s financial position and operating results.

      Arbitron uses listener diaries to gather radio listening data from sample households in the United States local markets for which it currently provides radio ratings. A representative sample of the population in each local market is randomly selected for each survey and is recruited by telephone. It is increasingly difficult and more costly to obtain consent from the phone sample to participate in the surveys and to get a usable diary returned to Arbitron. Arbitron must achieve response rates sufficient to maintain confidence in its ratings, the support of the industry and accreditation by the Media Rating Council. Response rates are a quality measure of survey performance and an important factor impacting costs associated with data collection. Overall response rates have declined over the past several years. If response rates continue to decline further, Arbitron’s radio audience measurement business could be adversely affected. Arbitron commits extensive efforts and resources to address the decline of response rates. Additional initiatives in 20 low response rate markets have had a positive impact on response rates, which have increased by approximately 2.7% in those markets from the Fall 2003 to the Fall 2004 survey. In addition, the response rate decline in all markets slowed significantly from the Fall 2003 to the Fall 2004 survey compared to the Fall 2003 to the Fall 2002 survey.

      On March 11, 2004, Arbitron acquired certain assets of Marketing Resources Plus (“MRP”) from Interactive Market Systems, Inc., part of the VNU Media Measurement and Information Group, for $8.9 million in cash. MRP is a provider of media buying software systems to local and regional advertising agencies for broadcast and print media. MRP develops, markets and supports a suite of software services used by approximately 800 advertisers and advertising agencies across the United States.

      On September 9, 2004, the Company announced that its Board of Directors authorized a repurchase program under which the Company could purchase up to $25.0 million of its outstanding common stock through December 31, 2004. The Company purchased the shares from time to time in either open market or private transactions at then prevailing market prices. As of December 31, 2004, the Company had repurchased an aggregate of 666,100 shares under the program for an aggregate purchase price of $25.0 million.

      Arbitron announced on February 28, 2005 that its Board of Directors approved the payment of the Company’s first cash dividend of $0.10 per common share. The dividend will be paid on April 1, 2005 to stockholders of record as of the close of business on March 15, 2005.

Critical Accounting Policies and Estimates

      Critical accounting policies and estimates are those that are both important to the presentation of the Company’s financial position and results of operations, and require management’s most difficult, complex or subjective judgments.

      The Company capitalizes software development costs with respect to major internal use software initiatives or enhancements. The costs are capitalized from the time that the preliminary project stage is completed and management considers it probable that the software will be used to perform the function intended until the time the software is placed in service for its intended use. Once the software is placed in service, the capitalized costs are generally amortized over periods of three to five years. If events or changes in circumstances indicate that the carrying value of software may not be recovered, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the software in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. The Company’s estimates are subject to revision as market conditions and management’s assessments change. As of December 31, 2004 and 2003, the Company’s capitalized software developed for internal use had a carrying amount of $8.5 million and $3.3 million, respectively, including $5.7 million and $3.1 million, respectively, of Portable People Meter software.

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      Arbitron uses the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Management must make assumptions, judgments and estimates to determine the current provision for income taxes and also deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset. Judgments, assumptions and estimates relative to the current provision for income tax take into account current tax laws, interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax law or interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in the consolidated financial statements. Assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future years could render current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause actual income tax obligations to differ from estimates, thus materially impacting Arbitron’s financial position and results of operations.

      Certain reserves for tax contingencies were reversed in the third quarter of 2004 due to guidance in an Internal Revenue Service Revenue Procedure. Also in the third quarter of 2004, the valuation allowance on the deferred tax assets related to state net operating loss carryforwards was reduced due to higher actual and projected taxable income in the applicable states. The net benefit of these changes was $4.2 million in 2004.

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Results of Operations

     Comparison of Year Ended December 31, 2004 to Year Ended December 31, 2003

      The following table sets forth information with respect to the consolidated statements of income of Arbitron for the years ended December 31, 2004 and 2003.

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

												Percentage of
						Increase (Decrease)						Revenue
		2004		2003		Dollars			Percent			2004			2003
Revenue		$	296,553	$	273,550	$	23,003			8.4	%		100.0	%		100.0	%
Costs and expenses
	Cost of revenue		109,951		103,109		6,842			6.6	%		37.1	%		37.7	%
	Selling, general and administrative		62,421		58,662		3,759			6.4	%		21.0	%		21.4	%
	Research and development		33,297		25,842		7,455			28.8	%		11.2	%		9.5	%
	Total costs and expenses		205,669		187,613		18,056			9.6	%		69.3	%		68.6	%
Operating income			90,884		85,937		4,947			5.8	%		30.7	%		31.4	%
	Equity in net income of affiliate		7,552		6,754		798			11.8	%		2.5	%		2.5	%
Income before interest and income tax expense			98,436		92,691		5,745			6.2	%		33.2	%		33.9	%
	Interest income		1,099		741		358			48.3	%		0.4	%		0.3	%
	Interest expense		7,909		12,338		(4,429	)		(35.9	%)		2.7	%		4.6	%
Income before income tax expense			91,626		81,094		10,532			13.0	%		30.9	%		29.6	%
	Income tax expense		31,061		31,221		(160	)		(0.5	%)		10.5	%		11.4	%
Net income		$	60,565	$	49,873	$	10,692			21.4	%		20.4	%		18.2	%
Net income per weighted average common share
	Basic	$	1.96	$	1.66	$	0.30			18.1	%
	Diluted	$	1.92	$	1.63	$	0.29			17.8	%
Other data
	EBIT	$	98,436	$	92,691	$	5,745			6.2	%
	EBITDA	$	104,158	$	97,528	$	6,630			6.8	%
EBIT and EBITDA Reconciliation
	Net income	$	60,565	$	49,873	$	10,692
	Income tax expense		31,061		31,221		(160	)
	Interest income		1,099		741		358
	Interest expense		7,909		12,338		(4,429	)
EBIT			98,436		92,691		5,745
	Depreciation and amortization		5,722		4,837		885
EBITDA		$	104,158	$	97,528	$	6,630

      Revenue. Revenue increased 8.4% to $296.6 million in 2004 from $273.6 million in 2003. The MRP acquisition accounted for $5.9 million of the increase. Additional revenue of $2.9 million was recognized from the delivery of 17 Scarborough markets which delivered in December 2004. In previous years these 17 markets had been delivered in the first quarter of the following year. The remainder of the increase was primarily attributed to increases in the subscriber base for the ratings and qualitative services, analytical software applications, escalations in multiyear customer contracts and contract renewals. Due to the slow economic growth of the radio industry as well as the high penetration of current services in the core radio station

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business, Arbitron expects that its annual organic rate of revenue growth will be slower than historical trends in future periods.

      Cost of Revenue. Cost of revenue increased 6.6% to $110.0 million in 2004 from $103.1 million in 2003, but decreased as a percentage of revenue to 37.1% in 2004 from 37.7% in 2003. The $6.8 million increase was mainly attributed to: increases in royalties of $3.3 million; increases in indirect PPM costs of $1.0 million; increases in Continental Research costs of $0.9 million; increases in computer center, security and facilities costs of $0.9 million; and the MRP acquisition which accounted for a $0.6 million increase.

      Selling, General and Administrative. Selling, general and administrative expenses increased 6.4% to $62.4 million in 2004 from $58.7 million in 2003, but decreased as a percentage of revenue to 21.0% in 2004 from 21.4% in 2003. The $3.8 million increase was primarily attributed to the MRP acquisition, which accounted for $3.6 million of the increase. Due to SFAS 123R, Share-Based Payment, Arbitron expects that, with regard to the expensing of stock compensation, its selling, general and administrative expenses will increase substantially beginning July 1, 2005.

      Research and Development. Research and development expenses increased 28.8% to $33.3 million in 2004 from $25.8 million in 2003, and increased as a percentage of revenue to 11.2% in 2004 from 9.5% in 2003. PPM research and development and the MRP acquisition accounted for $3.8 million and $1.8 million of the increase, respectively. The remainder of the increase was attributed to U.S. Media Services (Arbitron’s core quantitative, qualitative and software application services), where there was increased spending related to the maintenance, upgrade and replacement of legacy operating and reporting systems.

      Operating Income. Operating income increased 5.8% to $90.9 million in 2004 from $85.9 million in 2003. Operating margin decreased to 30.7% in 2004 from 31.4% in 2003.

      Equity in Net Income of Affiliate. Equity in net income of affiliate (relating to the Company’s Scarborough joint venture) increased 11.8% to $7.6 million in 2004 from $6.8 million in 2003. The equity in net income of affiliate changes as the net income of Scarborough Research changes. The increase was primarily attributed to the delivery of 17 Scarborough markets which delivered in December 2004.

      Interest Expense. Interest expense decreased to $7.9 million for the year ended December 31, 2004 from $12.3 million for the same period in 2003. The decrease was primarily attributed to a $63.7 million decline in the average debt principal balance outstanding under the Company’s revolving Credit Facility in 2004 compared to 2003.

      Income Tax Expense. Arbitron’s effective tax rate was 33.9% and 38.5% in 2004 and 2003, respectively. Income tax expense was lower in 2004 primarily because reserves for certain tax contingencies were reversed during the third quarter of 2004 due to guidance in an Internal Revenue Service notice. Also, the valuation allowance on the deferred tax assets related to state net operating loss carryforwards was reduced due to higher actual and projected taxable income in the applicable states. The net benefit of these changes was $4.2 million.

      Net Income. Net income increased 21.4% to $60.6 million in 2004 from $49.9 million in 2003. Tax changes amounting to $4.2 million accounted for 8.4% of the increase, and lower interest expense accounted for 8.9% of the 21.4% increase.

      EBIT and EBITDA. Earnings before interest and income tax expense (“EBIT”) increased 6.2% to $98.4 million and earnings before interest, income tax expense, depreciation and amortization (“EBITDA”) increased 6.8% to $104.2 million in 2004 from $92.7 million and $97.5 million, respectively, in 2003. Arbitron has presented EBIT and EBITDA as supplemental information that management of Arbitron believes may be useful to investors to evaluate the Company’s results because they exclude certain items that are not directly related to the Company’s core operating performance. EBIT is calculated by adding back net interest expense and income tax expense to net income. EBITDA is calculated by adding back net interest expense, income tax expense, and depreciation and amortization to net income. EBIT and EBITDA should not be considered substitutes either for net income, as indicators of Arbitron’s operating performance, or for cash flow, as measures of Arbitron’s liquidity. In addition, because EBIT and EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures reported by other companies.

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Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002

      The following table sets forth information with respect to the consolidated statements of income of Arbitron for the years ended December 31, 2003 and 2002.

Consolidated Statements of Income

(Dollars in thousands, except per share amounts

												Percentage of
						Increase (Decrease)						Revenue
		2003		2002		Dollars			Percent			2003			2002
Revenue		$	273,550	$	249,757	$	23,793			9.5	%		100.0	%		100.0	%
Costs and expenses
	Cost of revenue		103,109		91,821		11,288			12.3	%		37.7	%		36.8	%
	Selling, general and administrative		58,662		53,096		5,566			10.5	%		21.4	%		21.2	%
	Research and development		25,842		24,728		1,114			4.5	%		9.5	%		9.9	%
	Total costs and expenses		187,613		169,645		17,968			10.6	%		68.6	%		67.9	%
Operating income			85,937		80,112		5,825			7.3	%		31.4	%		32.1	%
	Equity in net income of affiliate		6,754		5,627		1,127			20.0	%		2.5	%		2.2	%
Income before interest and income tax expense			92,691		85,739		6,952			8.1	%		33.9	%		34.3	%
	Interest income		741		596		145			24.3	%		0.3	%		0.2	%
	Interest expense		12,338		16,815		(4,477	)		(26.6	%)		4.6	%		6.7	%
Income before income tax expense			81,094		69,520		11,574			16.6	%		29.6	%		27.8	%
	Income tax expense		31,221		26,765		4,456			16.6	%		11.4	%		10.7	%
Net income		$	49,873	$	42,755	$	7,118			16.6	%		18.2	%		17.1	%
Net income per weighted average common share
	Basic	$	1.66	$	1.45	$	0.21			14.5	%
	Diluted	$	1.63	$	1.42	$	0.21			14.8	%
Other data
	EBIT	$	92,691	$	85,739	$	6,952			8.1	%
	EBITDA	$	97,528	$	90,108	$	7,420			8.2	%
EBIT and EBITDA Reconciliation
	Net income	$	49,873	$	42,755	$	7,118
	Income tax expense		31,221		26,765		4,456
	Interest income		741		596		145
	Interest expense		12,338		16,815		(4,477	)
EBIT			92,691		85,739		6,952
	Depreciation and amortization		4,837		4,369		468
EBITDA		$	97,528	$	90,108	$	7,420

      Revenue. Revenue increased 9.5% to $273.6 million in 2003 from $249.8 million in 2002. Approximately $21.4 million of the $23.8 million increase was due to increases in the subscriber base for the ratings and qualitative services, analytical software applications, escalations in multiyear customer contracts and contract renewals.

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      Cost of Revenue. Cost of revenue increased 12.3% to $103.1 million in 2003 from $91.8 million in 2002 and increased as a percentage of revenue to 37.7% in 2003 from 36.8% in 2002. The $11.3 million increase was mainly attributed to: increases in data collection costs of $6.8 million; increases in royalties of $2.7 million; and increases in U.S. Media Services computer center costs of $0.9 million. These increases were partially offset by lower Internet broadcast services costs of $0.5 million.

      Selling, General and Administrative. Selling, general and administrative expenses increased 10.5% to $58.7 million in 2003 from $53.1 million in 2002, and increased as a percentage of revenue to 21.4% in 2003 from 21.2% in 2002. The $5.6 million increase was mainly attributed to increases in U.S. Media selling expenses of $2.0 million; increases in U.S. Media facilities costs of $1.0 million; increases in U.S. Media marketing costs of $0.5 million; increases in U.S. Media commissions of $0.5 million; increases in U.S. Media finance and legal expenses of $1.1 million; and an increase in variable compensation of $0.9 million. These increases were partially offset by lower Internet broadcast services expenses of $0.8 million.

      Research and Development. Research and development expenses increased 4.5% to $25.8 million in 2003 from $24.7 million in 2002, but decreased as a percentage of revenue to 9.5% in 2003 from 9.9% in 2002. U.S. Media Services expenses increased by $2.7 million which were offset by decreases in PPM expenses of $0.9 million and decreases in Internet broadcast services expenses of $0.6 million where the Company derived benefits from the acquisition of certain assets from MeasureCast, Inc. during the fourth quarter of 2002.

      Operating Income. Operating income increased 7.3% to $85.9 million in 2003 from $80.1 million in 2002. Operating margin decreased to 31.4% in 2003 from 32.1% in 2002.

      Equity in Net Income of Affiliate. Equity in net income of affiliate (relating to the Company’s Scarborough joint venture) increased 20.0% to $6.8 million in 2003 from $5.6 million in 2002. The increase was attributed to the growth in revenue and net income of Scarborough.

      Interest Expense. Interest expense decreased to $12.3 million for the year ended December 31, 2003 from $16.8 million for the same period in 2002. The decrease was primarily attributed to a $50.1 million lower average debt principal balance outstanding under the Company’s revolving Credit Facility in 2003 compared to 2002. The commitment level and effective interest rates are also lower in 2003 than in 2002.

      Income Tax Expense. Arbitron’s effective tax rate was 38.5% in 2003 and 2002. A 0.5% increase in the Company’s effective income tax rate resulting from changes in state tax laws and changes in certain state tax apportionment factors was offset by the reversal of a reserve as the result of the resolution of certain state tax contingencies.

      Net Income. Net income increased 16.6% to $49.9 million in 2003 from $42.8 million in 2002.

      EBIT and EBITDA. EBIT increased 8.1% to $92.7 million and EBITDA increased 8.2% to $97.5 million in 2003 from $85.7 million and $90.1 million, respectively, in 2002. Arbitron has presented EBIT and EBITDA as supplemental information that management of Arbitron believes may be useful to investors to evaluate Arbitron’s results because they exclude certain items that are not directly related to the Company’s core operating performance. EBIT is calculated by adding back net interest expense and income tax expense to net income. EBITDA is calculated by adding back net interest expense, income tax expense, and depreciation and amortization to net income. EBIT and EBITDA should not be considered substitutes either for net income, as indicators of Arbitron’s operating performance, or for cash flow, as measures of Arbitron’s liquidity. In addition, because EBIT and EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures reported by other companies.

Liquidity and Capital Resources

      Working capital was $24.2 million, $25.0 million and $2.5 million as of December 31, 2004, 2003 and 2002, respectively. Cash and cash equivalents was $86.9 million, $68.4 million and $43.1 million as of December 31, 2004, 2003, and 2002, respectively. Management expects that the cash position as of December 31, 2004, and cash flow generated from operations will be sufficient to support the Company’s operations for the foreseeable future.

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      Net cash provided by operating activities was $98.1 million, $65.4 million and $76.3 million for the years ended December 31, 2004, 2003 and 2002, respectively. The 2004 increase of $32.7 million was mainly attributable to a decrease in deferred income taxes of $24.7 million and higher net income in 2004 of $10.7 million. The decrease in deferred income taxes is due primarily to an Internal Revenue Service Procedure related to advance customer payments. Primarily as a result of the procedure, income taxes of approximately $21.8 million paid in 2003 were applied toward the Company’s 2004 tax liability and reduced cash taxes paid in 2004.

      Net cash used in investing activities was $19.1 million, $5.4 million and $22.4 million for the years ended December 31, 2004, 2003 and 2002, respectively. The 2004 increase in the use of cash is primarily attributed to the $8.9 million MRP acquisition in March 2004 and increased spending on property and equipment. The 2003 decrease in the use of cash is primarily attributed to the absence of business acquisitions in 2003 and lower capital expenditures.

      Net cash used in financing activities was $60.7 million, $34.9 million and $32.1 million for the years ended December 31, 2004, 2003 and 2002, respectively. In 2004, the Company received $19.3 million of cash from stock option exercises and other employee stock incentive plans compared to $25.1 million in 2003 and $7.9 million in 2002. Additionally, the Company made debt payments of $55.0 million in 2004 compared to $60.0 million and $40.0 million in 2003 and 2002, respectively. Arbitron made stock repurchases of $25.0 million in 2004. Arbitron did not make any stock repurchases in 2003 or 2002.

      Arbitron’s commitment under its revolving credit facility, which was $225.0 million at inception, had a balance of $0.2 million on December 31, 2004, and was closed by the request of the Company on January 31, 2005. Arbitron’s senior secured notes in the amount of $50.0 million mature on January 31, 2008.

      Arbitron’s senior secured notes contain non-investment-grade financial terms, covenants and operating restrictions that increase the cost of financing and restrict financial flexibility. Under the terms of the senior secured notes, Arbitron is required to maintain certain leverage and coverage ratios and meet other financial conditions. The senior secured notes limit, among other things, Arbitron’s ability to buy and sell assets, incur additional indebtedness, grant or incur liens on its assets, pay cash dividends over a certain amount, make certain investments or acquisitions, repurchase or redeem capital stock and engage in certain mergers or consolidations. The terms of the senior secured notes may restrict or prohibit Arbitron’s ability to raise additional capital when needed or could prevent Arbitron from making acquisitions or investing in other growth initiatives. Arbitron has met all covenants since the inception of all borrowings, including the terminated Credit Facility.

      On September 9, 2004, the Company announced that its Board of Directors authorized a repurchase program under which the Company could purchase up to $25.0 million of its outstanding common stock through December 31, 2004. As of December 31, 2004, the Company had repurchased an aggregate of 666,100 shares under the program for an aggregate purchase price of $25.0 million. Additional stock repurchases are limited by the terms of the Company’s senior secured notes. The Company is currently negotiating with the holder of these notes possible amendments to the terms that would permit additional stock repurchases in the future.

      Arbitron announced on February 28, 2005 that its Board of Directors approved the payment of the Company’s first cash dividend of $0.10 per common share. The dividend will be paid on April 1, 2005 to stockholders of record as of the close of business on March 15, 2005.

      In 2004, Clear Channel Communications and Infinity Broadcasting represented approximately 21% and 10%, respectively, of Arbitron’s revenue. Arbitron’s agreements with these customers are not exclusive and contain no renewal obligations. In August 2004, Arbitron entered into license agreements with Infinity Broadcasting, effective April 1, 2004, to provide audience estimates, software and other ancillary services to Infinity Broadcasting’s radio stations through the Company’s Winter 2008 survey. Certain of Clear Channel Communication’s existing license agreements with Arbitron were scheduled to expire on December 31, 2004. On December 27, 2004, the Company entered into new license agreements with Clear Channel Communications to provide radio ratings and software services for Clear Channel Communication’s radio stations and networks through the Company’s Fall 2008 survey. Arbitron cannot give any assurances that it will retain

38

current customers or that it will be able to replace the revenue that is lost when a key customer fails to renew its agreement with Arbitron.

      In 2004, Arbitron focused on a demonstration to be conducted in Houston, Texas, in 2005 and 2006 to confirm the results of previous tests and demonstrate enhancements to the Portable People Meter system that have been made since it was tested in Philadelphia. Arbitron continues to work with Nielsen Media Research to resolve outstanding issues and to negotiate business terms for a potential Portable People Meter joint venture.

      Separate from the proposed joint venture with Nielsen Media Research, in 2003 Arbitron began testing additional marketing research applications of the Portable People Meter technology. One application that Arbitron began testing was the use of the Portable People Meter as the media collection tool for a national marketing-oriented panel designed to correlate advertising with shopping behavior and sales. The objective is to provide multimedia exposure data combined with sales data from a single source to produce a measure of advertising effectiveness for advertisers, agencies and broadcasters. On September 29, 2004, Arbitron announced that Arbitron and VNU, Inc. signed an agreement to explore the development of a new national marketing research service. Procter & Gamble is collaborating with the two companies to ensure that the service properly addresses the needs of marketers. This would be a new type of service for which market acceptance is not yet known.

      The continuing development of PPM services will require both significant capital resources and operating costs over the next several years. In the event Arbitron decides to commercialize either a PPM ratings service or a PPM marketing application service there could be significant start-up expenses that could adversely affect Arbitron’s financial position and operating results.

      The following table summarizes Arbitron’s contractual cash obligations as of December 31, 2004:

Contractual Obligations

(In thousands)

	Less Than		1 - 3		3 - 5		More Than
	1 Year		Years		Years		5 Years		Total
Long-term debt(A)	$	4,980	$	9,960	$	50,457	$	—	$	65,397
Operating leases(B)		8,918		12,715		7,166		8,865		37,664
Purchase obligations(C)		—		—		—		—		—
Pension contributions(D)		1,000		—		—		—		1,000
	$	14,898	$	22,675	$	57,623	$	8,865	$	104,061

(A)  See note 8 to consolidated financial statements (includes future interest payments of $15.4 million).

(B)	See note 11 to consolidated financial statements.
(C)	Arbitron generally does not make unconditional, noncancelable purchase commitments. The Company enters into purchase orders in the normal course of business, but they do not exceed one-year terms.

(D)  Amount represents an estimate of its cash contribution for 2005 to its defined benefit pension plan. Future cash contributions will be determined based upon the funded status of the plan.

      As of December 31, 2004, the Company had an outstanding letter of credit of $0.1 million. The letter of credit was cancelled effective January 27, 2005.

Off-Balance Sheet Arrangements

      Arbitron did not enter into any off-balance sheet arrangements during 2004 or 2003, nor did Arbitron have any off-balance sheet arrangements outstanding at December 31, 2004 or 2003.

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New Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board (“FASB”) enacted Statement of Financial Accounting Standards 123 — revised 2004 (“SFAS 123R”), “Share-Based Payment” which replaces Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” SFAS 123R requires the measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in our consolidated statements of income. The accounting provisions of SFAS 123R are effective for reporting periods beginning after June 15, 2005.

      Arbitron is required to adopt SFAS 123R in the third quarter of 2005. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. See Note 2 in the Notes to Consolidated Financial Statements for the pro forma net income and net income per share amounts, for 2004, 2003 and 2002. Although Arbitron has not yet determined whether the adoption of SFAS 123R will result in amounts that are similar to the current pro forma disclosures under SFAS 123, the Company is evaluating the requirements under SFAS 123R and expects the adoption to have a significant adverse impact on the Company’s consolidated statements of income and net income per share.

Seasonality

      Arbitron recognizes revenue for products and services over the terms of license agreements as products and services are delivered, and expenses are recognized as incurred. Arbitron gathers radio-listening data in approximately 293 United States local markets. All markets are measured at least twice per year (April-May-June for the “Spring Survey” and October-November-December for the “Fall Survey”). In addition, all major markets are measured two additional times per year (January-February-March for the “Winter Survey” and July-August-September for the “Summer Survey”). Arbitron’s revenue is generally higher in the first and third quarters as a result of the delivery of the Fall Survey and Spring Survey, respectively, to all markets, compared to revenue in the second and fourth quarters, when delivery of the Winter Survey and Summer Survey, respectively, is only provided to major markets. Arbitron’s expenses are generally higher in the second and fourth quarters as the “Spring Survey” and “Fall Survey” are being conducted.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Risk

      The Company currently has no exposure to market risk with respect to changes in interest rates, because the Company’s only outstanding debt is on senior notes that bear interest at a fixed rate of 9.96%. The Company does not use derivatives for speculative or trading purposes.

      Because the Company currently has no outstanding floating rate debt, a hypothetical market interest rate change of 1% would have no effect on the Company’s results of operations. However, changes in market interest rates would impact the fair value of the Company’s senior notes. The fair value of the senior secured notes as of December 31, 2004 and 2003 was $53.8 million and $55.3 million, respectively, and was estimated using a cash flow valuation model and available market data for securities with similar maturity dates.

Foreign Currency Risk

      Arbitron’s foreign operations are not significant at this time, and, therefore, Arbitron’s exposure to foreign currency risk is minimal.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The report of the independent registered public accounting firm and financial statements are set forth below (see Item 15(a) for list of financial statements and financial statement schedules):

40

ARBITRON INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm		42
Consolidated Balance Sheets as of December 31, 2004 and 2003		44
Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002		45
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2004, 2003 and 2002		46
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002		47
Notes to Consolidated Financial Statements		48
Consolidated Schedule of Valuation and Qualifying Accounts		65

41

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

     Arbitron Inc.

      We have audited the accompanying consolidated balance sheets of Arbitron Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed under item 15(a)(2). These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Arbitron Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the internal control over financial reporting of Arbitron Inc. as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

Baltimore, Maryland

March 3, 2005

42

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

     Arbitron Inc.:

      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that Arbitron Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management of Arbitron Inc. is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that Arbitron Inc. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Arbitron Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Arbitron Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 3, 2005 expressed an unqualified opinion on those consolidated financial statements.

Baltimore, Maryland

March 3, 2005

43

ARBITRON INC.

Consolidated Balance Sheets

December 31, 2004 and 2003

(In thousands, except par value data)

			2004			2003
Assets
Current assets
	Cash and cash equivalents		$	86,901		$	68,433
	Trade accounts receivable, net of allowance for doubtful accounts of $1,124 in 2004 and $1,081 in 2003			23,369			21,355
	Deferred tax assets			4,362			24,183
	Prepaid expenses and other current assets			5,529			2,886
		Total current assets		120,161			116,857
Investment in affiliate				12,130			10,953
Property and equipment, net				18,536			13,182
Goodwill, net				37,773			32,937
Other intangibles, net				3,381			1,487
Noncurrent deferred tax assets				3,025			6,646
Other noncurrent assets				1,115			2,132
		Total assets	$	196,121		$	184,194
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities
	Accounts payable		$	5,444		$	5,326
	Accrued expenses and other current liabilities			30,955			28,119
	Deferred revenue			59,608			58,398
		Total current liabilities		96,007			91,843
	Noncurrent liabilities
	Long-term debt			50,000			105,000
	Other noncurrent liabilities			4,734			5,424
		Total liabilities		150,741			202,267
Commitments and contingencies
Stockholders’ equity (deficit)
	Preferred stock, $100.00 par value, 750 shares authorized, no shares issued			—			—
	Common stock, $0.50 par value, authorized 500,000 shares, issued 32,336 shares			16,168			16,168
	Additional paid-in capital			101,914			100,024
	Accumulated earnings (net distributions to Ceridian in excess of accumulated earnings) prior to spin-off			(242,870	)		(242,870	)
	Retained earnings subsequent to spin-off			173,360			112,795
	Common stock held in treasury, 1,376 shares in 2004 and 1,626 shares in 2003			(688	)		(813	)
	Accumulated other comprehensive loss			(2,504	)		(3,377	)
		Total stockholders’ equity (deficit)		45,380			(18,073	)
		Total liabilities and stockholders’ equity (deficit)	$	196,121		$	184,194

See notes to consolidated financial statements.

44

ARBITRON INC.

Consolidated Statements of Income

Years Ended December 31, 2004, 2003 and 2002

(In thousands, except per share data)

			2004		2003		2002
Revenue			$	296,553	$	273,550	$	249,757
Costs and expenses
	Cost of revenue			109,951		103,109		91,821
	Selling, general and administrative			62,421		58,662		53,096
	Research and development			33,297		25,842		24,728
		Total costs and expenses		205,669		187,613		169,645
Operating income				90,884		85,937		80,112
	Equity in net income of affiliate			7,552		6,754		5,627
Income before interest and income tax expense				98,436		92,691		85,739
	Interest income			1,099		741		596
	Interest expense			7,909		12,338		16,815
Income before income tax expense				91,626		81,094		69,520
	Income tax expense			31,061		31,221		26,765
Net income			$	60,565	$	49,873	$	42,755
Net income per weighted average common share
	Basic		$	1.96	$	1.66	$	1.45
	Diluted		$	1.92	$	1.63	$	1.42
Weighted average common shares used in calculations
	Basic			30,972		30,010		29,413
	Potentially dilutive securities			499		606		636
	Diluted			31,471		30,616		30,049

See notes to consolidated financial statements.

45

ARBITRON, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

Years Ended December 31, 2004, 2003 and 2002

(In thousands)

											Accumulated
											Earnings (Net
											Distributions to
											Ceridian in			Retained					Accumulated
											Excess of			Earnings		Common			Other			Total
			Number of					Additional			Accumulated			Subsequent		Stock			Comprehensive			Stockholders’
			Shares			Common		Paid-In			Earnings)			to		Held in			Income			Equity
			Outstanding			Stock		Capital			Prior to Spin-off			Spin-off		Treasury			(Loss)			(Deficit)
Balance at December 31, 2001				29,202		$	16,166	$	59,349		$	(260,146	)	$	20,167	$	(1,565	)	$	(3,080	)	$	(169,109	)
Net income				—			—		—			—			42,755		—			—			42,755
Other comprehensive income (loss)
	Net change in foreign currency translation			—			—		—			—			—		—			246			246
	Change in additional minimum pension liability — qualified plan			—			—		—			—			—		—			(3,026	)		(3,026	)
	Change in additional minimum pension liability — non-qualified plan			—			—		—			—			—		—			84			84
	Change in unrealized loss on interest rate swap			—			—		—			—			—		—			15			15
	Income tax benefit			—			—		—			—			—		—			1,138			1,138
Adjustments to distributions from Ceridian, net				—			—		—			17,276			—		—			—			17,276
Common stock issued				409			2		7,690			—			—		202			—			7,894
Tax benefit from stock option exercises and other plans				—			—		2,148			—			—		—			—			2,148
Balance at December 31, 2002				29,611			16,168		69,187			(242,870	)		62,922		(1,363	)		(4,623	)		(100,579	)
Net income				—			—		—			—			49,873		—			—			49,873
Other comprehensive income (loss)
	Net change in foreign currency translation			—			—		—			—			—		—			306			306
		Change in additional minimum pension liability — qualified plan		—			—		—			—			—		—			(1,275	)		(1,275	)
	Change in additional minimum pension liability — non-qualified plan			—			—		—			—			—		—			(405	)		(405	)
	Change in unrealized loss on interest rate swap			—			—		—			—			—		—			3,125			3,125
	Income tax benefit			—			—		—			—			—		—			(505	)		(505	)
Common stock issued				1,099			—		24,790			—			—		550			—			25,340
Tax benefit from stock option exercises and other plans				—			—		6,047			—			—		—			—			6,047
Balance at December 31, 2003				30,710			16,168		100,024			(242,870	)		112,795		(813	)		(3,377	)		(18,073	)
Net income				—			—		—			—			60,565		—			—			60,565
Other comprehensive income (loss)																							—
	Net change in foreign currency translation			—			—		—			—			—		—			230			230
	Change in additional minimum pension liability — qualified plan			—			—		—			—			—		—			(226	)		(226	)
	Change in additional minimum pension liability — non-qualified plan			—			—		—			—			—		—			394			394
	Change in unrealized loss on interest rate swap																			1,171			1,171
	Income tax benefit			—			—		—			—			—		—			(696	)		(696	)
Common stock issued				916			—		20,908			—			—		459			—			21,367
Noncash compensation				—			—		188			—			—		—			—			188
Common stock repurchased				(666	)		—		(24,692	)		—			—		(334	)		—			(25,026	)
Tax benefit from stock option exercises and other plans				—			—		5,486			—			—		—			—			5,486
Balance at December 31, 2004				30,960		$	16,168	$	101,914		$	(242,870	)	$	173,360	$	(688	)	$	(2,504	)	$	45,380

See notes to consolidated financial statements.

46

ARBITRON INC.

Consolidated Statements of Cash Flows

Years Ended December 31, 2004, 2003 and 2002

(In thousands)

				2004			2003			2002
Cash flows from operating activities
	Net income			$	60,565		$	49,873		$	42,755
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation and amortization of property and equipment			4,334			3,953			3,177
		Amortization of intangible assets			1,388			884			1,192
		Loss on asset disposals			541			434			119
		Asset impairment charges			328			178			—
		Deferred income taxes			22,748			(1,935	)		22,905
		Equity in net income of affiliate			(7,552	)		(6,754	)		(5,627	)
		Distributions from affiliate			6,375			6,050			5,100
		Bad debt expense			305			324			294
		Tax benefit from stock option exercises			5,486			6,047			2,148
		Noncash compensation			188			—			—
		Changes in operating assets and liabilities, excluding effects of business acquisitions
			Trade accounts receivable		(1,231	)		(999	)		(1,268	)
			Prepaid expenses and other assets		490			471			2,475
			Accounts payable		42			757			(834	)
			Accrued expense and other current liabilities		2,721			3,276			3,908
			Deferred revenue		705			3,614			1,715
			Other noncurrent liabilities		649			(818	)		(1,733	)
		Net cash provided by operating activities			98,082			65,355			76,326
Cash flows from investing activities
	Additions to property and equipment				(10,164	)		(5,350	)		(6,779	)
	Payments for business acquisitions				(8,928	)		—			(15,600	)
		Net cash used in investing activities			(19,092	)		(5,350	)		(22,379	)
Cash flows from financing activities
	Proceeds from stock option exercises and stock purchase plan				19,287			25,051			7,894
	Stock repurchases				(25,026	)		—			—
	Payment of long-term debt				(55,000	)		(60,000	)		(40,000	)
		Net cash used in financing activities			(60,739	)		(34,949	)		(32,106	)
Effect of exchange rate changes on cash and cash equivalents					217			282			211
Net increase in cash and cash equivalents					18,468			25,338			22,052
Cash and cash equivalents at beginning of year					68,433			43,095			21,043
Cash and cash equivalents at end of year				$	86,901		$	68,433		$	43,095

See notes to consolidated financial statements.

47

ARBITRON INC.

Notes to Consolidated Financial Statements

1. Basis of Presentation

Description of Business

      Arbitron Inc. (“Arbitron” or the “Company”) is an international media and marketing research firm primarily serving radio, cable, advertising agencies, advertisers, outdoor and out-of-home media and, through its Scarborough joint venture, broadcast television and print media.

      Arbitron currently has four main services: measuring radio audiences in local markets in the United States and Mexico; measuring national radio audiences and the audience size of network radio programs and commercials; providing application software used for accessing and analyzing media audience and marketing information data; and providing consumer and media usage information services to radio, cable, retailers, advertising agencies, advertisers, outdoor and out-of-home media, online industries and, through its Scarborough joint venture, broadcast television and print media.

2. Summary of Significant Accounting Policies

Basis of Consolidation

      The consolidated financial statements of Arbitron reflect the consolidated financial position, results of operations and cash flows of Arbitron Inc. and its subsidiaries: Arbitron Holdings Inc., Audience Research Bureau S.A. de C.V., Ceridian Infotech (India) Private Limited, CSW Research Limited and Euro Fieldwork Limited.

Revenue Recognition

      Syndicated or recurring products and services are licensed on a contractual basis. Revenues for such products and services are recognized over the term of the license agreement as products or services are delivered. Customer billings in advance of delivery are recorded as deferred revenue in the accompanying consolidated balance sheets. Deferred revenue relates primarily to quantitative radio measurement surveys which were delivered to customers in the quarter following the respective year-end. Software revenue is recognized ratably over the life of the agreement in accordance with Statement of Position 97-2, Software Revenue Recognition.

Expense Recognition

      Direct costs associated with the Company’s data collection and diary processing are recognized when incurred and are included in cost of revenue. Research and development expenses consist primarily of expenses associated with the development of new products and software and are expensed as incurred.

Cash Equivalents

      Cash equivalents consist primarily of highly liquid investments with insignificant interest rate risk and original maturities of three months or less.

Trade Accounts Receivable

      Trade accounts receivable are recorded at invoiced amounts. The allowance of doubtful accounts is estimated based on historical trends of past due accounts and write-offs.

48

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

Property and Equipment

      Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over the estimated useful lives of the assets, which are as follows:

Computer equipment	3 years
Purchased software and development costs	3 – 5 years
Leasehold improvements	Useful life or life of lease
Machinery, furniture and fixtures	3 – 6 years

      Repairs and maintenance are charged to expense as incurred. Gains and losses on dispositions are included in the consolidated results of operations at the date of disposal.

      Expenditures for major software purchases and software developed for internal use are capitalized. For software developed for internal use, all external direct costs for materials and services and certain payroll and related fringe benefit costs are capitalized in accordance with Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Computer software maintenance costs are expensed as incurred.

Investment in Affiliate

      Investment in affiliate is accounted for using the equity method where the Company has an ownership interest of 50% or less and the ability to exercise significant influence or has a majority ownership interest but does not have the ability to exercise effective control.

Goodwill and Other Intangibles

      Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement of Financial Accounting Standards No. 142 (“SFAS 142”). SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

Impairment of Long-Lived Assets

      Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized at the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

      Goodwill and intangible assets not subject to amortization are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

49

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

Income Taxes

      Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.

Derivatives

      The Company accounted for derivative financial instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activity (as amended by SFAS No. 138). SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires that entities recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. These fair value adjustments are to be included either in the determination of net income or as a component of other comprehensive income, depending on the purpose for the derivative transaction.

      On the date a derivative contract is entered into, the Company designates the derivative as a fair value hedge, a cash flow hedge or a foreign currency hedge. The Company formally documents relationships between hedging instruments and hedged items, as well as the risk management objectives and strategies for undertaking hedge transactions. The Company also assesses, both at inception, and on an ongoing basis, whether derivatives that are used in hedging transactions are highly effective in mitigating the identified risks.

      Derivatives used to hedge variable interest rate risk are recorded on the balance sheet at their fair value, as either liabilities or assets with the related unrealized gain or loss as a component of accumulated other comprehensive income. Any realized gains or losses due to hedge ineffectiveness would be recorded as an adjustment to interest expense in the consolidated statements of income.

      The Company does not hold or issue derivative financial instruments for speculative or trading purposes.

Pro Forma Disclosures of Stock-Based Compensation

      The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including Financial Accounting Standards Board (“FASB”) Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price of the options. SFAS No. 123, Accounting for Stock-Based Compensation (as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transitions and Disclosures), established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. The

50

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each year (dollars in thousands, except per share data):

		2004		2003		2002
Net income, as reported		$	60,565	$	49,873	$	42,755
Add: Nonemployee stock-based compensation expense, net of tax			116		—		—
Less: Stock-based compensation expense determined under fair value method, net of tax			3,042		3,168		4,213
Pro forma net income		$	57,639	$	46,705	$	38,542
Basic net income per weighted average common share, as reported		$	1.96	$	1.66	$	1.45
Pro forma basic net income per weighted average common share		$	1.86	$	1.56	$	1.31
Diluted net income per weighted average common share, as reported		$	1.92	$	1.63	$	1.42
Pro forma diluted net income per weighted average common share		$	1.83	$	1.52	$	1.26
Options granted to employees and directors			485,393		585,437		546,024
Weighted-average exercise price		$	37.96	$	34.79	$	34.67
Weighted-average fair value		$	13.09	$	7.57	$	8.01
Weighted-average assumptions:
	Expected lives in years		6.0		4.0		4.0
	Expected volatility		27.3%		23.9%		24.8%
	Expected dividend rate		—		—		—
	Risk-free interest rate		3.69%		2.77%		2.75%

Net Income per Weighted Average Common Share

      Potentially dilutive securities are calculated in accordance with the treasury stock method, which assumes that the proceeds from the exercise of all stock options are used to repurchase the Company’s common stock at the average market price for the period. Options totaling 402,538 in 2004, 14,084 in 2003 and 529,233 in 2002, were not included in the computation of diluted net income per common share because the options’ exercise prices exceeded the average market price of the Company’s common stock.

Translation of Foreign Currencies

      Financial statements of foreign subsidiaries are translated into United States dollars at current rates at the end of the period except that revenue and expenses are translated at average current exchange rates during each reporting period. Net translation exchange gains or losses and the effect of exchange rate changes on intercompany transactions of a long-term nature are accumulated and charged directly to a separate component of other comprehensive income and accumulated other comprehensive loss in stockholders’ equity (deficit). Gains and losses from translation of assets and liabilities denominated in other than the functional currency of the operation are recorded in income as incurred.

51

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

     Advertising Expense

      The Company recognizes advertising expense the first time advertising takes place. Advertising expense for the years ended December 31, 2004, 2003 and 2002 was $1.5 million, $1.9 million and $1.5 million, respectively.

     Accounting Estimates

      The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include: valuation allowances for receivables; deferred income tax assets; and assets and obligations related to employee benefits. Actual results could differ from those estimates.

     New Accounting Pronouncements

      In December 2004, the FASB recently enacted SFAS 123R, “Share-Based Payment” which replaces SFAS 123, “Accounting for Stock-Based Compensation” and supersedes APB 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires the measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in our consolidated statements of income. The accounting provisions of SFAS 123R are effective for reporting periods beginning after June 15, 2005.

      Arbitron is required to adopt SFAS 123R in the third quarter of 2005. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. See Note 2 in the Notes to Consolidated Financial Statements for the pro forma net income and net income per share amounts, for 2004, 2003 and 2002. Although Arbitron has not yet determined whether the adoption of SFAS 123R will result in amounts that are similar to the current pro forma disclosures under SFAS 123, the Company is evaluating the requirements under SFAS 123R and expects the adoption to have a significant adverse impact on the Company’s consolidated statements of income and net income per share.

3.     Investment in Affiliate

      Investment in affiliate consists of the Company’s 49.5% interest in Scarborough Research (“Scarborough”), a syndicated, qualitative local market research partnership, which is accounted for using the equity method of accounting.

      Under the Scarborough partnership agreement, the Company has the exclusive right to license Scarborough’s services to radio stations, cable companies, and outdoor media, and a nonexclusive right to license Scarborough’s services to advertising agencies and advertisers. The Company pays a royalty fee to Scarborough based on a percentage of revenues. Royalties of approximately $22.8 million, $19.6 million and $17.1 million for 2004, 2003 and 2002, respectively, are included in cost of revenue in the Company’s consolidated statements of income. Accrued royalties due to Scarborough as of December 31, 2004 and 2003 of $5.5 million and $3.0 million, respectively, are included in accrued expenses and other current liabilities in the consolidated balance sheets.

      Scarborough’s revenue was $54.9 million, $49.7 million and $43.7 million in 2004, 2003 and 2002, respectively. The Company’s equity in net income of Scarborough was $7.6 million, $6.8 million and $5.6 million in 2004, 2003 and 2002, respectively. The Company received distributions from Scarborough in 2004, 2003 and 2002 of $6.4 million, $6.1 million and $5.1 million, respectively.

52

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

4.     Property and Equipment

      Property and equipment as of December 31, 2004 and 2003 consist of the following (in thousands):

	2004			2003
Computer equipment	$	8,519		$	7,894
Purchased software and development costs		14,756			11,101
Leasehold improvements		7,133			6,892
Machinery, furniture and fixtures		4,830			4,160
Portable People Meter equipment		2,754			1,963
		37,992			32,010
Accumulated depreciation and amortization		(19,456	)		(18,828	)
Property and equipment, net	$	18,536		$	13,182

      Depreciation and amortization expense for 2004, 2003 and 2002 was $4.3 million, $4.0 million and $3.2 million, respectively.

      Capitalized interest costs for 2004 and 2003 were $0.4 million and $0.2 million, respectively.

5.     Goodwill and Other Intangible Assets

      Under SFAS No. 142, Goodwill and Other Intangible Assets, the Company is no longer amortizing goodwill, rather goodwill is measured for impairment annually on January 1 under the guidance set forth in the standard. During 2004, 2003 and 2002, the Company tested its goodwill in accordance with the standard and concluded no impairment charge was required.

      Intangible assets, which consists primarily of acquired software, customer lists and noncompete agreements, with finite lives are being amortized to expense over their estimated useful lives. As of December 31, 2004, the Company’s intangible assets with finite lives acquired in 2004 had a weighted average useful life of three years. As of December 31, 2004, the Company had no intangible assets with indefinite useful lives. Amortization expense for intangible assets for 2004, 2003 and 2002 was $1.4 million, $0.9 million and $1.2 million, respectively. Amortization expense for intangible assets is estimated to be $1.6 million in 2005, $1.2 million in 2006, $0.5 million in 2007, $0.1 million in 2008 and $0 in 2009.

      Changes in goodwill for the years ended December 31, 2004 and 2003 were as follows (in thousands):

	2004		2003
Beginning of year balance	$	32,937	$	32,937
MRP acquisition		4,836		—
End of year balance	$	37,773	$	32,937

53

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

6.     Accrued Expenses and Other Current Liabilities

      Accrued expenses and other current liabilities as of December 31, 2004 and 2003 consist of the following (in thousands):

	2004		2003
Employee compensation and benefits	$	17,307	$	14,332
Federal and state income taxes		5,078		7,837
Royalties due to Scarborough		5,484		3,046
Interest		830		842
Sales and value added taxes		1,403		1,091
Other		853		971
	$	30,955	$	28,119

7.     Purchase Acquisition

      On March 11, 2004, Arbitron acquired certain assets of Marketing Resources Plus from Interactive Market Systems, Inc., part of the VNU Media Measurement and Information Group, for $8.9 million in cash. The $8.9 million purchase price was allocated as follows: $0.5 million in tangible net assets, $3.6 million in identifiable intangible assets and $4.8 million in goodwill.

8.     Long-term Debt

      Long-term debt as of December 31, 2004 and 2003 consisted of the following (in thousands):

	2004		2003
Senior fixed rate notes	$	50,000	$	50,000
Revolving credit facility		—		55,000
	$	50,000	$	105,000

      On January 31, 2001, the Company entered into a $225.0 million five-year revolving credit agreement with a consortium of banks (“Credit Facility”). In connection with the Company’s spin-off of Ceridian Corporation (“Ceridian”) in March 2001, $200.0 million was drawn on the Credit Facility and distributed to Ceridian.

      On September 30, 2004, Arbitron paid the remaining $25.0 million outstanding under the Credit Facility. The effective interest rate on the Credit Facility borrowings outstanding prior to the payment on September 30, 2004, was 7.02%.

      Arbitron’s commitment under the Credit Facility, which was $225.0 million at inception, had been reduced to $0.2 million as of December 28, 2004. Available borrowings under the Credit Facility were $0.1 million as of December 31, 2004. A letter of credit remained outstanding in the amount of $0.1 million on the Credit Facility as of December 31, 2004. On January 27, 2005, the letter of credit was discontinued. On January 31, 2005, the Credit Facility was terminated at the request of Arbitron.

      Upon consummation of the spin-off, the Company issued $50.0 million of senior secured notes due January 31, 2008, and distributed the proceeds to Ceridian. The notes bear interest at a fixed rate of 9.96%. The senior secured notes agreement contains covenants. The agreement also contains a make-whole provision that applies in the event of early prepayment of principal. The fair value of the senior secured notes as of December 31, 2004 and 2003 was $53.8 million and $55.3 million, respectively, and was estimated using a cash flow valuation model and available market data for securities with similar maturity dates. Under the

54

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

terms of the senior secured notes, the Company is required to maintain certain other financial ratios, in addition to the leverage ratio, and meet other financial conditions. The senior secured notes limits, among other things, the Company’s ability to buy or sell assets, incur additional indebtedness, grant or incur liens on its assets, make investments or acquisitions, repurchase or redeem capital stock and engage in certain mergers or consolidations. The Company was in compliance with its covenants as of December 31, 2004.

      If a default occurs under the borrowings, the lenders under Arbitron’s secured senior notes could proceed against the lenders’ collateral, which includes a first priority lien on substantially all of the assets of Arbitron and its domestic subsidiaries and a pledge of the capital stock of all of its domestic subsidiaries and of 65% of the capital stock of its foreign subsidiaries. In addition, a default may result in higher rates of interest and the inability to obtain additional capital.

      Interest paid in 2004 and 2003 was $7.4 million and $11.8 million, respectively.

      Annual maturities of the Company’s long-term debt based on projected commitment reductions is $0 in 2005, $0 in 2006, $0 in 2007, $50.0 million in 2008 and $0 in 2009. As of December 31, 2004, the Company had outstanding letters of credit of $0.1 million. The outstanding letter of credit was terminated on January 27, 2005.

9. Interest Rate Swap

      The Company entered into an interest rate swap agreement effective March 29, 2001, to hedge its exposure to fluctuations in interest rates relating to its outstanding variable rate debt. The interest rate swap agreement was designated as a cash flow hedge, and was designed to be entirely effective by matching the terms of the swap agreement with the debt. The fair value of the cash flow hedge had been recorded as a noncurrent liability, and the offsetting unrealized loss had been recorded in accumulated other comprehensive loss until September 30, 2004. On September 30, 2004, the Company paid down the debt and retired the swap and recognized a loss of $0.1 million, which was recorded as interest expense in the 2004 consolidated statement of income.

      The Company’s risk-management objective for entering into the interest rate swap was to mitigate its exposure to interest rate risk. The Company’s initial strategy was to lock into a fixed rate of interest with a pay-fixed, receive-variable interest rate swap, thereby hedging exposure to the variability in future cash flows.

10. Comprehensive Income

      The Company’s comprehensive income is comprised of net income, foreign currency translation adjustments, changes in additional minimum pension liabilities and changes in unrealized gains and losses on the interest rate swap agreement.

55

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

      The components of comprehensive income for the years ended December 31, 2004, 2003 and 2002 were as follows (in thousands):

		2004			2003			2002
Net income		$	60,565		$	49,873		$	42,755
Other comprehensive income (loss)
	Change in foreign currency translation adjustment		230			306			246
	Change in fair value of interest rate swap		1,171			3,125			15
	Change in additional minimum pension liabilities		168			(1,680	)		(2,942	)
	Income tax benefit, net		(696	)		(505	)		1,138
Comprehensive income		$	61,438		$	51,119		$	41,212

      The components of accumulated other comprehensive loss as of December 31, 2004 and 2003 were as follows (in thousands):

	2004			2003
Foreign currency translation adjustment	$	466		$	236
Unrealized loss on interest rate swap		—			(1,171	)
Additional minimum pension liability		(4,538	)		(4,706	)
Income tax benefit		1,568			2,264
	$	(2,504	)	$	(3,377	)

11. Commitments and Contingencies

Leases

      Arbitron conducts all of its operations in leased facilities and leases certain equipment which have minimum lease obligations under noncancelable operating leases. Certain of these leases contain rent escalations based on specified percentages. Most of the leases contain renewal options and require payments for taxes, insurance and maintenance. Rent expense is charged to operations as incurred except for escalating rents, which are charged to operations on a straight-line basis over the life of the lease. Rent expense was $9.1 million, $8.5 million and $8.4 million in 2004, 2003 and 2002, respectively.

      Future minimum lease commitments under noncancelable operating leases having an initial term of more than one year, are as follows (in thousands):

2005	$	8,918
2006		8,305
2007		4,410
2008		3,686
2009		3,480
Thereafter		8,865
	$	37,664

56

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

Legal Matters

      The Company is involved, from time to time, in litigation and proceedings arising out of the ordinary course of business. There are no pending material legal proceedings or environmental investigations to which the Company is a party or to which the property of the Company is subject.

12. Income Taxes

      The provision for income taxes is based on income recognized for consolidated financial statement purposes and includes the effects of permanent and temporary differences between such income and income recognized for income tax return purposes. As a result of the spin-off, deferred tax assets consisting of net operating loss and credit carryforwards were transferred from Ceridian to Arbitron, along with temporary differences related to the Arbitron business. The net operating loss carryforwards will expire in varying amounts from 2005 to 2022. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

      The components of income before income tax expense and a reconciliation of the statutory federal income tax rate to the income tax rate on income before income tax expense for the years ended December 31, 2004, 2003 and 2002 are as follows (dollars in thousands):

			2004			2003			2002
Income before income tax expense:
	U.S.		$	91,469		$	80,357		$	69,591
	International			157			737			(71	)
	Total		$	91,626		$	81,094		$	69,520
Income tax expense:
	Current:
		U.S.	$	10,553		$	28,925		$	2,188
		State and other		(2,240	)		4,231			1,672
				8,313			33,156			3,860
	Deferred:
		U.S.		18,455			(1,729	)		21,304
		State and other		6,500			(206	)		1,601
		Reduction in valuation allowance		(2,207	)		—			—
		Total		22,748			(1,935	)		22,905
			$	31,061		$	31,221		$	26,765
U.S. statutory rate				35	%		35	%		35	%

57

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

		2004			2003			2002
Income tax expense at U.S. statutory rate		$	32,069		$	28,383		$	24,332
State income taxes, net of federal benefit			2,769			2,616			2,145
Meals and entertainment			295			261			260
Reduction in valuation allowance for State NOLs			(2,207	)		—			—
Reversal of reserve for tax contingencies			(1,718	)		—			—
Other			(147	)		(39	)		28
	Income tax expense	$	31,061		$	31,221		$	26,765
Effective tax rate			33.9	%		38.5	%		38.5	%

      The effective tax rate of 33.9% was lower in 2004 than the effective tax rate of 38.5% in 2003 because certain reserves for tax contingencies were reversed in the third quarter of 2004 due to guidance in an Internal Revenue Service Revenue Procedure. Also in the third quarter of 2004, the valuation allowance on the deferred tax assets related to state net operating loss carryforwards was reduced due to higher actual and projected taxable income in the applicable states. The net benefit of these changes was $4.2 million in 2004.

      Reserves have been recorded for unasserted contingent claims as the Company is subject to federal and state audits throughout the normal course of operations.

      Pursuant to an Internal Revenue Service Revenue Procedure issued during the second quarter of 2004, the Company changed its tax method of accounting for advanced customer payments. Primarily as a result of the method change, income taxes of approximately $21.8 million paid in 2003 were applied toward the Company’s 2004 tax liability, and the deferred tax assets no longer include a temporary difference for deferred revenue. Temporary differences and the resulting deferred income tax assets as of December 31, 2004 and 2003 were as follows (in thousands):

		2004			2003
Deferred tax assets:
	Deferred revenue	$	—		$	21,942
	Income tax benefit of other comprehensive loss		1,568			2,264
	Depreciation		752			1,062
	Accruals		3,335			2,628
	Net operating loss carryforwards		5,079			5,034
	Other deferred tax assets		615			342
			11,349			33,272
Deferred tax liabilities:
	Goodwill and other intangible amortization	$	(3,078	)	$	(1,178	)
	Other deferred tax liabilities		(884	)		(1,265	)
			(3,962	)		(2,443	)
Net deferred tax assets:		$	7,387		$	30,829

      In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during periods in which the temporary differences become deductible and before tax credits or net operating loss carryforwards expire. Management considered historical results of Arbitron during the previous three years and projected future taxable income

58

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

and determined no valuation allowance was required at December 31, 2004 and 2003, except for state operating loss carryforwards, which are presented net of a valuation allowance of $1.2 million and $7.8 million, respectively.

      Income taxes paid in 2004 and 2003 were $5.6 million and $27.0 million, respectively.

13. Retirement Plans

Pension Benefits

      Arbitron’s United States employees participate in a defined benefit pension plan that closed to new participants effective January 1, 1995. Benefits under the plan for most employees are calculated using the final five year average salary of the employee. Employees participate in this plan by means of salary deduction contributions. Retirement plan funding amounts are based on independent consulting actuaries’ determination of the Employee Retirement Income Security Act of 1974 funding requirements.

      Due primarily to a drop in the discount rate and the effect of the plan’s investment experience as of the September 30, 2004 and 2003 measurement dates on the valuation of plan assets, the accrued benefit obligation of the plan exceeded the fair value of plan assets. Pension expense was $1.2 million, $1.0 million and $0.5 million for 2004, 2003 and 2002, respectively. The Company’s pension obligations exceeded plan assets by $5.1 million and $4.7 million as of September 30, 2004 and 2003, respectively.

      The Company’s overall expected long-term rate of return on assets is 8.0%. Arbitron employs a total return investment approach whereby a mix of equities and fixed income investments is used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks as well as growth and value stocks. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and periodic investment performance reviews.

      Arbitron’s pension plan weighted-average asset allocations as of September 30, 2004 and 2003, by asset category were as follows:

		Plan Assets as
		of
		September 30,
Asset Category		2004			2003
Equity Securities			59	%		58	%
Debt Securities			39	%		40	%
Cash and Cash Equivalents			2	%		2	%
	Total		100	%		100	%

      Arbitron’s investment strategy is to diversify assets so that adverse results from one asset or asset class will not have an unduly detrimental effect on the entire portfolio. Diversification includes by type, by characteristic, and by number of investments, as well as by investment style of management organization. Cash held and intended to pay benefits is considered to be a residual asset in the asset mix, and therefore, compliance with the ranges and targets specified shall be calculated excluding such reserves. Assets of the plan do not include securities issued by Arbitron. The target allocation for each asset class is 60% equity securities and 40% debt securities.

59

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

      Arbitron’s estimate for contributions to be paid in 2005 is $1.0 million. The expected benefit payments are as follows (in thousands):

2005	$	805
2006		744
2007		1,092
2008		1,180
2009		1,315
2010-2014		8,492
	$	13,628

      The funded status of the plan as of the measurement dates of September 30, 2004 and 2003, and change in funded status for the annual period ended September 30, 2004 and 2003 are shown in the accompanying table, along with the net periodic pension cost and assumptions used in calculations.

Postretirement Benefits

      Arbitron provides health care benefits for eligible retired employees who participate in the pension plan and were hired before January 1, 1992. These postretirement benefits are provided by several health care plans in the United States for both pre-age 65 retirees and certain grandfathered post-age 65 retirees. Employer contributions to these plans differ for various groups of retirees and future retirees. Employees hired before January 1, 1992 and retiring after that date may enroll in plans for which a company subsidy is provided through age 64.

      The Company’s postretirement benefit liability was $0.7 million and $0.6 million, as of December 31, 2004 and 2003, respectively. The Company’s postretirement benefit expense was $0.1 million in the years ended December 31, 2004, 2003 and 2002.

      Arbitron does not expect to make contributions in 2005. The expected benefit payments are as follows (in thousands):

2005	$	24
2006		37
2007		47
2008		59
2009		71
2010-2014		472
	$	710

      The accompanying table presents the balances of and changes in the aggregate benefit obligation as of the measurement dates of September 30, 2004 and 2003, and the components of net periodic postretirement benefit cost. The plan is unfunded.

60

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

		Defined Benefit
		Pension Plan						Postretirement Plan
		September 30,						September 30,
		2004			2003			2004			2003
		(Dollars in thousands)
Change in benefit obligation during the period
At beginning of period		$	22,330		$	19,558		$	802		$	674
Service cost			742			559			31			19
Interest cost			1,415			1,304			63			45
Plan participants’ contributions			343			342			7			3
Actuarial loss			1,222			1,055			451			67
Benefits paid			(394	)		(488	)		(16	)		(6	)
At end of period		$	25,658		$	22,330		$	1,338		$	802
Change in fair value of plan assets
At beginning of period		$	17,630		$	14,880		$	—		$	—
Actual return on plan assets			1,940			417			—			—
Employer contribution			1,078			2,479			9			3
Plan participants’ contributions			343			342			7			3
Benefits paid			(394	)		(488	)		(16	)		(6	)
At end of period		$	20,597		$	17,630		$	—		$	—
Funded status of plan
Funded status		$	(5,061	)	$	(4,700	)	$	(1,338	)	$	(802	)
Unrecognized net actuarial loss			8,390			8,091			616			189
Unrecognized prior service cost			116			138			—			—
Fourth quarter participant contributions			—			—			19			2
Intangible asset			(116	)		(138	)		—			—
Amount included in comprehensive income			(4,527	)		(4,301	)		—			—
Net liability		$	(1,198	)	$	(910	)	$	(703	)	$	(611	)
Net periodic cost
Service cost of benefits		$	742		$	559		$	31		$	19
Interest cost			1,415			1,304			63			45
Expected return on plan assets			(1,486	)		(1,322	)		—			—
Amortization of net actuarial loss			469			430			23			6
Amortization of prior service cost			22			22			—			—
Total		$	1,162		$	993		$	117		$	70
Weighted-average assumptions
Discount rate
	Components of cost		6.25	%		6.75	%		6.25	%		6.75	%
	Benefit obligations		6.00	%		6.25	%		6.00	%		6.25	%
Expected return on plan assets			8.00	%		8.00	%		—			—
Rate of compensation increase			4.00	%		4.00	%		4.00	%		4.00	%

61

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

      The accumulated benefit obligation for the defined benefit pension plan was $21.8 million and $18.5 million as of September 30, 2004 and 2003, respectively.

      The assumed health care cost trend rate used in measuring the postretirement benefit obligation was 8.30% for pre-age 65 and post-age 65 in 2004, with pre-age and post-age 65 rates declining to an ultimate rate of 5.75% in 2007. A 1% change in this rate would change the benefit obligation by approximately $0.1 million and the aggregate service and interest cost by less than $0.1 million.

     Supplemental Retirement

      Arbitron also sponsors two nonqualified supplemental retirement plans. The projected benefit obligation at September 30, 2004 and 2003 was $2.0 million and $2.9 million, respectively. The accumulated benefit obligation at September 30, 2004 and 2003 was $1.2 million and $1.1 million, respectively. Net periodic pension costs were $0.5 million for 2004, $0.2 million for 2003 and less than $0.1 million for 2002. As of December 31, 2004 and 2003, prepaid pension costs of $0.4 million and $0.4 million, respectively, held in benefit protection trusts were included in other noncurrent assets in the consolidated balance sheets. The change in additional minimum liability for the years ended December 31, 2004 and 2003, was $(0.4) million and $0.4 million, respectively.

     401(k) Plan

      Arbitron employees may also participate in a defined contribution plan that is sponsored by the Company. The plan generally provides for employee salary deferral contributions of up to 17% of eligible employee compensation. Under the terms of the plan, Arbitron contributes a matching contribution of 50% up to a maximum of 3% to 6% of eligible employee compensation. The employer may also make an additional discretionary matching contribution of up to 30% up to a maximum of 3% to 6% of eligible employee compensation. Arbitron’s costs with respect to its contributions to the defined contribution plan were $1.9 million, $1.5 million and $1.4 million in 2004, 2003 and 2002, respectively.

14.     Stock-Based Compensation

      The Company has two stock incentive plans (“SIP”) from which awards of stock options, restricted stock awards and performance unit awards are granted to eligible participants: the 1999 SIP, which was approved by the Company’s stockholders, and the 2001 SIP, which was not approved by the Company’s stockholders. Eligible participants in the 1999 and 2001 SIPs include all employees of the Company and any nonemployee director, consultant and independent contractor of the Company. Stock options awarded to employees under the 1999 and 2001 SIPs generally vest annually over a three-year period, have five-year and ten-year terms and have an exercise price that may not be less than the fair market value of the underlying stock at the date of grant. Stock awards granted to directors under the 1999 SIP generally are exercisable in six months, have 10-year terms and have an exercise price that may not be less than the fair market value of the underlying stock at the date of grant. As of December 31, 2004, shares available for grant were 1,302,920 and 141,663 under the 1999 and 2001 SIPs, respectively.

62

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

      Stock option activity and options outstanding for the years ended December 31, 2004, 2003 and 2002 were as follows:

						Weighted
	Exercise price					average exercise
	per share		Outstanding			price of options
Options in Arbitron stock, December 31, 2001	$	5.88 – $42.71		3,701,680		$	22.89
Granted		30.23 –  37.02		546,024			34.67
Exercised		5.88 –  32.86		(375,415	)		18.95
Canceled		14.21 –  34.61		(49,006	)		23.62
Options in Arbitron stock, December 31, 2002	$	8.62 – $42.71		3,823,283		$	24.95
Granted	$	31.25 – $41.72		585,437		$	34.79
Exercised		8.62 –  34.61		(1,069,818	)		22.86
Canceled		20.95 –  35.08		(55,970	)		27.33
Options in Arbitron stock, December 31, 2003	$	13.92 – $42.71		3,282,932		$	27.34
Granted	$	36.38 – $43.90		490,393		$	38.03
Exercised		13.92 –  35.08		(887,297	)		22.97
Canceled		14.21 –  35.08		(37,039	)		34.64
Options in Arbitron stock, December 31, 2004	$	18.85 – $43.90		2,848,989		$	30.45

      Weighted average characteristics of outstanding and exercisable stock options by exercise price range as of December 31, 2004 were as follows:

	Outstanding Options						Exercisable Options
			Average		Weighted				Weighted
			remaining		average				average
Range of	Number of		contractual		exercise		Number of		exercise
exercise price	options		life		price		options		price
$18.85 – $23.91		804,743		2.46	$	21.95		788,243	$	21.97
23.92 –  34.20		690,055		3.53		29.08		665,390		29.00
34.21 –  35.70		786,596		3.19		34.88		321,264		34.83
35.71 –  43.90		567,595		9.17		38.03		159,038		37.63
$18.85 – $43.90		2,848,989		4.26	$	30.45		1,933,935	$	27.81

      The Company’s Employee Stock Purchase Plan (“ESPP”) provides for the issuance of up to 600,000 shares of newly issued or treasury common stock of Arbitron. The purchase price of the stock to ESPP participants is 85% of the lesser of the fair market value on either the first day or the last day of the applicable three-month offering period.

15.     Significant Customers and Concentration of Credit Risk

      Arbitron’s quantitative radio audience measurement service and related software sales accounted for approximately 85% of its revenue in 2004, the largest portion of which is provided to radio broadcasters. Arbitron has two customers that individually represent 10% or more of its revenue. For the years 2004, 2003 and 2002, those customers represented 21% and 10%, 21% and 10%, and 21% and 11%, respectively, of the Company’s revenue. Although the industry consolidation has led to a concentration of Arbitron’s customer base, the Company believes that the consolidating enterprises are well financed, publicly held companies with

63

ARBITRON INC.

Notes to Consolidated Financial Statements — (Continued)

whom it has good relationships. Arbitron routinely assesses the financial strength of its customers and has experienced only nominal losses on its trade accounts receivable.

16.     Financial Instruments

      Fair values of trade accounts receivable and accounts payable approximate carrying values due to their short-term nature. The fair value of the senior secured notes as of December 31, 2004 and 2003 was $53.8 million and $55.3 million, respectively, and was estimated using a cash flow valuation model and available market data for securities with similar maturity dates.

17.     Stock Repurchase

      On September 9, 2004, the Company announced that its Board of Directors authorized a repurchase program under which the Company could purchase up to $25.0 million of its outstanding common stock through December 31, 2004. As of December 31, 2004, the Company had repurchased an aggregate of 666,100 shares under the program for an aggregate purchase price of $25.0 million.

18.     Subsequent Event

      Arbitron announced on February 28, 2005 that its Board of Directors approved the payment of the Company’s first cash dividend of $0.10 per common share. The dividend will be paid on April 1, 2005 to stockholders of record as of the close of business on March 15, 2005.

19.     Quarterly Information (Unaudited) (dollars in thousands, except per share data)

		Three Months Ended
										Year Ended
		March 31		June 30		September 30		December 31		December 31
2004
Revenue		$	76,585	$	65,084	$	81,965	$	72,919	$	296,553
Operating income			33,234		12,019		34,836		10,795		90,884
Net income			18,104		8,615		24,228		9,618		60,565
Net income per weighted average common share
	Basic	$	0.59	$	0.28	$	0.78	$	0.31	$	1.96
	Diluted	$	0.57	$	0.27	$	0.77	$	0.31	$	1.92
2003
Revenue		$	71,354	$	61,448	$	75,319	$	65,429	$	273,550
Operating income			31,109		12,669		31,261		10,898		85,937
Net income			16,118		8,006		17,011		8,738		49,873
Net income per weighted average common share
	Basic	$	0.54	$	0.27	$	0.56	$	0.29	$	1.66
	Diluted	$	0.53	$	0.26	$	0.55	$	0.28	$	1.63

64

Arbitron, Inc.

Consolidated Schedule of Valuation and Qualifying Accounts

For the Years Ended December 31, 2004, 2003 and 2002

(In thousands)

			2004			2003			2002
Allowance for doubtful trade accounts receivable:
	Balance at beginning of year		$	1,081		$	1,043		$	995
	Additions charged to expenses			305			324			294
	Additions through business acquisition			75			—			—
	Write-offs net of recoveries			(337	)		(286	)		(246	)
		Balance at end of year	$	1,124		$	1,081		$	1,043

65

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

      There have been no changes in, or disagreements with, accountants on accounting and financial disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

      The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15 of the rules promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the most recent fiscal year. Based upon that evaluation, the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic Securities and Exchange Commission filings.

Management’s Report on Internal Control Over Financial Reporting

      Arbitron’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2004. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework.” Our management has concluded that, as of December 31, 2004, our internal control over financial reporting is effective based on these criteria. Our independent registered public accounting firm, KPMG LLP, has issued an audit report on our assessment of our internal control over financial reporting, which report is included herein.

Changes in Internal Control Over Financial Reporting

      There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

      On November 16-17, 2004, the Board of Directors of Arbitron approved certain increases in the compensation payable to the nonemployee directors, effective January 1, 2005. Under the revised compensation arrangements, each director who is not also an employee of Arbitron or its subsidiaries is paid an annual retainer fee of $30,000, which is paid in quarterly installments. The nonemployee chair of the Audit Committee is paid a supplemental annual cash payment of $10,000; nonemployee chairs of the Compensation and Human Resources Committee, the Nominating Committee and the Technology Strategy Committee are paid a supplemental annual cash payment of $7,500. For each Board meeting attended, in person or by telephone, participating nonemployee directors receive $1,500. For each committee meeting attended, in person, participating nonemployee directors receive $1,500; and $750 for each committee meeting held by telephone.

      Each newly elected nonemployee director will receive a one-time grant of an option to purchase 15,000 shares of Arbitron common stock. These options will become exercisable in three equal installments of 5,000 shares over a three-year period and will expire 10 years from their date of grant. Beginning the year after initial election to the Board of Directors, each nonemployee director will also receive an annual grant of an option to purchase 7,000 shares of Arbitron common stock on the date of the annual meeting of stockholders. The exercise price per share of each option granted will be 100% of the fair market

66

value of the underlying Arbitron common stock on the date the option is granted. The options will be fully vested on the date of grant and become exercisable in full six months after their date of grant and will expire 10 years from the date of grant. The Chairman of the Board of Directors will also receive an annual stock option grant to purchase 10,000 shares in addition to the initial and annual option grants discussed above. These options will be fully vested on the date of grant and become exercisable in full six months after their date of grant and will expire 10 years from the date of grant.

      The Company previously has adopted a Nonemployee Director Incentive Program, as a component of its 1999 Stock Incentive Plan, which permits nonemployee directors to receive, at their discretion, either stock options or deferred stock units in lieu of their annual cash retainers and meeting fees. A director who elects to receive options receives a number of options based on a calculation approved by the Board of Directors. The formula for determining the number of option shares is to divide the cash fees earned in the quarter by the closing price of Arbitron stock on the date of the grant, which is the last trading day of the quarter. This amount is then multiplied by four to arrive at the number of option shares granted. A director who elects to receive deferred stock units receives a number of units based on a calculation approved by the Board of Directors. The formula for determining the number of deferred stock units is to multiply the cash fees earned in the quarter by 120 percent and divide the result by the closing price of Arbitron stock on the date of the grant, which is the last trading day of the quarter.

      A schedule outlining the terms of the current director compensation arrangements is filed herewith as Exhibit 10.18 and is incorporated by reference herein.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Arbitron has adopted a Code of Ethics for the Chief Executive Officer and Financial Managers (“Code of Ethics”), which applies to the Chief Executive Officer, the Chief Financial Officer and all managers in the Financial Organization of Arbitron. The Code of Ethics is available on Arbitron’s Web site at www.arbitron.com. The Company intends to disclose any amendment to, or a waiver from, a provision of its Code of Ethics on its Web site within four business days following the date of the amendment or waiver.

      Biographical information of Directors and Executive Officers required by this item is included in the sections entitled “Election of Directors” and “Executive Compensation and Other Information” of the definitive proxy statement for the Annual Stockholders Meeting to be held in 2005 (the “proxy statement”), which is incorporated herein by reference and will be filed with the Securities and Exchange Commission not later than 120 days after the close of Arbitron’s fiscal year ended December 31, 2004.

      Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 required by this item is included in the section entitled “Other Matters — Section 16(a) Beneficial Ownership Reporting Compliance” of the proxy statement, which is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

      Information required by this item is included in the sections entitled “Election of Directors — Director Compensation” and “Executive Compensation and Other Information” of the proxy statement, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

      Information required by this item regarding security ownership of certain beneficial owners and management is included in the section entitled “Stock Ownership Information” of the proxy statement, which is incorporated herein by reference.

67

      The following table summarizes the equity compensation plans under which Arbitron’s common stock may be issued as of December 31, 2004.

					Number of
					securities
	Number of		Weighted-		remaining available
	securities to be		average exercise		for future issuance
	issued upon		price of		under equity
	exercise of		outstanding		compensation
	outstanding		options,		plans (excluding
	options, warrants		warrants and		securities reflected
	and rights		rights		in column (a))
Plan Category	(a)		(b)		(c)
Equity compensation plans approved by security holders		2,404,618	$	30.87		1,302,920
Equity compensation plans not approved by security holders		444,371	$	28.15		141,663
Totals		2,848,989	$	30.45		1,444,583

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Information required by this item is included in the section entitled “Certain Relationships and Related Transactions” of the proxy statement, which is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Information required by this item is included in the section entitled “Independent Auditors and Audit Fees” of the proxy statement, which is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

      (a) Documents filed as part of this report

      (1) Financial Statements: The following financial statements, together with the report thereon of independent auditors, are included in this Report:

•  Independent Registered Public Accounting Firm Reports

•  Consolidated Balance Sheets as of December 31, 2004 and 2003

•  Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002

•  Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2004, 2003 and 2002

•  Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002

•  Notes to Consolidated Financial Statements for the Years Ended December 31, 2004, 2003 and 2002

      (2) Consolidated Financial Statement Schedule of Valuation and Qualifying Accounts

      (3) Exhibits:

Exhibit No.			Description
	3	.1	Restated Certificate of Incorporation of Arbitron Inc. (formerly known as Ceridian Corporation) (Filed as Exhibit 4.01 to Ceridian’s Registration Statement on Form S-8 (File No. 33-54379) and incorporated herein by reference).

68

Exhibit No.			Description
	3	.2	Certificate of Amendment of Restated Certificate of Incorporation of Arbitron Inc. (formerly known as Ceridian Corporation) (Filed as Exhibit 3 to Ceridian’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference).
	3	.3	Certificate of Amendment of Restated Certificate of Incorporation of Arbitron Inc. (formerly known as Ceridian Corporation) (Filed as Exhibit 3.01 to Ceridian’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference).
	3	.4	Certificate of Amendment to Restated Certificate of Incorporation of Arbitron Inc. (formerly known as Ceridian Corporation) (Filed as Exhibit 3.4 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
	3	.5	First Amended and Restated Bylaws of Arbitron Inc., effective as of August 29, 2002 (Filed as Exhibit 3.1 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 and incorporated herein by reference).
	4	.1	Specimen of Common Stock Certificate (Filed as Exhibit 4.1 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
	10	.1	Distribution Agreement, dated as of February 14, 2001, between Arbitron Inc. (formerly known as Ceridian Corporation) and Ceridian Corporation (formerly known as New Ceridian Corporation) (Filed as Exhibit 10.1 to New Ceridian’s Registration Statement on Form 10 (SEC File No. 001-16149) and incorporated herein by reference).
	10	.2	Personnel Agreement, dated as of February 14, 2001, between Arbitron Inc. (formerly known as Ceridian Corporation) and Ceridian Corporation (formerly known as New Ceridian Corporation) (Filed as Exhibit 10.2 to New Ceridian’s Registration Statement on Form 10 (SEC File No. 001-16149) and incorporated herein by reference).
	10	.3	Tax Matters Agreement, dated as of February 14, 2001, between Arbitron Inc. (formerly known as Ceridian Corporation) and Ceridian Corporation (formerly known as New Ceridian Corporation) (Filed as Exhibit 10.3 to New Ceridian’s Registration Statement on Form 10 (SEC File No. 001-16149) and incorporated herein by reference).
	10	.4	Transition Services Agreement, dated as of February 14, 2001, between Arbitron Inc. (formerly known as Ceridian Corporation) and Ceridian Corporation (formerly known as New Ceridian Corporation) (Filed as Exhibit 10.4 to New Ceridian’s Registration Statement on Form 10 (SEC File No. 001-16149) and incorporated herein by reference).
	10	.5	Sublease Agreement, dated as of February 14, 2001, between Arbitron Inc. (formerly known as Ceridian Corporation) and Ceridian Corporation (formerly known as New Ceridian Corporation) (Filed as Exhibit 10.5 to New Ceridian’s Registration Statement on Form 10 (SEC File No. 001-16149) and incorporated herein by reference).
	10	.6	Credit Agreement, dated as of January 31, 2001, by and among Arbitron Inc. and the Lenders referred to therein and Bank of American, N.A., as administrative agent (Filed as Exhibit 10.6 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
	10	.7	Note Purchase Agreement, January 31, 2001, by and among Arbitron Inc. and the Note Holders referred to therein (Filed as Exhibit 10.7 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
	10	.8	Secured Subordinated Promissory Notes maturing January 31, 2008 of Arbitron Inc. (Filed as Exhibit 10.8 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
	10	.9	Subsidiary Guaranty, dated as of January 31, 2001, of Arbitron Holdings Inc. in favor of the Lenders referred to therein, the Swap Provider referred to therein and the Note Holders referred to therein (Filed as Exhibit 10.9 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
	10	.10	Arbitron Executive Investment Plan.*
	10	.11	Arbitron Inc. 1999 Stock Incentive Plan (Filed as Exhibit 10.10 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).*
	10	.12	Form of Non-Qualified Stock Option Agreement (Filed as Exhibit 10.1 to Arbitron’s Current Report on Form 8-K, dated February 23, 2005 and incorporated herein by reference).*

69

Exhibit No.			Description
	10	.13	Form of Non-Qualified Stock Option Agreement for Annual Non-Employee Director Stock Option Grants (Filed as Exhibit 10.2 to Arbitron’s Current Report on Form 8-K, dated February 23, 2005 and incorporated herein by reference).*
	10	.14	Form of Non-Qualified Stock Option Agreement for Initial Non-Employee Director Stock Option Grants (Filed as Exhibit 10.3 to Arbitron’s Current Report on Form 8-K, dated February 23, 2005 and incorporated herein by reference).*
	10	.15	Form of Non-Qualified Stock Option Agreement in Lieu of Fees Grants (Filed as Exhibit 10.4 to Arbitron’s Current Report on Form 8-K, dated February 23, 2005 and incorporated herein by reference).*
	10	.16	Arbitron Inc. Director Deferred Compensation Procedures.*
	10	.17	Form of Deferred Stock Unit Agreement for Non-Employee Directors (Filed as Exhibit 10.5 to Arbitron’s Current Report on Form 8-K, dated February 23, 2005 and incorporated herein by reference).*
	10	.18	Director Compensation Schedule.*
	10	.19	Schedule of 2004 Bonuses and 2005 Bonus Parameters for Named Executive Officers.*
	10	.20	Arbitron Inc. Benefit Equalization Plan.*
	10	.21	Arbitron Inc. 2001 Broad Based Stock Incentive Plan (Filed as Exhibit 10.14 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and incorporated herein by reference).
	10	.22	Executive Employment Agreement, dated April 1, 2001, by and between Arbitron Inc. and Stephen B. Morris (Filed as Exhibit 10.15 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and incorporated herein by reference).*
	10	.23	Amendment No. 1 to the Executive Employment Agreement between Arbitron Inc. and Stephen B. Morris (Filed as Exhibit 10.18 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).*
	10	.24	Amendment No. 2 to the Executive Employment Agreement between Arbitron Inc. and Stephen B. Morris (Filed as Exhibit 10.19 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).*
	10	.25	Form of Executive Retention Agreement (Filed as Exhibit 10.20 to Arbitron’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).*
	10	.26	Customer Contract, dated as of December 27, 2004, by and between Arbitron Inc. and Clear Channel Communications, Inc.†
	21		Subsidiaries of Arbitron Inc.
	23		Consent of Independent Registered Public Accounting Firm.
	24		Power of Attorney.
	31	.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Indicates management contract or compensatory plan, contract or arrangement required to be filed as an Exhibit.

†  A request for confidential treatment has been submitted with respect to this exhibit. The copy filed as an exhibit omits the information subject to the request for confidential treatment.

      (b) Exhibits

           See (a)(3), above.

      (c) Financial Statement Schedules

           See (a)(2), above.

70

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized.

ARBITRON INC.

By:  /s/ Stephen B. Morris

Stephen B. Morris

Chief Executive Officer and President

Date: March 8, 2005

      Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated.

Signature		Title	Date
/s/ Stephen B. Morris Stephen B. Morris		Chief Executive Officer, President and Director (Principal Executive Officer)	March 8, 2005
/s/ William J. Walsh William J. Walsh		Executive Vice President of Finance and Planning and Chief Financial Officer (Principal Financial and Principal Accounting Officer)	March 8, 2005
* Alan W. Aldworth		Director
* Erica Farber		Director
* Kenneth F. Gorman		Director
* Philip Guarascio		Director
* Larry E. Kittelberger		Director
* Luis B. Nogales		Director
* Lawrence Perlman		Director
* Richard A. Post		Director
*By:	/s/ Dolores L. Cody Dolores L. Cody Attorney-in-Fact		March 8, 2005

71 EX-10.10 2 w06139exv10w10.htm EX-10.10

Exhibit 10.10

ARBITRON EXECUTIVE INVESTMENT PLAN

As Adopted Effective as of January 1, 2001

ARBITRON EXECUTIVE INVESTMENT PLAN

TABLE OF CONTENTS

	Page
ARTICLE 1. DESCRIPTION		1
1.1 Plan Name		1
1.2 Plan Purpose		1
1.3 Plan Type		1
1.4 Plan Background		2
ARTICLE 2. PARTICIPATION		3
2.1 Participation		3
2.2 Conditions of Participation		3
2.3 Termination of Participation		3
ARTICLE 3. BENEFITS		4
3.1 Participant Accounts		4
3.2 Participant Deferral Credits		4
3.3 Earnings Credits		4
3.4 Vesting		6
ARTICLE 4. DISTRIBUTION		7
4.1 Distribution to Participant Before Severance or Disability		7
4.2 Distribution to Participant After Severance or Disability		8
4.3 Distribution to Beneficiary		11
4.4 Nondeductibility		13
4.5 Payment in Event of Incapacity		13
4.6 Suspension		13
ARTICLE 5. SOURCE OF PAYMENTS; NATURE OF INTEREST		14
5.1 Establishment of Trust		14
5.2 Source of Payments		14
5.3 Status of Plan		14
5.4 Non-assignability of Benefits		14
ARTICLE 6. AMENDMENT, TERMINATION		15
6.1 Amendment		15
6.2 Termination of Participation		15
6.3 Termination		16
ARTICLE 7. DEFINITIONS, CONSTRUCTION AND INTERPRETATION		17
7.1 Account		17
7.2 Administrator		17
7.3 Affiliate		17
7.4 Board		17
7.5 Beneficiary		17
7.6 Code		17
7.7 Company		17

 i 

	Page
7.8 Cross Reference		18
7.9 Disability		18
7.10 ERISA		18
7.11 Governing Law		18
7.12 Headings		18
7.13 Number and Gender		18
7.14 Participant		18
7.15 Participating Employer		19
7.16 Plan		19
7.17 Plan Rules		19
7.18 Prior Plan		19
7.19 Retirement		19
7.20 Severance		19
7.21 Trust		19
7.22 Trustee		20
7.23 Unforeseeable Emergency		20
7.24 Valuation Date		20
ARTICLE 8. ADMINISTRATION		21
8.1 Administrator		21
8.2 Plan Rules and Regulations		21
8.3 Administrator’s Discretion		21
8.4 Specialist’s Assistance		21
8.5 Indemnification		21
8.6 Benefit Claim Procedure		22
8.7 Disputes		22
ARTICLE 9. MISCELLANEOUS		24
9.1 Withholding and Offsets		24
9.2 Other Benefits		24
9.3 No Warranties Regarding Tax Treatment		24
9.4 No Rights to Continued Service Created		24
9.5 Special Provisions		24
9.6 Successors		24

 ii 

ARBITRON EXECUTIVE INVESTMENT PLAN

ARTICLE 1.
DESCRIPTION

1.1   Plan Name.

     The name of the Plan is the “Arbitron Executive Investment Plan.”

1.2   Plan Purpose.

     The purpose of the Plan is to provide Participants who, as of December 31, 2000, were participants in the Prior Plan with

(a)	the benefits to which they were entitled under the Prior Plan as of December 31, 2000 (other than benefits scheduled to be distributed pursuant to the Prior Plan on January 1, 2001) and
(b)	deferral credits relating to the 2000 plan year under the Prior Plan that would have otherwise been credited to the Participant’s account under the Prior Plan as of a date after December 31, 2000, such as deferral credits relating to elections pursuant to the Prior Plan to defer annual bonuses earned during the 2000 plan year and otherwise payable during the first calendar quarter of 2001.

1.3   Plan Type.

     The Plan is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. It is intended that the Plan is exempt from the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of ERISA by operation of sections 201(2), 301(a)(3) and 401(a)(4) thereof, respectively, and from the provisions of Title IV of ERISA, to the extent otherwise applicable, by operation of section 4021(b)(6) thereof. The Plan is also intended to be unfunded for tax purposes. The Plan will be construed and administered in a manner that is consistent with and gives effect to the foregoing.

1

1.4 Plan Background.

(a)	The Company adopted the Prior Plan effective as of January 1, 1995.
(b)	Effective as of January 1, 1999, the Prior Plan was restated and the name of the Prior Plan was changed from the Ceridian Corporation Deferred Compensation Plan to the Ceridian Corporation Executive Investment Plan.
(c)	Effective as of January 1, 2001, the Company established the Plan and the account balances of the Participants under the Prior Plan as of the close of business on December 31, 2000 (other than the portion of such account balances, if any, scheduled to be distributed pursuant to the Prior Plan on January 1, 2001) were credited to their Accounts under the Plan as of January 1, 2001.

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ARTICLE 2.
PARTICIPATION

2.1 Participation.

     Participation in the Plan is limited to those individuals whose account balances under the Prior Plan as of the close of business on December 31, 2000 (other than the portion of such account balances, if any, scheduled to be distributed pursuant to the Prior Plan on January 1, 2001) were credited to their Accounts under the Plan as of January 1, 2001. No one else is eligible to participate in the Plan.

2.2 Conditions of Participation.

     Each Participant, as a condition of participation in the Plan, is bound by all the terms and conditions of the Plan and the Plan Rules, and must furnish to the Administrator such pertinent information and execute such election forms and other instruments as the Administrator or Plan Rules may require by such dates as the Administrator or Plan Rules may establish. All elections, directions, designations and similar actions required in connection with the Plan must be made in accordance with and are subject to the terms of the Plan and Plan Rules.

2.3 Termination of Participation.

     A Participant will cease to be a Participant as of the date on which his or her entire Account balance has been distributed.

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ARTICLE 3.
BENEFITS

3.1 Participant Accounts.

(a)

Participant Accounts. For each Participant, the Administrator will establish and maintain an Account. Effective as of January 1, 2001, a Participant’s Account will be credited with an amount equal to the balance of his or her account under the Prior Plan as of the close of business on December 31, 2000 (other than the portion of such account, if any, scheduled to be distributed pursuant to the Prior Plan on January 1, 2001).

(b)

Subaccounts.

(i)

Prime Rate Earnings Method. The portion of a Participant’s Account balance with respect to which earnings credits are made pursuant to Section 3.3(g) will be credited to a separate subaccount within the Account if deferrals were credited to the Participant’s account pursuant to Section 3.2 of the Prior Plan for any plan year beginning after December 31, 1998.

(ii)

Grandfathered Distribution Elections. If a Participant made distribution elections under the provisions of the Prior Plan in effect prior to January 1, 1999 pursuant to which distributions are scheduled to be made or to begin before January 1, 2001, the Administrator will maintain separate subaccounts within the Participant’s Account each of which will evidence amounts credited to the Account pursuant to any such election with respect to which the Participant has elected an identical form and timing of distribution.

3.2 Participant Deferral Credits.

(a)

Prior Plan Deferral Credits. If a Participant made a deferral election pursuant to the Prior Plan relating to base compensation or annual bonus earned during 2000 for which the deferral credit would have been made to the Participant’s account under the Prior Plan as of a date after December 31, 2000, the credit will instead be made to his or her Account as of the same date and in the same amount that the credit would have been made under the Prior Plan.

(b)

No Other Deferral Credits. No other deferral credits will be made pursuant to the Plan.

3.3 Earnings Credits.

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(a)	Designation of Investment Funds. The Administrator will designate two or more investment funds which will serve as the basis for determining adjustments pursuant to this section. The Administrator may, from time to time, designate additional investment funds or eliminate any previously designated investment funds. The designation or elimination of a fund pursuant to this subsection is not a Plan amendment. The Administrator will not be responsible in any manner to any Participant or other person for any damages, losses, liabilities, costs or expenses of any kind arising in connection with any designation or elimination of an investment fund.
(b)	Change in Direction for Existing Account Balance. A Participant may direct a change in the manner in which his or her existing Account balance is deemed to be invested among the investment funds designated pursuant to Subsection (a). The direction will be effective on or as soon as administratively practicable after the first day of the calendar month that first follows by at least 10 days (or such shorter period as Plan Rules may allow) the date on which the Administrator receives the direction from the Participant.
(c)	Account Adjustment. The Administrator will cause Participants’ Accounts to be separately adjusted as of each Valuation Date, in a manner determined by the Administrator to be uniform and equitable, to reflect the income, expense, gains, losses, fees and the like that would have resulted since the last Valuation Date had the Participant’s investment directions pursuant to this section actually been implemented. To the extent determined by the Administrator to be necessary in conjunction with any distribution pursuant to the Plan, the Administrator will cause the Account from which the distribution is to be made to be adjusted to reflect a good faith estimate by the Administrator of any fees and other expenditures payable after the date of the distribution in connection with deemed investment activity in the Account through and including the date of the distribution. Any such estimate is binding on the Participating Employer and the person to whom the distribution is made.
(d)	Administrator’s Obligations and Responsibilities. The sole obligation of the Administrator with respect to the designation or elimination of any investment fund designated pursuant to Subsection (a) is to act in accordance with the express terms of Subsection (a). By way of example and without limiting the previous sentence, the Administrator is not required, and no course of conduct will cause it to be required, to investigate or monitor any designated fund to any extent or for any purpose or to take or refrain from taking any action with respect to a fund because of any aspect of the performance of the fund. The designation of a limited number of investment funds is solely for administrative convenience and in no way reflects any endorsement of any such funds by the Administrator.
(e)	Deemed Investment. Trust assets are not required to be invested in accordance with a Participant’s directions and the balance of all Accounts pursuant to the

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	Plan will be determined pursuant to this section and other applicable sections of the Plan without regard to the actual amount of Trust assets.
(f)	Participant Responsibilities. Each Participant is solely responsible for any and all consequences of his or her investment directions made pursuant to this section. Neither any Participating Employer, any of its directors, officers or employees nor the Administrator has any responsibility to any Participant or other person for any damages, losses, liabilities, costs or expenses of any kind arising in connection with any investment direction made by the Participant pursuant to this section.
(g)	Prime Rate Method.

(i)

General. The entire portion of a Participant’s Account attributable to deferral credits under the Prior Plan for plan years ending before January 1, 1999 will be credited with earnings in accordance with clause (ii) unless the Participant elected otherwise in accordance with Section 3.4(i) of the Prior Plan.

(ii)

Method. As of the last day of each calendar month, the Administrator will, in accordance with Plan Rules, credit the Account of each Participant to whom this clause applies with earnings in an amount equal to the “applicable percentage” of the average daily balance of the Account for the month. The applicable percentage for a given month is the monthly equivalent of the annual prime rate of interest in effect on the first banking day of the month as reported in The Wall Street Journal or other national financial publication selected by the Administrator.

3.4 Vesting.

     Each Participant always has a fully vested nonforfeitable interest in his or her Account.

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ARTICLE 4.
DISTRIBUTION

4.1 Distribution to Participant Before Severance or Disability.

(a)   In-Service Distributions.

(i)	If a Participant elected pursuant to Section 4.1(a) of the Prior Plan to receive a distribution of all or any portion of his or her Prior Plan account as of a specified date or dates after January 1, 2001 and prior to his or her Severance date or Disability, the election will apply to the Participant’s Account pursuant to the Plan.
(ii)	A Participant will be provided with one opportunity to elect to either delay or cancel each date specified in an election described in clause (i). An election pursuant to this clause will not be valid and will not have any effect unless it is made on a properly completed form received by the Administrator before the first day of the calendar year immediately preceding the calendar year that includes the distribution date originally specified. If the Participant made such an election pursuant to Section 4.1(a)(iii) of the Prior Plan before January 1, 2001, the election will apply to the Participant’s Account pursuant to the Plan and the Participant is not eligible to make an election pursuant to this clause (ii).
(iii)	If the Participant experiences a Severance or Disability before a specified date, the Participant’s election pursuant to this subsection will become ineffective on his or her Severance date or Disability and distribution of his or her remaining Account balance will be made pursuant to Section 4.2 or 4.3, as the case may be.
(iv)	Any distribution pursuant to this subsection will be made in a lump sum cash payment on or as soon as administratively practicable after the date specified by the Participant. If the Participant elected a specific dollar amount, the amount of the distribution will be the specified amount or the balance of the Participant’s Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date), whichever is less. If the Participant elected a specific percentage of the Account, the amount of the distribution will be the specified percentage of the Participant’s Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date).

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(b)	Withdrawals Due to Unforeseeable Emergency. Prior to a Participant’s Severance date or Disability, a distribution will be made to a Participant from his or her Account if the Participant submits a written distribution request to the Administrator and the Administrator determines that the Participant has experienced an Unforeseeable Emergency. The amount of the distribution may not exceed the lesser of (i) the amount necessary to satisfy the emergency, as determined by the Administrator, and (ii) the balance of the Participant’s Account as of the Valuation Date coinciding with or immediately preceding the date of the distribution (reduced by the amount of any other distribution from the Account after that Valuation Date). The distribution will be made in the form of a lump sum cash payment as soon as administratively practicable after the Administrator’s determination that the Participant has experienced an Unforeseeable Emergency.
(c)	Accelerated Distribution. Prior to a Participant’s Severance date or Disability, the Participant may elect to receive a distribution in an amount equal to 90 percent of his or her Account balance as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date), and the remaining 10 percent balance of the Account will be permanently forfeited as of that Valuation Date. The distribution will be made in the form of a lump sum cash payment as soon as administratively practicable after the Participant’s properly completed written election is filed with the Administrator.
(d)	Reduction of Account Balance. The balance of the Participant’s Account will be reduced (but not below zero) by the amount of the distribution as of the beginning of the next day after the Valuation Date coinciding with or last preceding the date of the distribution.

4.2 Distribution to Participant After Severance or Disability.

(a)	Time. Distribution to a Participant will be made or commence on or as soon as administratively practicable after the date of the Participant’s Retirement, Disability or other Severance.
(b)	Form.

(i)	Severance Before Retirement or Disability. Upon a Participant’s Severance before his or her Retirement or Disability, distribution to the Participant will be made in the form of a lump sum cash payment.
(ii)	Retirement or Disability. Upon a Participant’s Retirement or Disability, distribution to the Participant will be made in the form of a lump sum cash payment unless (1) the Participant made a written election, on a form provided by the Administrator, to receive his or her distribution in the

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form of five, 10 or 15 annual installment cash payments and (2) his or her properly completed election form is filed with the Administrator before the first day of the calendar year immediately preceding the calendar year that includes his or her Retirement or Disability. Not more than once during any 12-month period, a Participant may change an election made pursuant to this subsection, but the change will not be valid and will not have any effect unless it is made on a properly completed form received by the Administrator before the first day of the calendar year immediately preceding the calendar year that includes the Participant’s Retirement or Disability. Until an election becomes effective, it will have no effect on any prior election whether or not such prior election became effective before or after the Administrator received the later election. When an election becomes effective, it will automatically supersede any prior election then in effect. An election or change made pursuant to Section 4.2(b)(ii) of the Prior Plan will be deemed to be an election or change made pursuant to this Section 4.2(b)(ii).

(c)   Amount.

(i)

Lump Sum. The amount of a lump sum payment from a Participant’s Account will be equal to the balance of the Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date).

(ii)

Installments. The amount of an installment payment from a Participant’s Account will be determined by dividing the balance of the Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date) by the total number of remaining payments (including the current payment). The undistributed portion of an Account distributed in the form of installment payments will continue to be credited with earnings in accordance with Section 3.3.

(d)   Special Rules. The provisions of this subsection apply notwithstanding Subsection (a), (b) or (c) or any election by a Participant to the contrary.

     (i) Divestitures.

(1)   If some or all of the assets of a Participating Employer are sold or otherwise disposed of to an unrelated third party, the Administrator may, but is not required to, cause to be distributed the Account of any Participant whose employment with all Affiliates is terminated in connection with the sale or disposition unless the acquirer

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adopts a successor plan which is substantially similar to the Plan in all material respects and expressly assumes the Participating Employer’s obligation to provide benefits to the Participant, in which case the Participating Employer will cease to have any obligation to provide benefits to the Participant pursuant to the Plan as of the effective date of the assumption. Any such distribution will be made in the form of a lump sum cash payment as soon as administratively practicable after the date of the sale or disposition. The amount of the payment will be determined in accordance with Subsection (c).

(2)

If a Participating Employer ceases to be an Affiliate, unless otherwise provided in an agreement between an Affiliate and the Participating Employer or an Affiliate and an unrelated third-party acquirer:

(A)	a Participant who is employed with the Participating Employer or
(B)	a Participant who is not employed with the Participating Employer but has an Account balance attributable to service with the Participating Employer

will not become entitled to his or her Account balance attributable to service with the Participating Employer solely as a result of the cessation and the Participating Employer will, after the date on which it ceases to be an Affiliate, continue to be solely responsible to provide benefits to the Participant at least equal to the balance of the Account as of the effective date of the cessation and as thereafter increased by deferral credits relating to the period before the effective date and earnings credits pursuant to Section 3.3.

(ii)   Withdrawals Due to Unforeseeable Emergency. If a Participant is receiving installment payments, a distribution will be made to a Participant from his or her Account if the Participant submits a written distribution request to the Administrator and the Administrator determines that the Participant has experienced an Unforeseeable Emergency. The amount of the distribution may not exceed the lesser of (a) the amount necessary to satisfy the emergency, as determined by the Administrator, and (b) the balance of the Participant’s Account as of the Valuation Date coinciding with or immediately preceding the date of the distribution (reduced by the amount of any other distribution from the Account after that Valuation Date). The distribution will be made in the form of a lump sum cash payment as soon as administratively practicable after the

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Administrator’s determination that the Participant has experienced an Unforeseeable Emergency.

(iii)

Accelerated Distribution. If a Participant is receiving installment payments, the Participant may elect to receive a distribution in an amount equal to 90 percent of his or her Account balance as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date), and the remaining 10 percent balance of the Account will be permanently forfeited as of that Valuation Date. The distribution will be made in the form of a lump sum cash payment as soon as administratively practicable after the Participant’s properly completed written election is filed with the Administrator.

(e)   Reduction of Account Balance. The balance of the Account from which a distribution is made will be reduced (but not below zero) by the amount of the distribution as of the beginning of the next day after the Valuation Date coinciding with or last preceding the date of the distribution.

4.3 Distribution to Beneficiary.

(a)	Time. Distribution to a Beneficiary will be made as soon as administratively practicable after the date on which the Administrator receives notice of the Participant’s death and determines that the Beneficiary is entitled to receive the distribution.
(b)	Form. Distribution to the Participant’s Beneficiary will be made in the form of a lump sum cash payment whether or not payments had commenced to the Participant in the form of installments prior to his or her death.
(c)	Amount. The amount of a lump sum payment will be equal to the balance of the Participant’s Account as of the Valuation Date coinciding with or immediately preceding the date on which the payment is made (reduced by the amount of any other distribution from the Account after that Valuation Date). In addition, if the Participant dies before his or her Severance date or Disability and the Administrator determines that the death is not attributable to the Participant’s suicide committed during the first calendar year beginning after December 31, 1998 for which deferrals were credited to the Participant’s account under the Prior Plan or are credited to the Participant’s Account under the Plan pursuant to Section 3.2(a) or the next following calendar year, the Beneficiary will also receive an amount equal to twice the Participant’s total deferrals pursuant to the Prior Plan and the Plan for all years (exclusive of earnings on the deferrals). If there are multiple Beneficiaries, the total amount distributed will be divided among the Beneficiaries as directed by the Participant in the Beneficiary designation.

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(d)	Reduction of Account Balance. The balance of the Account from which a distribution is made will be reduced (but not below zero) by the amount of the distribution as of the beginning of the next day after the Valuation Date coinciding with or immediately preceding the date of the distribution.
(e)	Beneficiary Designation.

(i)

Each Participant may designate, on a form furnished by the Administrator, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of his or her Account, and the additional amount described in Subsection (c), after his or her death, and the Participant may change or revoke any such designation from time to time. No such designation, change or revocation is effective unless executed by the Participant and received by the Administrator during the Participant’s lifetime. No designation of a Beneficiary other than the Participant’s spouse is effective unless the spouse consents to the designation or the Administrator determines that spousal consent cannot be obtained because the spouse cannot reasonably be located or is legally incapable of consenting. The consent must be in writing, must acknowledge the effect of the election and must be witnessed by a notary public. The consent is effective only with respect to the Beneficiary or class of Beneficiaries so designated and only with respect to the spouse who so consented.

(ii)

If a Participant—

(1)	fails to designate a Beneficiary, or
(2)	revokes a Beneficiary designation without naming another Beneficiary, or
(3)	designates one or more Beneficiaries, none of whom survives the Participant or exists at the time in question,

for all or any portion of his or her Account, such Account or portion will be paid to the Participant’s surviving spouse or, if the Participant is not survived by a spouse, to the representative of the Participant’s estate.

(iii)   The automatic Beneficiaries specified above and, unless the designation otherwise specifies, the Beneficiaries designated by the Participant, become fixed as of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of the payment due such Beneficiary, the payment will be made to the representative of such Beneficiary’s estate. Any designation of a Beneficiary by name that is accompanied by a description of relationship or only by statement of relationship to the Participant is effective only to designate the person or

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	persons standing in such relationship to the Participant at the Participant’s death.
(iv)	A beneficiary designation made pursuant to the provisions of the Prior Plan and in effect at the close of business on December 31, 2000 will remain in effect under the Plan until changed or revoked pursuant to the Plan.

4.4 Nondeductibility.

     If the Company determines in good faith that there is a reasonable likelihood that any compensation paid to a Participant by an Affiliate for a taxable year of the Affiliate would not be deductible by the Affiliate solely by reason of the limitation under Code section 162(m), to the extent deemed necessary by the Company to ensure that the entire amount of any distribution to the Participant pursuant to the Plan is deductible, notwithstanding any other provision of the Plan or any election by the Participant to the contrary, all or any portion of the distribution may be deferred. Any amounts deferred pursuant to this section will continue to be credited with earnings in accordance with Section 3.3. The deferred amounts and earnings thereon will be distributed to the Participant, or to his or her Beneficiary in the case of the Participant’s death, at the earliest possible date, as determined by the Company in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Affiliate during which the distribution is made will not be limited by Code section 162(m).

4.5 Payment in Event of Incapacity.

     If any individual entitled to receive any payment under the Plan is, in the judgment of the Administrator, physically, mentally or legally incapable of receiving or acknowledging receipt of the payment, and no legal representative has been appointed for the individual, the Administrator may (but is not required to) cause the payment to be made to any one or more of the following as may be chosen by the Administrator: the Beneficiary (in the case of the incapacity of a Participant); the institution maintaining the individual; a custodian for the individual under the Uniform Transfers to Minors Act of any state; or the individual’s spouse, children, parents, or other relatives by blood or marriage. The Administrator is not required to see to the proper application of any such payment and the payment completely discharges all claims under the Plan against the Participating Employer, the Plan and Trust to the extent of the payment.

4.6 Suspension.

     If a Participant who is receiving installment payments again becomes an employee of an Affiliate, the installment payments will stop. The remaining balance of the Participant’s Account will be distributed upon the Participant’s subsequent Severance or Disability in accordance with Article 4 without regard to any election made pursuant to Section 4.2(b)(ii) prior to the Participant’s last preceding Retirement or Disability.

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ARTICLE 5.
SOURCE OF PAYMENTS; NATURE OF INTEREST

5.1 Establishment of Trust.

     A Participating Employer may establish a Trust, or may be covered by a Trust established by another Participating Employer, with an independent corporate trustee. The Trust must (a) be a grantor trust with respect to which the Participating Employer is treated as the grantor for purposes of Code section 677, (b) not cause the Plan to be funded for purposes of Title I of ERISA and (c) provide that the Trust assets will, upon the insolvency of a Participating Employer, be used to satisfy claims of the Participating Employer’s general creditors. The Participating Employers may from time to time transfer to the Trust cash, marketable securities or other property acceptable to the Trustee in accordance with the terms of the Trust.

5.2 Source of Payments.

(a)	Each Participating Employer will pay, from its general assets, the portion of any benefit pursuant to Article 4 or Section 6.3 or 6.4 attributable to a Participant’s Account with respect to that Participating Employer, and all costs, charges and expenses relating thereto.
(b)	The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of a Participating Employer’s obligations under the Plan in accordance with the terms of the Trust. The Participating Employer is responsible for paying any benefits attributable to a Participant’s Account with respect to that Participating Employer that are not paid by the Trust.

5.3 Status of Plan.

     Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of the Plan, the Participant’s or other person’s only interest under the Plan being the right to receive benefits in accordance with the terms of the Plan. The Trust is established only for the convenience of the Participating Employers and the Participants, and no Participant has any interest in the assets of the Trust. To the extent the Participant or any other person acquires a right to receive benefits under the Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Participating Employer.

5.4 Non-assignability of Benefits.

     The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered or subjected to any charge or legal process.

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ARTICLE 6.
AMENDMENT, TERMINATION

6.1 Amendment.

(a)	Right. The Company reserves the right to amend the Plan at any time to any extent that it may deem advisable.
(b)	Method. To be effective, an amendment must be stated in a written instrument approved in advance or ratified by the Company’s Board and executed in the name of the Company by two of its officers.
(c)	Binding Effect. An amendment adopted in accordance with Subsection (b) is binding on all interested parties as of the effective date stated in the amendment; provided, however, that no amendment may retroactively deprive any Participant, or the Beneficiary of a deceased Participant, of any benefit to which he or she is entitled under the terms of the Plan in effect immediately prior to the effective date of the amendment or the date on which the amendment is adopted, whichever is later.
(d)	Prime Rate Investment Fund. An amendment which changes the method of crediting earnings described in Section 3.3(g)(ii) will be effective only if the Company’s Board determines in good faith that on the date on which the amendment is approved by the Board, it is reasonably likely that, in the long run, the new method will not result in materially lower earnings credits than the method described in Section 3.3(g)(ii).
(e)	Applicability to Participants Who Have Experienced a Severance or Disability. The provisions of the Plan in effect on a Participant’s Severance date or Disability will, except as otherwise expressly provided by a subsequent amendment, continue to apply to such Participant.

6.2 Termination of Participation.

     Notwithstanding any other provision of the Plan to the contrary, if determined by the Administrator to be necessary to ensure that the Plan is exempt from ERISA to the extent contemplated by Section 1.3, or upon the Administrator’s determination that a Participant’s interest in the Plan has been or is likely to be includable in the Participant’s gross income for federal income tax purposes prior to the actual payment of benefits pursuant to the Plan, the Administrator may take any or all of the following steps:

(a)   terminate the Participant’s future participation in the Plan;

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(b)	cause the Participant’s entire interest in the Plan to be distributed to the Participant in the form of an immediate lump sum cash payment in an amount determined in accordance with Section 4.2(c); and/or
(c)	transfer the benefits that would otherwise be payable pursuant to the Plan for all or any of the Participants to a new plan that is similar in all material respects (other than those which require the action in question to be taken.)

6.3 Termination.

     The Company reserves the right to terminate the Plan in its entirety at any time. Each Participating Employer reserves the right to cease its participation in the Plan at any time. The Plan will terminate in its entirety or with respect to a particular Participating Employer as of the date specified by the Company or such Participating Employer in a written instrument adopted in the same manner as an amendment. Upon the termination of the Plan in its entirety or with respect to any Participating Employer, the Company or Participating Employer, as the case may be, will either cause (a) any benefits to which Participants have become entitled prior to the effective date of the termination to continue to be paid in accordance with the provisions of Article 4 or (b) the entire interest in the Plan of any or all Participants, or the Beneficiaries of any or all deceased Participants, to be distributed in the form of an immediate lump sum cash payment in an amount determined in accordance with Section 4.2(c).

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ARTICLE 7.
DEFINITIONS, CONSTRUCTION AND INTERPRETATION

     The definitions and rules of construction and interpretation set forth in this article apply in construing the Plan unless the context otherwise indicates.

7.1 Account.

     “Account” means the bookkeeping account maintained with respect to a Participant pursuant to Section 3.1.

7.2 Administrator.

     “Administrator” means the Company or the person to whom administrative duties are delegated pursuant to the provisions of Section 8.1, as the context requires.

7.3 Affiliate.

     “Affiliate” means the Company and any corporation at least a majority of whose outstanding securities ordinarily having the right to vote at elections of directors is owned, directly or indirectly, by the Company.

7.4 Board.

     “Board” means the board of directors of the Affiliate in question. When the Plan provides for an action to be taken by the Board, the action may be taken by any committee or individual authorized to take such action pursuant to a proper delegation by the board of directors in question.

7.5 Beneficiary.

     “Beneficiary” with respect to a Participant is the person designated or otherwise determined under the provisions of Section 4.3(e) as the distributee of benefits payable after the Participant’s death. A person designated or otherwise determined to be a Beneficiary under the terms of the Plan has no interest in or right under the Plan until the Participant in question has died. A Beneficiary will cease to be such on the day on which all benefits to which he, she or it is entitled under the Plan have been distributed.

7.6 Code.

     “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes a reference to that provision as it may be amended from time to time and to any successor provision.

7.7   Company.

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     “Company” means Ceridian Corporation, a Delaware corporation, to be renamed Arbitron Inc.

7.8 Cross Reference.

     References within a section of the Plan to a particular subsection refer to that subsection within the same section and references within a section or subsection to a particular clause refer to that clause within the same section or subsection, as the case may be.

7.9 Disability.

     “Disability” means a disability for which a Participant is receiving disability benefits pursuant to a long-term disability plan maintained by an Affiliate or as a result of which the Participant is certified as being disabled by the Social Security Administration and is receiving disability benefits under the disability provisions of the Social Security Act. The Participant must provide the Administrator with proof of his or her Disability that is satisfactory to the Administrator. For purposes of the Plan, a Disability occurs on the date following the Administrator’s receipt of such proof on which the Administrator determines that the Participant has experienced a Disability.

7.10 ERISA.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Any reference to a specific provision of ERISA includes a reference to that provision as it may be amended from time to time and to any successor provision.

7.11 Governing Law.

     To the extent that state law is not preempted by the provisions of ERISA, or any other laws of the United States, all questions pertaining to the construction, validity, effect and enforcement of the Plan will be determined in accordance with the internal, substantive laws of the State of Minnesota without regard to the conflict of law rules of the State of Minnesota or any other jurisdiction.

7.12 Headings.

     The headings of articles and sections are included solely for convenience of reference; if there exists any conflict between such headings and the text of the Plan, the text will control.

7.13 Number and Gender.

     Wherever appropriate, the singular may be read as the plural, the plural may be read as the singular and one gender may be read as the other gender.

7.14   Participant.

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     “Participant” means an individual who (a) on December 31, 2000, was a participant in the Prior Plan and whose account balance under the Prior Plan as of the close of business on December 31, 2000 (other than the portion of such account balance, if any, scheduled to be distributed pursuant to the Prior Plan on January 1, 2001) was credited to his or her Account as of January 1, 2001 and (b) has not ceased to be a Participant pursuant to Section 2.3.

7.15 Participating Employer.

     “Participating Employer” means the Company and any other Affiliate that has adopted the Plan, or all of them collectively, as the context requires. An Affiliate will cease to be a Participating Employer upon a termination of the Plan as to its employees and the satisfaction in full of all of its obligations under the Plan or upon its ceasing to be an Affiliate.

7.16 Plan.

     “Plan” means the Arbitron Executive Investment Plan, as from time to time amended or restated.

7.17 Plan Rules.

     “Plan Rules” are rules, policies, practices or procedures adopted by the Administrator pursuant to Section 8.2.

7.18 Prior Plan.

     “Prior Plan” means the Ceridian Corporation Executive Investment Plan.

7.19 Retirement.

     “Retirement” means a Participant’s Severance after his or her

(a)	attainment of age 65 or
(b)	attainment of age 55 and completion of at least 15 years of “vesting service” (within the meaning of the Company’s 401(k) Plan as in effect at the time in question).

7.20 Severance.

     “Severance” means the date on which a Participant has completely severed his or her employment relationship with all Affiliates.

7.21 Trust.

     “Trust” means any trust or trusts established by a Participating Employer pursuant to Section 5.1.

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7.22 Trustee.

     “Trustee” means the independent corporate trustee or trustees that at the relevant time has or have been appointed to act as Trustee of the Trust.

7.23 Unforeseeable Emergency.

     “Unforeseeable Emergency” means an unanticipated emergency that is caused by an event beyond the Participant’s or Beneficiary’s control resulting in a severe financial hardship that cannot be satisfied through other means. The existence of an unforeseeable emergency will be determined by the Administrator.

7.24 Valuation Date.

     “Valuation Date” means, prior to the first Valuation Date in calendar year 2001, the close of business on December 31, 2000 with respect to a Participant’s account balance under the Prior Plan credited to his or her Account as of January 1, 2001, and, thereafter, the last day of each calendar month on which the New York Stock Exchange is open for regular business and any interim dates selected by the Administrator.

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ARTICLE 8.
ADMINISTRATION

8.1 Administrator.

     The general administration of the Plan and the duty to carry out its provisions is vested in the Company. The Company may delegate such duty or any portion thereof to a named person or persons and may from time to time revoke such authority and delegate it to another person or persons.

8.2 Plan Rules and Regulations.

     The Administrator has the discretionary power and authority to make such Plan Rules as the Administrator determines to be consistent with the terms, and necessary or advisable in connection with the administration, of the Plan and to modify or rescind any such Plan Rules.

8.3 Administrator’s Discretion.

     The Administrator has the discretionary power and authority to make all determinations necessary for administration of the Plan, except those determinations that the Plan requires others to make, and to construe, interpret, apply and enforce the provisions of the Plan and Plan Rules whenever necessary to carry out its intent and purpose and to facilitate its administration, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions and erroneous benefit calculations. In the exercise of its discretionary power and authority, the Administrator will treat all similarly situated persons uniformly.

8.4 Specialist’s Assistance.

     The Administrator may retain such actuarial, accounting, legal, clerical and other services as may reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services. All costs of administering the Plan will be paid by the Participating Employers.

8.5 Indemnification.

     The Participating Employers jointly and severally agree to indemnify and hold harmless, to the extent permitted by law, each director, officer, and employee of any Affiliates against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Participating Employers have the right, but not the obligation, to select counsel and control the defense and settlement of any action for which a person may be entitled to indemnification under this provision.

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8.6 Benefit Claim Procedure.

(a)	If a request for a benefit by a Participant or Beneficiary of a deceased Participant is denied in whole or in part, he or she may, not later than 30 days after the denial, file with the Administrator a written claim objecting to the denial.
(b)	The Administrator, not later than 90 days after receipt of such claim, will render a written decision to the claimant on the claim. If the claim is denied, in whole or in part, such decision will include the reason or reasons for the denial; a reference to the Plan provisions on which the denial is based; a description of any additional material or information, if any, necessary for the claimant to perfect his or her claim; an explanation as to why such information or material is necessary; and an explanation of the Plan’s claim procedure.
(c)	The claimant may file with the Administrator, not later than 60 days after receiving the Administrator’s written decision, a written notice of request for review of the Administrator’s decision, and the claimant or his or her representative may thereafter review relevant Plan documents which relate to the claim and may submit written comments to the Administrator.
(d)	Not later than 60 days after receipt of such review request, the Administrator will render a written decision on the claim, which decision will include the specific reasons for the decision, including a reference to the Plan’s specific provisions where appropriate.
(e)	The foregoing 90- and 60-day periods during which the Administrator must respond to the claimant may be extended by up to an additional 90- or 60 days, respectively, if special circumstances beyond the Administrator’s control so require and notice of such extension is given to the claimant prior to the expiration of such initial 90- or 60-day period, as the case may be.
(f)	A Participant or Beneficiary must exhaust the procedure described in this section before making any claim of entitlement to benefits pursuant to the Plan in any court or other proceeding.

8.7 Disputes.

(a)   In the case of a dispute between a Participant or his or her Beneficiary and a Participating Employer, the Administrator or other person relating to or arising from the Plan, the United States District Court for the District of Minnesota is a proper venue for any action initiated by or against the Participating Employer, Administrator or other person and such court will have personal jurisdiction over any Participant or Beneficiary named in the action.

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(b)   Regardless of where an action relating to or arising from the participation in the Plan by any Participant is pending, the law as stated and applied by the United States Court of Appeals for the Eighth Circuit or the United States District Court for the District of Minnesota will apply to and control all actions relating to the Plan brought against the Plan, a Participating Employer, the Administrator or any other person or against any such Participant or his or her Beneficiary.

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ARTICLE 9.
MISCELLANEOUS

9.1 Withholding and Offsets.

     The Participating Employers and the Trustee retain the right to withhold from any compensation, deferral and/or benefit payment pursuant to the Plan, any and all income, employment, excise and other tax as the Participating Employers or Trustee deems necessary and the Participating Employers may offset against amounts then payable to a Participant or Beneficiary under the Plan any amounts then owing to the Participating Employers by such Participant or Beneficiary.

9.2 Other Benefits.

     Neither amounts deferred nor amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of a Participating Employer unless otherwise expressly provided thereunder.

9.3 No Warranties Regarding Tax Treatment.

     The Participating Employers make no warranties regarding the tax treatment to any person of any deferrals or payments made pursuant to the Plan and each Participant will hold the Administrator and the Participating Employers and their officers, directors, employees, agents and advisors harmless from any liability resulting from any tax position taken in good faith in connection with the Plan.

9.4 No Rights to Continued Service Created.

     Neither the establishment of nor participation in the Plan gives any individual the right to continued employment or limits the right of the Participating Employer to discharge, transfer, demote, modify terms and conditions of employment or otherwise deal with any individual without regard to the effect which such action might have on him or her with respect to the Plan.

9.5 Special Provisions.

     Special provisions of the Plan applicable only to certain Participants may be set forth on an exhibit to the Plan adopted in the same manner as an amendment to the Plan. In the event of a conflict between the terms of the exhibit and the terms of the Plan, the exhibit controls. Except as otherwise expressly provided in the exhibit, the generally applicable terms of the Plan control all matters not covered by the exhibit.

9.6 Successors.

     Except as otherwise expressly provided in the Plan, all obligations of the Participating Employers under the Plan are binding on any successor to the Participating Employer whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Participating Employer.

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EX-10.10

exv10w10

EX-10.16

Exhibit 10.16

ARBITRON INC. DIRECTOR DEFERRED COMPENSATION PROCEDURES

ARTICLE 1
ESTABLISHMENT

          Pursuant to the Arbitron Inc. 1999 Stock Incentive Plan (the “Stock Incentive Plan”), the Compensation Committee (the “Committee”) sets forth in this document the policies and procedures for the award of deferred stock units to Directors in lieu of the payment of Retainer Fees or Meeting Fees otherwise payable to the Directors. This document shall be referred to as the Arbitron Inc. Director Deferred Compensation Procedures (the “Procedures”). The Procedures are hereby restated and ratified as of January 1, 2004.

ARTICLE 2
PARTICIPATION

          2.1. Participation

          A Director may elect to receive deferred stock units in lieu of Retainer Fees or Meeting Fees payable with respect to an upcoming calendar year. Elections may only be made to receive 0%, 50% or 100% of the Fees to be earned in the upcoming year. The election must be made in writing during the enrollment period established by the Corporate Secretary that closes prior to the calendar year in which the Fees otherwise would be paid. The enrollment period shall be a period of up to 60 days ending no later than December 31 of the year prior to the calendar year in which the Fees otherwise would be paid. The election for the upcoming year shall become irrevocable as of the close of the enrollment period. Failure to complete an election form by December 31 will result in fees for the upcoming year being paid entirely in cash.

          A Director who elects to receive deferred stock units under the Procedures shall become a Participant, and the Company shall establish a Deferred Stock Unit Account in which such deferral(s) shall be held in accordance with these Procedures.

          A Director’s election shall specify the percentage of the Director’s Fees converted to deferred stock units and credited to the Deferred Stock Unit Account.

          The Company shall grant deferred stock units to a Participant at the end of each calendar quarter in lieu of Retainer Fees or Meeting Fees that otherwise would be paid to the Participant for his or her Board service during such calendar quarter. The number of deferred stock units credited is determined by dividing the amount of Fees deferred by the closing price of common stock of the Company (“Common Stock”) on the last trading day of the calendar quarter. For the purpose of crediting the Deferred Stock Unit Account for the quarterly Fee deferral, fractional shares shall be rounded to the nearest whole number of shares. The deferred stock units are fully vested and shall be credited to a Participant’s Deferred Stock Unit Account on the date of grant.

          2.2. First-Year Eligibility

          If a Director first becomes eligible to participate in accordance with these Procedures during a calendar year (i.e., is elected to fill a vacancy on the Board during a calendar year), notwithstanding the general requirement stated in Section 2.1 that the election be completed and submitted before the calendar year of commencement, an election may be submitted to the Plan Administrator within 30 days after the Participant first becomes a Director. However, the election will be effective only with respect to Fees earned and payable following submission of the election to the Plan Administrator.

ARTICLE 3
PAYMENT OF DEFERRED STOCK UNIT ACCOUNT

          3.1. Termination of Board Service

          Payment of the deferred stock units shall not be made until following the Participant’s termination of service as a Director of the Company. If the Participant’s service as a Director of the Company ceases for any reason, payment shall be made as previously elected by the Participant in accordance with Section 3.2 below.

          3.2. Form and Time of Payment

          In the election that the Director completes and submits in connection with the Procedures, which is confirmed by the Participant’s execution of the Deferred Stock Unit Agreement (the “Agreement”), and pursuant to which he or she becomes a Participant, the Director shall designate whether payment of his or her Deferred Stock Unit Account is to be made as a lump sum in shares of Common Stock or as a series of annual installments of shares of Common Stock, not to exceed 5 such consecutive annual installments.

          If the Participant elects payment as a lump sum, payment shall commence within 30 days after the end of the calendar quarter in which the Participant has ceased to serve as a Director of the Company, with any fractional shares to be distributed in cash.

          If the Participant elects payment in a series of annual installments, payment shall commence as of January 1 of the calendar year following the year in which the Participant has ceased to serve as a Director of the Company (or as soon as reasonably practicable thereafter). The amount of shares paid in each installment shall be determined by dividing the Participant’s total remaining deferred stock units by the remaining number of installments to be paid, such that the divisor shall be reduced by one in each subsequent year. Fractional shares shall be rounded down to the nearest whole number, except that in the final year in which an installment is to be paid, any fractional shares shall be distributed in cash.

          The payment form reflected in the Participant’s Agreement shall apply to any deferred stock units accrued to the Participant’s Deferred Stock Unit Account under a prior deferred stock unit agreement. However, to the extent the payment form reflected in the

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Agreement represents a change of form from the prior year(s), the Participant’s election shall be subject to the conditions of Section 3.3 below.

          3.3. Change of Form of Payment

          A Participant may change the form of his or her payment election in effect under Section 3.2, contingent on the following requirements having been satisfied:

               (a) the change must be made in writing and in the form designated by the Plan Administrator;

               (b) the change must be made at a time when the Participant is still a Director, and must be consistent with Section 3.2; and

               (c) the change will be voided and of no effect if made less than one year prior to the date that the Director terminates service on the Board.

ARTICLE 4
ACCOUNTS ESTABLISHMENT

          4.1. Accounts

          A Deferred Stock Unit Account shall be established and maintained by the Plan Administrator for each Participant, in which shall be recorded the Fees converted to deferred stock units. The deferred stock units shall be credited to the Deferred Stock Unit Account as of the following dates:

               (a) The deferred portion of one-fourth of the annual Retainer Fee shall be converted into deferred stock units and credited to the Deferred Stock Unit Account as of the last day of each calendar quarter; and

               (b) The deferred portion of any Meeting Fee shall be converted into deferred stock units and credited to the Deferred Stock Unit Account as of the last day of the calendar quarter in which such meeting was held.

          4.2. DSU Value

          Each deferred stock unit credited to the account represents the value of a share of Common Stock.

          4.3. Dividend Equivalents

          Dividend Equivalents shall be credited to each deferred stock unit on each dividend record date to the extent of dividends issued on Common Stock, provided the record date for such dividends is on or after the end of the quarter as of which the deferred stock units are credited to the Participant. Such Dividend Equivalents shall themselves be converted into deferred stock units as

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of the dividend record date by dividing the amount of the Dividend Equivalents by the value of the Common Stock as of the applicable dividend record date. Any such additional deferred stock units (or fraction thereof) resulting from Dividend Equivalent credits shall be treated as deferred stock units and credited to the Deferred Stock Unit Account, and shall be subject to the terms and conditions of the Procedures, the Agreement, and the Stock Incentive Plan.

          4.4. Effect of Certain Transactions

          In the event of a change in the number of outstanding shares of Common Stock by reason of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off), or any other change in the corporate structure or shares of the Company that does not result in a Change of Control, the Committee (or, if the Company is not the surviving corporation in any such transaction, the Board of Directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Participant, will make appropriate adjustment (which determination shall be conclusive) as to the number and kind of securities represented by the stock units making up the Deferred Stock Unit Account.

          If there is a Change of Control, then, upon consummation of the Change of Control, but in no event more than 15 days following the Change of Control, the Company shall provide the Participant with a cash payment equal to the value per share of the consideration received in the Change of Control multiplied by the number of deferred stock units. Upon payment of the cash amount just described, notwithstanding anything to the contrary in the Agreement, the Procedures or the Stock Incentive Plan, the Agreement shall expire, and no further payment shall be due to the Participant in respect of the Deferred Stock Unit Account.

ARTICLE 5
SURVIVOR AND DEATH BENEFITS

          5.1. Death Benefit

          Upon the death of a participant Director, all amounts, if any, remaining in his or her Deferred Stock Unit Account shall be distributed to the Beneficiary designated by the Director in a lump sum as soon as practicable following the Director’s death.

          If the designated Beneficiary does not survive the Director or dies before receiving payment of the Director’s Deferred Stock Unit Account, payment shall be made to the estate of the Director.

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ARTICLE 6
ADMINISTRATION

          6.1. Administration

          The Procedures shall be administered by the Committee to the same extent as provided in Section 3 of the Stock Incentive Plan. The Committee shall have full power and authority to administer and interpret the Procedures, to establish procedures for administering the Procedures and to take any and all necessary action in connection therewith. The Committee’s interpretation and construction of the Procedures shall be conclusive and binding on all persons.

          6.2. Amendment and Termination of the Procedures

          The Committee may, in their sole discretion, amend the Procedures at any time or from time to time, in whole or in part, and for any reason, by written action. However, no amendment shall reduce the amount accrued in any Deferred Stock Unit Account as of the date of such amendment.

          The Committee also may terminate the Procedures with respect to the Participants who render services as Directors or who formerly rendered services as Directors by written action. In the event of such termination, the Deferred Stock Unit Accounts of participating Directors shall be paid at such times and in such forms as shall be determined pursuant to Article 3, unless the Board of Directors shall prescribe an earlier time or times for payment of such accounts.

ARTICLE 7
GENERAL PROVISIONS

          7.1. Alienation of Benefits

          No Deferred Stock Unit Account payable under the Procedures shall be subject to alienation, sale, transfer, assignment, pledge, attachment, garnishment, lien, levy or like encumbrance. The Company shall not in any manner be liable for or subject to the debts or liabilities of any person entitled to payment hereunder.

          7.2. No Right to Service

          Nothing contained in the Stock Incentive Plan or these Procedures shall be deemed to give any Director the right to be retained in the service of the Company or to interfere with the right of the Company to remove or seek the resignation of any Director at any time without regard to the effect that such removal or resignation may have upon the Director under the Stock Incentive Plan or these Procedures.

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          7.3. Unfunded Arrangement

          The Deferred Stock Units Account shall be an unfunded, unsecured, contractual obligation of the Company. The Company shall not be required to segregate any assets to provide payment of Deferred Stock Unit Accounts, and the Procedures shall not be construed as providing for such segregation. Any liability of the Company to any Participant or Beneficiary with respect to the payment of Deferred Stock Unit Accounts shall be based solely upon any contractual obligations created by the Procedures. Any such obligation shall not be deemed to be secured by any pledge or other encumbrance or any Company property. Accordingly, the Participant’s rights to payment hereunder shall be that of an unsecured creditor.

          7.4. Miscellaneous

               (a) Construction

          Unless the contrary is plainly required by the context, wherever any words are used herein in the masculine gender, they shall be construed as though they were also used in the female gender, and vice versa, and wherever any words are used herein in the singular form, they shall be construed as though they were also used in the plural form, and vice versa.

               (b) Severability

          If any provision of the Procedures is held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Procedures, and the Procedures shall be construed and enforced as if such illegal or invalid provision had never been included in it.

               (c) Titles and Headings Not to Control

          The titles to Articles and the headings of Sections in the Procedures are for convenience of reference only, and in the event of any conflict, the text of the Procedures, rather than the titles or headings, shall control.

               (d) Complete Statement of Procedures

          This document is a complete statement of the Procedures. The Procedures may be amended, modified or terminated only in writing, subject to any terms and conditions for amendment, modification or termination set forth in the Stock Incentive Plan.

          7.5. Governing Law

          The Procedures shall be governed by the laws of the State of Delaware without regard to its choice of law provisions.

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ARTICLE 8
DEFINITIONS

     In addition to those definitions set forth in Article 1 or otherwise in the text of these Procedures, the following terms shall have the meaning assigned below in this Article 8:

     8.1. “Beneficiary” means the person or persons designated by the Director to receive payment of the Director’s Deferred Stock Unit Account in the event of the death of the Director.

     8.2. “Board” means the Board of Directors of the Company

     8.3. “Change of Control” means any of the following events:

(i)	a merger or consolidation to which the Company is a party if the individuals and entities who were stockholders of the Company immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of less than 50% of the total combined voting power for election of directors of the surviving Company immediately following the effective date of such merger or consolidation;
(ii)	the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) in the aggregate of securities of the Company representing 51% or more of the total combined voting power of the Company’s then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert; provided, however, that for purposes hereof, any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company shall not constitute a Change of Control;
(iii)	the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) in the aggregate of securities of the Company representing 25% or more of the total combined voting power of the Company’s then issued and outstanding securities by any person or entity, or group of associated persons or entities acting in concert if such acquisition is not approved by the Board of Directors of the Company prior to any such acquisition; provided, however, that for purposes hereof, any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company shall not constitute a Change of Control;
(iv)	the sale of the properties and assets of the Company, substantially as an entirety, to any person or entity which is not a wholly-owned subsidiary of the Company;

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(v)

the stockholders of the Company approve any plan or proposal for the liquidation of the Company; or

(vi)

a change in the composition of the Board at any time during any consecutive 24 month period such that the “Continuity Directors” cease for any reason to constitute at least a 70% majority of the Board. For purposes of this clause, “Continuity Directors” means those members of the Board who either (A) were directors at the beginning of such consecutive 24 month period, or (B) were elected by, or on the nomination or recommendation of, at least a two-thirds majority of the then-existing Board of Directors. As a result, a director who no longer serves on the Board of Directors, and who is replaced by an individual nominated or recommended for nomination by a two-thirds vote of the remaining Board of Directors, does not count as a loss for purposes of determining whether 70% of the members of the Board of Directors remain in tact.

     8.4. “Director” means any member of the Board of the Company who is not also an employee of the Company.

     8.5. “Fee” means compensation expected to be paid by the Company to a Director for services rendered on or after the effective date, exclusive of any reimbursement by the Company for expenses incurred by the Director related to attendance at Board meetings or Board committee meetings.

     8.6. “Meeting Fee” means any Fee, other than a Retainer Fee, paid by the Company to a Director as compensation for attendance at a meeting of the Board or attendance at a meeting of a Board committee.

     8.7. “Participant” means a Director or former Director who has a Deferred Stock Unit Account established pursuant to these Procedures.

     8.8. “Retainer Fee” means the annual retainer amount and committee chair fee expected to be paid by the Company to a Director.

     8.9. “Deferred Stock Unit Account” means the bookkeeping account established under these Procedures by the Company for each Participant, in which shall be reflected amounts credited as deferred stock units.

* * * * *

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EX-10.18

Exhibit 10.18

ARBITRON INC.

Schedule of Non-Employee Director Compensation 1/

Annual Retainer Fee	$30,000
Board Meeting Fees (In person or	$1,500
by telephone)
Committee Chair Retainer	Audit Committee: $10,000
	Other Committees: $7,500
Committee In Person Meeting Fees	$1,500
Committee Telephonic Meeting Fees	$750
Initial Option Awards	Each newly elected director will receive a one-time grant of
	options to purchase 15,000 shares of common stock, which options
	will vest and become exercisable in three equal installments of
	5,000 shares over a three-year period and will expire 10 years
	from the date of grant.
Annual Option Awards	Beginning the year after initial election, each non-employee
	director will receive an annual grant of options to purchase
	7,000 shares of common stock, which options will be fully vested
	upon grant. These options will become exercisable in full six
	months after the date of grant and will expire 10 years from the
	date of grant.
Annual Option Awards to Chairman	The Chairman of the Board of Directors will also receive an
	annual grant of options to purchase 10,000 shares of common
	stock, which options will be fully vested upon grant. These
	options will become exercisable in full six months after the
	date of grant and will expire 10 years from the date of grant.

1/All cash retainer fees and meeting fees payable to directors may be partially or fully deferred at the election of each director into deferred stock units (DSUs) or may be paid at the election of each director in the form of stock options in lieu of cash.

EX-10.19

Exhibit 10.19

ARBITRON INC.

Schedule of 2004 Bonuses and 2005 Bonus Parameters
for Named Executive Officers

2004 Bonuses for Named Executive Officers

     On January 27, 2005, the Compensation and Human Resources Committee (the “Committee”) of the Board of Directors of Arbitron Inc. (the “Company”) met and made certain determinations that affect the bonuses for executive officers for 2004.

     The Committee previously established certain parameters for determining bonuses for executive officers for 2004. These parameters included achievement of various objective and subjective Company performance goals, as well as individual performance goals in certain circumstances. The bonus determinations for Mr. Steve Morris, the Company’s chief executive officer, and Mr. Bill Walsh, the Company’s chief financial officer, were established based on the Committee’s review and determination of the Company’s 2004 performance in comparison to the goals established by the Committee. Bonuses for Mr. Owen Charlebois and Ms. Janice Giannini, two of the Company’s other named executive officers, were established based on an assessment of their individual performance and the determination by the Committee of the Company’s performance based on the goals previously established by the Committee. As a result of the Committee’s review and determination, the following executive officers will be entitled to a bonus for 2004 in the amounts set forth below:

Name and Principal Position	2004 Bonus
Stephen B. Morris
President and Chief Executive Officer.	77% of 2004 base salary
Owen Charlebois
President of U.S. Media Services.	51% of 2004 base salary
William J. Walsh
Executive Vice President of Finance and Planning and
Chief Financial Officer.	44% of 2004 base salary
Janice Giannini
Executive Vice President and Chief Information Officer	37% of 2004 base salary

The bonus for Mr. Pierre Bouvard, the Company’s other named executive officer in 2004, has not yet been determined.

2005 Bonus Parameters for Named Executive Officers

     On February 23, 2005, the Compensation and Human Resources Committee (the “Committee”) of the Board of Directors of Arbitron Inc. (the “Company”) met and approved the establishment of certain parameters for determining bonuses for executive officers for 2005,

which would be payable in early 2006.

     The Committee set various objective and subjective Company goals in terms of earnings per share, revenue and implementation of certain non-financial initiatives, with certain weightings attributable to achievement of each of these goals. The Committee then established various criteria for achieving “threshold”, “target” and “superior” performance in relation to these goals. Under the bonus arrangements currently in place, each executive officer’s bonus can be weighted to take into account achievement of both Company goals and individual goals. As a general matter, the bulk of an executive officer’s bonus for 2005 will be determined as a result of achievement of Company goals, with the remaining portion based on achievement of individual goals, except in the case of Mr. Steve Morris, the Company’s President and Chief Executive Officer, and Bill Walsh, the Company’s Executive Vice President, Finance and Planning and Chief Financial Officer, whose bonuses will be determined entirely on the basis of achievement of Company goals.

     Taking into account the foregoing, the Committee established a “target” bonus for each executive officer, expressed as a percentage of base salary. The target bonuses for the executive officers who are expected to be “named executive officers” in 2005 are set forth below:

Name and Principal Position	2005 Target Bonus
Stephen B. Morris
President and Chief Executive Officer.	75% of 2005 base salary
Owen Charlebois
President of U.S. Media Services.	50% of 2005 base salary
Pierre C. Bouvard
President of International/New Ventures.	40% of 2005 base salary
William J. Walsh
Executive Vice President of Finance and Planning and
Chief Financial Officer.	40% of 2005 base salary
Scott Henry
Executive Vice President and Chief Information Officer	40% of 2005 base salary

     In addition, the Committee approved a supplementary bonus opportunity based on achievement of certain additional non-financial goals in 2005. Under this opportunity, executive officers may be eligible to receive an additional bonus equal to up to 100% of their “target” bonus if these non-financial goals are achieved.

     The Committee has the discretion to award bonuses in excess of the percentages set forth above.

EX-10.20

Exhibit 10.20

ARBITRON BENEFIT EQUALIZATION PLAN

As Adopted Effective as of January 1, 2001

Table of Contents

	Page
ARTICLE 1 DESCRIPTION		2
1.1 Structure and Name		2
1.2 Purpose		2
1.3 Type		2
1.4 Background		2
ARTICLE 2 BENEFITS		3
2.1 Amount		3
2.2 Form and Time of Payment		4
2.3 Entitlement, Reductions		4
2.4 Payment in the Event of Incapacity		5
ARTICLE 3 SOURCE OF PAYMENTS; NATURE OF INTEREST		6
3.1 Establishment of Trust		6
3.2 Source of Payments		6
3.3 Status of Plan		6
3.4 Non-assignability of Benefits		6
ARTICLE 4 ADOPTION, AMENDMENT AND TERMINATION		7
4.1 Adoption		7
4.2 Amendment		7
4.3 Termination of Participation		7
4.4 Termination		8
ARTICLE 5 DEFINITIONS, CONSTRUCTION AND INTERPRETATION		10
5.1 Administrator		10
5.2 Affiliated Organization		10
5.3 Board		10
5.4 Code		10
5.5 Company		10
5.6 Compensation Equalization Plan		10
5.7 ERISA		10
5.8 Excess Benefit Plan		10
5.9 Executive Investment Plan		10
5.10 Governing Law		11
5.11 Headings		11
5.12 Number and Gender		11
5.13 Participant		11
5.14 Participating Employer		11
5.15 Pension Plan		11
5.16 Plan		11
5.17 Trust		11
5.18 Trustee		11

 i 

Table of Contents
(continued)

	Page
ARTICLE 6 ADMINISTRATION		12
6.1 Administrator		12
6.2 Rules and Regulations		12
6.3 Administrator’s Discretion		12
6.4 Specialist’s Assistance		12
6.5 Indemnification		12
6.6 Benefit Claim Procedure		13
ARTICLE 7 MISCELLANEOUS		14
7.1 Withholding and Offsets		14
7.2 Other Benefits		14
7.3 No Warranties Regarding Tax Treatment		14
7.4 No Employment Rights Created		14

 ii 

ARBITRON BENEFIT EQUALIZATION PLAN

ARTICLE 1
Description

1.1   Structure and Name. The Plan consists of two separate component plans which, for administrative convenience, have been incorporated in one instrument. One such component plan is the Excess Benefit Plan and the other such component plan is the Compensation Equalization Plan. Together, the two component plans are referred to as the “Arbitron Benefit Equalization Plan.”

1.2   Purpose. The purpose of the Excess Benefit Plan is to ensure that Pension Plan participants will not be deprived of benefits that would otherwise be payable under the Pension Plan but for the operation of the provisions of Code section 415. The purpose of the Compensation Equalization Plan is to ensure that Pension Plan participants will not be deprived of benefits that would otherwise be payable under the Pension Plan but for the operation of the provisions of Code section 401(a)(17) or certain elections relative to the form of bonus payments or the deferral of compensation pursuant to the Executive Investment Plan.

1.3   Type. The Excess Benefit Plan is an unfunded “excess benefit plan” within the meaning of section 3(36) of ERISA and, as such, is exempt from ERISA by operation of sections 4(b)(5) and 4021(b)(8) thereof. The Compensation Equalization Plan is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and, as such, is exempt from Parts 2, 3 and 4 of Subtitle B of Title I of ERISA by operation of sections 201(2), 302(a)(3) and 401(a)(4) thereof, respectively, and from Title IV of ERISA by operation of section 4021(a)(6) thereof. The Excess Benefit Plan and Compensation Equalization Plan are also intended to be unfunded for tax purposes. The Plan will be construed and administered in a manner that is consistent with and gives effect to the foregoing.

1.4   Background. Effective as of the close of business on December 31, 2000, the Company caused assets and liabilities of the Ceridian Corporation Retirement Plan attributable to certain participants who were then employed with the Company or an Affiliated Organization to be transferred to the Pension Plan, which was adopted by the Company effective as of January 1, 2001. In connection with the adoption of the Pension Plan, the Company adopted the Plan, effective as of January 1, 2001, as a successor to the Ceridian Corporation Benefit Equalization Plan for participants in the Pension Plan.

2

ARTICLE 2
Benefits

2.1 Amount.

(A)	As of the date on which a Participant’s Pension Plan benefit is scheduled to commence, the Administrator will determine the amount of the benefit to which the Participant is entitled pursuant to the Plan in accordance with Subsection (B).
(B)	Subject to Sections 2.2 and 2.3, the amount of a Participant’s benefit will be computed in the following manner:

(1)   The Administrator will determine a monthly benefit amount equal to the amount by which the monthly benefit determined pursuant to clause (a) exceeds the monthly benefit determined pursuant to clause (b), in each case based on a benefit payable in the normal form under the Pension Plan commencing at the later of the participant’s normal retirement date under the Pension Plan or his or her age on the date on which benefits under the Pension Plan are scheduled to commence.

(a)   The monthly benefit to which the Participant would be entitled under the Pension Plan determined

(i)	without regard to any limitations imposed under the Pension Plan to satisfy the provisions of Code sections 401(a)(17) and 415,
(ii)	by including as annual compensation for a plan year for purposes of calculating benefits any amount that would have otherwise been paid to the Participant as base salary or a cash bonus during the plan year but for the Participant’s election pursuant to the Executive Investment Plan (but only to the extent such amount is not otherwise taken into account under the Pension Plan for such plan year and, in the case of a cash bonus, only if the cash bonus would otherwise be considered “annual compensation,” within the meaning of the Pension Plan, for such plan year) and
(iii)	if and only if the Administrator determines that the Participant is a member of a select group of management or highly compensated employees, by including as annual compensation for a plan year any amount that would have been paid to the Participant as a cash bonus during the plan year but for the Participant’s election to receive such

3

amount in the form of common stock of the Company or an option to purchase such stock (but only to the extent such amount is not otherwise taken into account under the Pension Plan for such plan year).

(b)   The actual amount of the monthly benefit to which the Participant is entitled under the Pension Plan.

(2)   The amount determined pursuant to clause (1) will be adjusted in the same manner as the Participant’s benefit under the Pension Plan to reflect any early or late commencement of the benefit.

(C)   If a Participant dies before his or her “annuity starting date,” within the meaning of Code section 417(f)(2), and the Participant’s surviving spouse is entitled to a “qualified preretirement survivor annuity,” within the meaning of Code section 417(c), from the Pension Plan or the Pension Plan provides for the payment of any other death benefit to the surviving spouse or any other person, the amount of the benefit to which the surviving spouse or other person is entitled pursuant to the Plan will be determined in accordance with Subsection (B) but based, for the purpose of clause (1), on the difference between the normal form of the death benefit determined under items (a) and (b).

2.2 Form and Time of Payment.

(A)	Payment of a benefit to any Participant determined pursuant to Section 2.1(B) or surviving spouse or other person determined pursuant to Section 2.1(C) will be made or commence, as the case may be, at the same time and in the same form as his or her benefit under the Pension Plan.
(B)	If a Participant, surviving spouse or other person entitled to receive a benefit under the Plan elects to receive his or her benefit under the Pension Plan in a form other than the normal form, the benefit under the Plan will be actuarially adjusted to reflect the form in which it is paid in the same manner as the benefit under the Pension Plan.
(C)	If a Participant dies following the commencement of monthly benefit payments, any death benefits payable under the form of payment applicable to the Participant’s benefit under the Plan will be paid to the same beneficiary or joint or contingent annuitant, as the case may be, as his or her benefit under the Pension Plan.

2.3   Entitlement, Reductions. Notwithstanding the foregoing provisions of this Article 2 –

(A)   A Participant who has elected to participate in the Pension Plan on an after-tax basis is not entitled to a benefit under the Plan attributable to annual

4

	compensation in excess of the limitation in effect under Code section 401(a)(17) or deferred under the Executive Investment Plan unless, prior to a date specified by the Administrator, the Participant makes an irrevocable election, applicable to any period of future employment with respect to which his or her Pension Plan after-tax participation election applies, to forego four percent of that portion of his or her compensation that is (i) attributable to services performed after the date of the election and (ii) not taken into account under the Pension Plan solely by reason of the Code section 401(a)(17) limitation or the Participant’s election pursuant to the Executive Investment Plan.
(B)	If, after commencement of monthly benefit payments under the Plan, the amount of monthly payments to which the Participant is entitled under the Pension Plan is increased by reason of an increase in the limitations under Code section 415, the amount of the monthly payments to which he or she is entitled under the Plan will be decreased by the amount of monthly payment increase under the Pension Plan.
(C)	A former Participant is not entitled to a benefit under the Plan to the extent the liability for such benefit has been transferred to or assumed by a successor to all or any portion of the business of the Participating Employer.
(D)	If a Participant who is receiving or entitled to receive a benefit pursuant to the Plan is reemployed with a Participating Employer or an affiliate of a Participating Employer and, in connection with such reemployment, his or her Pension Plan benefit payment is suspended, his or her benefit under the Plan will be suspended for the same period. The Participant’s benefit under the Plan will recommence at the same time as his or her benefit under the Pension Plan and the amount of the benefit at recommencement will be adjusted in accordance with Plan Rules to reflect any additional benefits earned and benefits previously paid.

2.4   Payment in the Event of Incapacity. If any person entitled to receive any payment under the Plan is physically, mentally, or legally incapable of receiving or acknowledging receipt thereof, and no legal representative has been appointed for such person, the Administrator, in his or her discretion, may (but is not required to) cause any sum otherwise payable to such person to be paid to any one or more of the following (as may be chosen by the Administrator): the person’s beneficiary or joint or contingent annuitant for purposes of his or her benefit under the Plan, if any, the institution maintaining such person, a custodian for such person under the Uniform Transfers to Minors Act of any state, or such person’s spouse, children, parents or other relatives by blood or marriage. Any payment so made completely discharges all liability under the Plan to the extent of such payment.

5

ARTICLE 3
Source Of Payments; Nature Of Interest

3.1

Establishment of Trust. Each Participating Employer may establish a Trust, or become covered under a Trust established by another Participating Employer, with an independent corporate trustee. The Trust must (a) be a grantor trust with respect to which the Participating Employer is treated as grantor for purposes of Code section 677, (b) not cause the Plan to be funded for purposes of Title I of ERISA or the Code and (c) provide that Trust assets attributable to a Participating Employer will, upon the insolvency of the Participating Employer, be used to satisfy the claims of the Participating Employer’s general creditors. The Participating Employers may from time to time transfer to the Trust cash, marketable securities or other property acceptable to the Trustee in accordance with the terms of the Trust.

3.2

Source of Payments.

(A)	Subject to Subsections (B) and (C), a Participant’s benefit will be paid by the Participating Employer with whom the Participant was last employed.
(B)	If a Participant has participated in the Pension Plan as an employee of more than one Participating Employer, the Administrator will determine the portion of the benefit to which the Participant is entitled under the Plan allocable to each such Participating Employer.
(C)	The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of a Participating Employer’s obligations under the Plan in accordance with the terms of the Trust. The Participating Employer is responsible for paying any benefits attributable to a Participant’s Account with respect to that Participating Employer that are not paid by the Trust.

3.3   Status of Plan. Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of this Plan, the Participant’s or other person’s only interest under the Plan being the right to receive the benefits set forth herein. The Trust is established only for the convenience of the Participating Employers and the Participants, and no Participant has any interest in the assets of the Trust prior to distribution of such assets pursuant to the Plan. To the extent the Participant or any other person acquires a right to receive benefits under this Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Participating Employer.

3.4   Non-assignability of Benefits. The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process.

6

ARTICLE 4
Adoption, Amendment And Termination

4.1	Adoption. With the prior approval of the Administrator, an Affiliated Organization may adopt the Plan and become a Participating Employer by furnishing to the Administrator a certified copy of a resolution of its Board adopting the Plan.
4.2	Amendment.

(A)	The Company reserves the right to amend the Plan at any time to any extent that it may deem advisable. To be effective, an amendment must be stated in a written instrument approved in advance or ratified by the Company’s Board and executed in the name of the Company by two of its officers.
(B)	An amendment adopted in accordance with Subsection (A) is binding on all interested parties as of the effective date stated in the amendment; provided, however, that no amendment will have any retroactive effect so as to deprive any Participant, or the beneficiary or joint or contingent annuitant of a deceased Participant, of any benefit to which he or she is entitled under the terms of the Plan in effect immediately prior to the effective date of the amendment, determined in the case of a Participant who is employed by an Affiliated Organization, as if he or she had terminated employment immediately prior to the effective date of the amendment.
(C)	The provisions of the Plan in effect at the termination of a Participant’s employment will, except as otherwise expressly provided by a subsequent amendment, continue to apply to such Participant.

4.3   Termination of Participation.

(A)   Notwithstanding any other provision of the Plan to the contrary, if determined by the Administrator to be necessary to ensure that the Plan is exempt from ERISA to the extent contemplated by Section 1.3 or upon the Administrator’s determination that a Participant’s interest in the Plan has been or is likely to be includable in the Participant’s gross income for federal income tax purposes prior to the actual payment of benefits pursuant to the Plan, the Administrator may take any or all of the following steps:

(1)	terminate the Participant’s future participation in the Plan;
(2)	cause the Participant’s entire interest in the Plan to be distributed to the Participant in the form of an immediate lump sum; and/or

7

(3)   transfer the benefits that would otherwise be payable pursuant to the Plan for all or any of the Participants to a new plan that is similar in all material respects (other than those which require the action in question to be taken.)

(B)   For the purpose of Subsection(A)(2), the lump sum value of a Participant’s interest in the Plan will be determined

(1)	in the case of a Participant whose benefit under the Plan is not then in pay status, in accordance with Article 2 but assuming that the Participant had terminated employment and elected to receive his or her Pension Plan benefit in the form of an immediate lump sum, or
(2)	in the case of a Participant or beneficiary or joint or contingent annuitant of a beneficiary whose benefit under the Plan is then in pay status, by converting the expected future benefit from the form in which it is being paid to an actuarially equivalent lump sum benefit using actuarial assumptions specified in the Pension Plan.

4.4   Termination.

(A)	The Company reserves the right to terminate the Plan in its entirety at any time. Each Participating Employer reserves the right to cease its participation in the Plan or terminate the Plan with respect to any group of similarly situated current or former employees of the Participating Employer at any time. The Plan will terminate in its entirety or with respect to a particular Participating Employer or group of current or former employees as of the date specified by the Company or such Participating Employer in a written instrument approved in advance or ratified by the Company’s Board and executed in the name of the Company by two of its officers.
(B)	Upon the termination of the Plan in its entirety or with respect to any Participating Employer or group of current or former employees, the Company or Participating Employer, as the case may be, will either cause (1) any benefits to which Participants have become entitled prior to the effective date of the termination to continue to be paid in accordance with the provisions of Article 2 or (2) subject to Subsection (C), cause the entire interest in the Plan of any or all Participants, or the beneficiaries or joint or contingent annuitants of any or all deceased Participants, to be distributed in the form of an immediate lump sum payment calculated in accordance with the provisions of Section 4.3(B).
(C)	If the Company determines in good faith that there is a reasonable likelihood that any compensation paid to a Participant by an Affiliated Organization for a taxable year of the Affiliated Organization would not be deductible by the Affiliated Organization solely by reason of the limitation under Code section 162(m), to the

8

extent deemed necessary by the Company to ensure that the entire amount of any distribution pursuant to clause (2) of Subsection (B) is deductible, the Company may defer all or any portion of the distribution. The deferred amounts and interest thereon from the date on which the payment would have been made but for this subjection and the date on which the payment is actually made at the rate then used under the Pension Plan for the purpose of computing lump sum distributions will be distributed to the Participant, or to his or her beneficiary in the case of the Participant’s death, at the earliest possible date, as determined by the Company in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Affiliated Organization during which the distribution is made will not be limited by Code section 162(m).

9

ARTICLE 5
Definitions, Construction And Interpretation

The definitions and rules of construction and interpretation set forth in this article apply in construing the Plan unless the context otherwise indicates.

5.1   Administrator. “Administrator” is the Company, or the person to whom administrative duties are delegated pursuant to the provisions of Section 6.1, as the context requires.

5.2   Affiliated Organization. “Affiliated Organization” is the Company and any corporation that is a member of a controlled group of corporations, within the meaning of Code section 414(b), that includes the Company.

5.3   Board. “Board” is the board of directors of the Affiliated Organization in question or any individual or committee authorized to act on behalf of such board of directors pursuant to a proper delegation.

5.4   Code. “Code” is the Internal Revenue Code of 1986, as amended from time to time, and any reference to a section of the Code refers to that section or to the corresponding section of the Code as amended.

5.5   Company. “Company” is Ceridian Corporation, to be renamed Arbitron Inc., or any successor thereto.

5.6   Compensation Equalization Plan. “Compensation Equalization Plan” means the component plan incorporated in this instrument for the purpose of ensuring that Participants will not be deprived of benefits otherwise due them under the Pension Plan by operation of the provisions of Code section 401(a)(17) or certain elections relative to the form of bonus payments or the deferral of compensation pursuant to the Executive Investment Plan.

5.7   ERISA. “ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and any reference to a section of ERISA refers to that section or to the corresponding section of ERISA as amended.

5.8   Excess Benefit Plan. “Excess Benefit Plan” is the component plan incorporated in this instrument for the purpose of ensuring that Participants will not be deprived of benefits otherwise due them under the Pension Plan by operation of the provisions of Code section 415.

5.9   Executive Investment Plan. “Executive Investment Plan” is the Arbitron Executive Investment Plan, as adopted effective January 1, 2001 and as thereafter amended from time to time. For the period prior to January 1, 2001, the Executive Investment Plan was the Ceridian Corporation Executive Investment Plan.

10

5.10   Governing Law. To the extent state law is not preempted by the provisions of the ERISA or any other laws of the United States, this Plan will be administered, construed and enforced according to the internal laws of the State of Minnesota without regard to the conflict of law principles of the State of Minnesota or any other jurisdiction.

5.11   Headings. The headings of articles, sections, subsections and clauses are included solely for convenience and, if there is a conflict between such headings and the text of the Plan, the text will control.

5.12   Number and Gender. Wherever appropriate, the singular may be read as the plural, the plural may be read as the singular and one gender may be read as the other gender.

5.13   Participant. “Participant” is an employee of a Participating Employer who is (a) a participant under the Pension Plan, (b) entitled to a benefit pursuant to the provisions of Article 2 and (c) not a party to an agreement with the Participating Employer pursuant to which he or she is not eligible to participate in the Plan.

5.14   Participating Employer. “Participating Employer” is the Company and any other Affiliated Organization that has adopted the Plan, or all of them collectively, as the context requires, and their respective successors. A Participating Employer will cease to be such upon a termination of the Plan as to its employees and the satisfaction in full of all of its obligations under the Plan or upon its ceasing to be an Affiliated Organization.

5.15   Pension Plan. “Pension Plan” is the Arbitron Retirement Plan, as adopted effective as of January 1, 2001 and as thereafter amended. For the period prior to January 1, 2001, the Pension Plan was the Ceridian Corporation Retirement Plan.

5.16   Plan. The “Plan” is the Compensation Equalization Plan or the Excess Benefit Plan or both of them, as the context requires. For the period prior to January 1, 2001, the Plan was the Ceridian Corporation Benefit Equalization Plan or either or both of the Ceridian Corporation Compensation Equalization Plan and the Ceridian Corporation Excess Benefit Plan, as the context requires.

5.17   Trust. “Trust” means any trust or trustee established by a Participating Employer pursuant to Section 3.1.

5.18   Trustee. “Trustee” means the independent corporate trustee or trustees that at the relevant time has or have been appointed to act as Trustee of the Trust.

11

ARTICLE 6
Administration

6.1   Administrator. The general administration of the Plan and the duty to carry out its provisions is vested in the Company. The Company may delegate such duty or any portion thereof to a named person and may from time to time revoke such authority and delegate it to another person.

6.2   Rules and Regulations. The Administrator has the discretionary power and authority to make such rules and regulations as the Administrator determines to be consistent with the terms, and necessary or advisable in connection with the administration, of the Plan and to modify or rescind any such rules or regulations.

6.3   Administrator’s Discretion. The Administrator has the discretionary power and authority to make all determinations necessary for administration of the Plan, except those determinations that the Plan requires others to make, and to construe, interpret, apply and enforce the provisions of the Plan and Plan rules and regulations whenever necessary to carry out its intent and purpose and to facilitate its administration, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions and erroneous benefit calculations. In the exercise of its discretionary power and authority, the Administrator will treat all similarly situated persons uniformly.

6.4   Specialist’s Assistance. The Administrator may retain such actuarial, accounting, legal, clerical and other services as may reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services. All costs of administering the Plan will be paid by the Participating Employers.

6.5   Indemnification. The Participating Employers jointly and severally agree to indemnify and hold harmless, to the extent permitted by law, each director, officer, and employee of any Affiliated Organization against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Participating Employers have the right, but not the obligation, to select counsel and control the defense and settlement of any action for which a person may be entitled to indemnification under this provision.

12

6.6 Benefit Claim Procedure.

(A)	If a request for a benefit by a Participant or beneficiary of a deceased Participant is denied in whole or in part, he or she may, not later than 30 days after the denial, file with the Administrator a written claim objecting to the denial.
(B)	The Administrator, not later than 90 days after receipt of such claim, will render a written decision to the claimant on the claim. If the claim is denied, in whole or in part, such decision will include the reason or reasons for the denial; a reference to the Plan provisions on which the denial is based; a description of any additional material or information, if any, necessary for the claimant to perfect his or her claim; an explanation as to why such information or material is necessary; and an explanation of the Plan’s claim procedure.
(C)	The claimant may file with the Administrator, not later than 60 days after receiving the Administrator’s written decision, a written notice of request for review of the Administrator’s decision, and the claimant or his or her representative may thereafter review relevant Plan documents which relate to the claim and may submit written comments to the Administrator.
(D)	Not later than 60 days after receipt of such review request, the Administrator will render a written decision on the claim, which decision will include the specific reasons for the decision, including a reference to the Plan’s specific provisions where appropriate.
(E)	The foregoing 90 and 60-day periods during which the Administrator must respond to the claimant may be extended by up to an additional 90 or 60 days, respectively, if special circumstances beyond the Administrator’s control so require and notice of such extension is given to the claimant prior to the expiration of such initial 90 or 60-day period, as the case may be.
(F)	A claimant must exhaust the procedure described in this section before making any claim of entitlement to benefits pursuant to the Plan in any court or other proceeding.

13

ARTICLE 7
Miscellaneous

7.1   Withholding and Offsets. The Participating Employers and the Trustee retain the right to withhold from any compensation or benefit payment pursuant to the Plan any and all income, employment, excise and other tax as the Participating Employers or Trustee deem necessary in connection with any benefits earned or paid pursuant to the Plan and the Participating Employers may offset against amounts payable to any person under the Plan any amounts then owing to the Participating Employers by such persons.

7.2   Other Benefits. No amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of a Participating Employer unless otherwise expressly provided thereunder.

7.3   No Warranties Regarding Tax Treatment. The Participating Employers make no warranties regarding the tax treatment to any person of participation in the Plan or any action or omission of the Participating Employer or Participant in connection therewith and each Participant will hold the Administrator and the Participating Employers and their officers, directors, employees, agents and advisors harmless from any liability resulting from any tax position taken in good faith in connection with the Plan.

7.4   No Employment Rights Created. Neither the establishment of or participation in the Plan gives any employee a right to continued employment or limits the right of any Affiliated Organization to discharge, transfer, demote or modify the terms and conditions of employment or otherwise deal with any employee without regard to the effect such action might have on his or her with respect to the Plan.

14

EX-10.26

Exhibit 10.26

Portions of this exhibit have been omitted and filed separately pursuant to an application for confidential treatment filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

Omissions are designated as [****].

Station License Agreement to Receive and Use Arbitron Radio Listening Estimates

Date of Proposal: December 2, 2004

THIS AGREEMENT is between Arbitron Inc., a Delaware corporation (“Arbitron”), and the undersigned radio broadcaster (“Station”), a Nevada corporation. Arbitron hereby grants to Station, for the radio stations listed below, a limited license to receive and use Arbitron data and listening estimates (“Arbitron Data” or “Data”) for the survey(s) and for the geographic area (“Market”) described in Section 1. This license is personal, nontransferable and nonexclusive. Such Arbitron Data may be furnished to Station in printed or other form (“Reports”), at Arbitron’s option, but title thereto will remain with Arbitron at all times.

1. Services Provided; Term: This Agreement shall become effective when countersigned by Arbitron’s Contract Manager and shall be for a period of    *     years    *     months beginning and ending on the dates described below (the “Term”). This Agreement will continue without regard to Station’s ownership of the radio station(s) licensed hereunder absent a valid Assignment pursuant to Section 11 of this Agreement.

Broadcaster (“Station”): Clear Channel Communications

For use only by radio station(s): *See Attached Schedule 1

Arbitron Radio Geographic Area (“Market”): *See Attached Schedule 1

Term begins  *       ; ends  *       .

Number of surveys currently provided during first Term year:  *       .

Reports currently
licensed hereunder:  o Spring  o Fall  o Winter  o Summer

First Report: *See Attached Schedule 1

Number of printed copies currently provided: 20

All representations in this Section regarding number of surveys, number of printed copies and Report titles are subject to qualifications set forth in Section 6(a) herein.

2. Annual Rate:

A License Charge in the form of a Net Annual Rate for each year of the Term, which may be subject to adjustments and discounts pursuant to Sections 3, 4, 6, 11 and 16 of this Agreement, shall be paid by Station, with the first of * payments (the “Periodic Charge” or “Charge”) due on  *      

The Gross Annual Rate for the first Term year is $ *See Schd. 1      .

For each succeeding Term year, the Gross Annual Rate shall be the Gross Annual Rate for the previous Term year increased by a factor of   *    percent. Any applicable discounts or other adjustments will be applied thereafter to the Gross Annual Rate so derived.

3. Discounts:

(a) Continuous Service Discount: A discount of ten percent (10%) in calculating the Periodic Charge shall be allowed for each month in excess of twelve (12) consecutive months that Station is continuously licensed to use the Arbitron Data for this Market, provided that such discount shall no longer apply if Station fails to sign and return this Agreement to Arbitron within forty-five (45) days after the termination of a prior Arbitron radio listening estimates License Agreement.

(b) Group Discount: If Station owns two or more radio stations located in different markets and such radio stations are under common ownership as defined by Arbitron, Station may be entitled to a Group Discount based on the number of subscribing radio stations owned at the time this Agreement is executed, which discount may vary and be adjusted during the Term of this Agreement in accordance with Arbitron’s Group Discount Schedule should the number of subscribing commonly owned radio stations change.

(c) Long-Term Discount: A discount of

[****] % in months 1-12,	[****] % in months 13-24,
[****] % in months 25-36,	[****] % in months 37-48,
* % in months 49-60,	* % in months 61-72,
* % in months 73-84

shall be allowed in calculating the Net Annual Rate charged during the applicable months.

4. Periodic Charge;Taxes: The Periodic Charge, due and payable by Station on the first day of each billing period, shall be: (a) the Gross Annual Rate plus any adjustments; (b) less any applicable Continuous Service Discount; (c) less, from the amount thereby derived, any applicable Group Discount; (d) less, from the amount thereby derived, any applicable Long-Term Discount; (e) with such amount prorated equally between the number of payments for the Term year.

In addition to and together with the above payments, Station shall pay to Arbitron any sales, excise, gross-receipts, service, use or other taxes, however designated, now or hereafter imposed upon or required to be collected by Arbitron by any authority having jurisdiction over the Market being surveyed or over any location to which Station directs Arbitron to deliver Data, or by any other taxing jurisdiction.

5. Late Payment Charge and Right to Suspend Report Delivery or Terminate License:

(a) A late payment charge of one and one-half percent (1.5%) per month will be charged on all Periodic Charges, as adjusted, which are not paid within 60 days after due hereunder, but in no event will the applicable per-month late payment charge exceed one-twelfth of the maximum annual percentage allowed to be charged by applicable state usury law. Any failure to impose a late payment charge shall not prejudice Arbitron’s right to do so should the default continue or should a subsequent payment not be made when due.

(b) In the event Station is in default in its payment obligations hereunder, and in addition to Arbitron’s right to impose a late payment charge, Arbitron may, with respect to this Agreement and/or any other agreement for Station’s use of services licensed by Arbitron in this Market or an adjacent market, and without terminating, breaching or committing a default under this Agreement or such other agreements: (i) accelerate or modify in any way the payment schedule of Periodic Charges for the duration of this Agreement or such other agreement(s) to a number of installments to be determined by Arbitron in its discretion; and/or (ii) suspend delivery to Station of any Data or Report(s), in any form, which are due until such time as Station is current in its payments of all sums due; and/or (iii) send Station written notice that Station’s license hereunder is suspended, in which case Station further expressly agrees that it thereafter shall not use Data and/or Reports previously received by Station until such time as Station becomes current in its payments of all sums due for services licensed by Arbitron.

(c) In the event Station is in default in its payment obligations under this Agreement or under any other agreement for Station’s use of services licensed by Arbitron in this Market or an adjacent market, then Arbitron may exercise any or all of its rights set forth in Section 5(b) of this Section 5 with respect to any such agreement entered into with Arbitron by Station or any of Station’s affiliated, subsidiary or related corporations or entities regardless of whether such other agreements are in default. For purposes of this Section 5(c), a corporation or entity shall be deemed to be affiliated with or related to Station if (i) such corporation or entity owns or controls more than a fifty percent (50%) interest in Station and/or it enters or has entered into any management agreement, joint operating agreement or other business relationship with Station; or (ii) Station owns or controls more than a fifty percent (50%) interest in such corporation or entity and/or it enters or has entered into any management agreement, joint operating agreement or other business relationship with such corporation or entity; or (iii) a third party owns or controls more than a fifty percent (50%) interest in, and/or enters or has entered into, any management agreement, joint

© 2003 Arbitron Inc.		JH LP
KPER-UNI 10/03 r2		Initials here

operating agreement or other business relationship with both Station and such corporation or entity.

(d) Arbitron’s suspension hereunder of delivery of Data and/or Reports to Station, and of this License, shall not relieve Station of any of its obligations hereunder. Station further agrees to reimburse Arbitron for all collection costs and expenses (including reasonable attorneys’ fees) incurred hereunder. This license may be terminated immediately by Arbitron should Station or its station(s) default in payment of any sum due or should Station or its station(s) default in any other condition or obligation of this Agreement and/or any other agreement for Station’s use of services licensed by Arbitron.

6. Changes in Service; Modification of Rates:

(a) Arbitron reserves the right to change at any time the geographical territory comprising any Market, its policies and procedures, survey dates, survey length, survey frequency, sampling procedures, delivery schedules, methodology, method of Data or Report collection or delivery, provision of printed copies of Reports, Report content, Report titles, Report format, or any other aspect of the Data and Reports provided hereunder, and to cancel surveys and the preparation of Arbitron Data and Reports or any other aspect of the Data services provided.

Arbitron reserves the right not to publish any Data or Reports whenever, in its judgment, insufficient data are available to meet its minimum research standards or any event has jeopardized the reliability of the data. In the event that Data and/or Reports are not published, Station shall receive a credit reflecting the pro rata value of the Net Annual Rate for said Data and/or Report(s). Without limiting the foregoing, Station expressly understands and agrees that Arbitron may, at any time during the Term of this Agreement, reduce the number of surveys conducted and/or Reports published for any Market and consequently reduce the number of Reports provided to Station and that, in the event such reduction occurs, Station is not relieved of any of its obligations under this Agreement.

(b) In the event that any cause(s) prevents Arbitron from conducting any survey in accordance with its methodology, schedules or other publications, Arbitron reserves the right to publish abbreviated Report(s). Station hereby consents to publication of such abbreviated Report(s) under such circumstances. In the event that such an abbreviated Report covers a substantially decreased geographic area, or deletes twenty-five percent (25%) or more of the survey days from the aggregate number of days scheduled, Station shall be entitled to either a proportionate credit for the abbreviated Report, or, upon return of the abbreviated Report within 10 days, a full credit for the abbreviated Report, at Station’s option, provided however, that if Station elects to return an abbreviated Report for full credit, Station shall no longer be licensed to use that Report during the remainder of the Term of this Agreement. Further, Arbitron reserves the right in its sole discretion to augment available data by means of expanded or extended samples and Station agrees it shall not be entitled to any credit in such event.

(c) Arbitron may increase the Gross Annual Rate hereunder at any time. If Arbitron increases the Rate for a reason other than as permitted elsewhere in this Agreement, it shall give prior written notice to Station. Station may, within a 30-day period following such notice, cancel the unexpired Term of the Agreement for only the Data and/or Reports and/or services and Market for which Arbitron has increased its Rate pursuant to such notice, by written notice pursuant to Section 15(a), without cancellation charge or other cost, effective on the date the new Gross Annual Rate would have become effective. In the absence of such timely cancellation, this Agreement shall continue and the new Gross Annual Rate shall become payable as stated in Arbitron’s notice and thereafter.

7. Permitted Uses and Confidentiality: Subject to the restrictions stated herein and to the permitted uses set forth in Arbitron’s publication entitled Working with Arbitron’s Copyrighted Estimates available to all Arbitron licensees and posted on Arbitron’s Web site at www.arbitron.com, Station agrees to limit its uses of the Arbitron Data and Report(s) to its programming and media selling. Station understands and agrees that this use is limited exclusively to the radio station(s) specified in Section 1 of this Agreement and only for

the Term of this Agreement. In this connection, Station agrees that the Arbitron Data and/or Report(s) will only be disclosed:

(a) directly or through its Station representatives to advertisers, prospective advertisers and their agencies for the purpose of obtaining and retaining advertising accounts; and

(b) through advertising or other promotional literature as permitted hereunder.

All such disclosures shall identify Arbitron as the source of the disclosed Arbitron Data and/or Report(s) and should identify the Market, survey period and type of audience estimate, daypart and survey area and shall state that the Arbitron Data and/or Report(s) quoted therein are copyrighted by Arbitron and are subject to all limitations and qualifications disclosed in the Data and/or Report(s) (“Sourcing”).^* At all times during the Term of this Agreement and thereafter, Station agrees to keep the Arbitron Data and/or Report(s) confidential and not to disclose the same except as permitted by this Agreement. Station agrees to use its best efforts to prevent the unauthorized disclosure of Arbitron Data and/or Report(s) by Station’s employees and/or its radio station(s)’s employees and agents, by its radio station(s)’s representatives, by its advertisers and their advertising agencies, by data processing firms, and by all other persons who obtain the Arbitron Data and/or Reports from Station or its radio station(s)’s employees or agents. For Station or its radio station(s) to divulge any Arbitron Data and/or Report(s) to a nonsubscribing station or to lend and/or give an original copy or any reproduction of any part of any Data and/or Report(s) or any Arbitron Data and/or Reports to any person or entity not authorized by this Agreement constitutes a breach of this Agreement and an infringement of Arbitron’s copyright.

In the event that a Report listed in Section 1 of this Agreement is delivered after the expiration of the Term of this Agreement, Station’s license to use that Report shall continue under the terms and conditions of this Agreement until the release of the next survey Report in the applicable licensed Market.

Station may authorize a third party to process the Data licensed hereunder on Station’s behalf, provided: (1) that said third party is a then current Arbitron licensee in good standing who is authorized to process the Data and (2) that all restrictions concerning the use of the Data provided under this Agreement shall apply with full force and effect to any data, estimates, reports or other output, in any form, containing or derived from the Data, produced by said third party for Station.

8. Confidentiality of Arbitron Respondents: Station agrees that it will not try either before, during or after a survey, or in connection with any litigation, to determine or discover the identity or location of any Arbitron survey participant. Station will under no circumstances directly or indirectly attempt to contact any such persons. Station agrees to promptly report to Arbitron any evidence or indication that has come to Station’s attention regarding the identity or location of any such persons. Station agrees to abide by Minimum Standard A9 (or any successor provision concerning confidentiality of survey respondents) of the Media Rating Council and shall abide by any determination of the Media Rating Council concerning respondent confidentiality. Station further agrees that Arbitron may enjoin any breach of the above-stated obligations and shall have the right to damages or other remedies (including costs, expenses and reasonable attorneys’ fees) available to it at law or hereunder.

9. Methodology: ARBITRON MAKES NO WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS, CONCERNING:

(A) DATA GATHERED OR OBTAINED BY ARBITRON FROM ANY SOURCE;

(B) THE PRESENT OR FUTURE METHODOLOGY EMPLOYED BY ARBITRON IN PRODUCING ARBITRON DATA AND/OR REPORT(S); OR

(C) THE ARBITRON DATA AND/OR REPORT(S) LICENSED HEREUNDER.

^* Station(s) should refer to current regulations and guidelines of the federal government for further requirements concerning the manner of quoting audience estimates.

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ALL ARBITRON DATA AND/OR REPORT(S) REPRESENT ONLY THE OPINION OF ARBITRON. RELIANCE THEREON AND USE THEREOF BY STATION IS AT STATION’S OWN RISK.

IN NO EVENT SHALL ARBITRON BE LIABLE FOR THE FAILURE OF ANY THIRD PARTY TO PROVIDE ANY DATA OR SERVICES FOR USE IN CONNECTION WITH THE DATA AND/OR REPORTS LICENSED HEREUNDER.

10. Liabilities and Limitations of Remedies: THE SOLE AND EXCLUSIVE REMEDY, AT LAW OR IN EQUITY, FOR ARBITRON’S AND/OR ANY THIRD PARTY DATA AND/OR SERVICE PROVIDER’S BREACH OF ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS, AND THE SOLE AND EXCLUSIVE REMEDY FOR ARBITRON’S AND/OR ANY THIRD PARTY DATA AND/OR SERVICE PROVIDER’S LIABILITY OF ANY KIND, INCLUDING WITHOUT LIMITATION LIABILITY FOR NEGLIGENCE OR DELAY WITH RESPECT TO THE ARBITRON DATA AND/OR REPORTS AND ALL PERFORMANCE PURSUANT TO THIS AGREEMENT, SHALL BE LIMITED TO A CREDIT TO LICENSEE OF AN AMOUNT EQUAL TO, AT THE MAXIMUM AMOUNT, THE LICENSE CHARGE PAID BY LICENSEE WHICH IS ATTRIBUTABLE TO THE MATERIALLY AFFECTED DATA OR REPORT. IN NO EVENT SHALL ARBITRON AND/OR ANY THIRD PARTY DATA AND/OR SERVICE PROVIDER BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, NOR SHALL THEY BE SUBJECT TO INJUNCTIVE RELIEF WITH RESPECT TO THE PUBLICATION OF ANY DATA AND/OR REPORT. STATION UNDERSTANDS THAT THE DATA AND/OR REPORTS EITHER WOULD NOT BE PREPARED OR WOULD BE AVAILABLE ONLY AT A SUBSTANTIALLY INCREASED LICENSE CHARGE WERE IT NOT FOR THE LIMITATIONS OF LIABILITIES AND REMEDIES AS SET FORTH IN THIS SECTION.

Station agrees that it will notify Arbitron in writing of any alleged defect in any Data and/or Report within thirty (30) days after Station learns of said alleged defect. In the event that Station does not timely notify Arbitron, then Station waives all rights with regard to said alleged defect. Station further agrees that any action to be brought by it concerning any Data and/or Report shall be brought not more than one (1) year after such Data or Report was originally published by Arbitron.

In the event that either party commences litigation against the other party and fails to ultimately prevail on the merits of such litigation, the commencing party shall reimburse and indemnify the other party from any and all costs and expenses incurred with respect to such litigation, including reasonable attorneys’ fees, provided, however, that this sentence shall not apply where Arbitron commences litigation pursuant to Sections 5, 7 or 8 of this Agreement. This provision shall survive the termination of this Agreement.

11. Assignments and Changes in Station Status: Station may not assign either its rights or obligations under this Agreement without the prior written consent of Arbitron. Subject to Arbitron’s consent, a successor-in-interest by merger, operation of law, assignment, purchase or otherwise of the entire business of Station shall acquire all rights and be subject to all obligations of Station hereunder. In the event that Arbitron consents to the assignment of this Agreement, Arbitron reserves the right to redetermine the rate to be charged to the assignee in accordance with the terms of this Agreement. Arbitron shall be entitled to assign any of its rights or obligations under this Agreement, including the right to receive License Charge payable hereunder.

Station acknowledges and agrees that the License Charge due and the adjustments and discounts applied hereunder are based on Station’s group ownership status and/or any joint operating agreement with one or more other radio stations and/or Station’s ownership of radio stations in this Market or other Markets. In the event Station conveys any one of its radio stations, Station remains fully obligated for the License Charge specified for any radio station covered by the terms of this Agreement. Station may only be released from such obligations upon valid assignment of this Agreement and subject to the terms thereof.

Station agrees that if at any time it changes or has changed its ownership, operating or sales policy, frequency, broadcasting

arrangements, group or business relationships of the station(s) licensed under this Agreement, or if it enters or has entered into any management or other business relationship with another radio station in any Market and/or its adjacent Market(s), or if it enters or has entered into any joint operating agreement with one or more other radio stations, or if it is or was purchased or controlled by an entity owning or otherwise controlling other radio stations in any Market and/or its adjacent Market(s), or if it purchases, or an entity which is in any manner controlled by it purchases, at any time, another radio station in any Market or its adjacent Market(s), Station and its radio station(s) will report the change and the effective date thereof to Arbitron within thirty (30) days of such change. In the event of such occurrence, Station agrees that such station(s) shall be licensed under this Agreement and that Arbitron may redetermine the Gross Annual Rate for the Data, Reports, and/or services pursuant to the then current Arbitron rate card in order to license such additional station(s), effective the first month following the date of the occurrence. Notwithstanding Station’s failure to notify Arbitron, pursuant to the provisions of this Section 11, Arbitron may redetermine Station’s Gross Annual Rate for all Data, Reports, and/or services, based on the foregoing, effective the first month following the date of the occurrence.

Station further agrees that if the parent company or other controlling entity of Station, or any entity in any manner related to Station, purchases or otherwise acquires a controlling interest in a radio station in Station’s Market that is not licensed by Arbitron for the same Data, Reports and/or services, then Arbitron may redetermine Station’s Gross Annual Rate based on such occurrence as described in this Section 11.

In the event Arbitron increases Station’s Gross Annual Rate as a result of an occurrence as described in this Section, then Arbitron shall amend this Agreement to permit use of the Data, Reports and/or services by the additional radio station(s) prompting the increase.

12. Other Arbitron Services and Reports : If, during the Term of this Agreement, Station orders any Arbitron services or report(s) not licensed through any other Arbitron agreement, Station hereby agrees that this Agreement shall be applicable with respect to all such services and/or reports with the same force and effect as if printed out at length in a separate agreement executed by Station.

13. Ratings Distortion Activity:

(a) Station agrees that it shall not engage in any activities which are determined by Arbitron to be ratings distortion. Such prohibited activities may include, but are not limited to, activities which could:

(i) cause any survey participant to record erroneous listening information in his or her Arbitron diary; or

(ii) cause any survey participant to utilize an Arbitron diary for a contest or promotion conducted by Station or its radio station(s).

(b) Station further agrees that Arbitron may delete all estimates of listening to Station and/or its radio station(s) from any Data, Reports, computer tape and/or other Arbitron service or method of delivery where, in its judgment it has deemed that Station or its radio station(s) has engaged in such activities. Arbitron shall:

(i) first give Station and its radio station(s) notice setting forth what activities it deems Station and its radio station(s) have engaged in which allegedly could cause or have caused ratings distortion;

(ii) present evidence to substantiate the allegations set forth in (i) above; and

(iii) give Station and its radio station(s) reasonable opportunity (in light of Arbitron’s publication schedule for any Report) to present its position both in writing and orally.

In the event that Station or its radio station(s) is notified by Arbitron that allegations of ratings distortion have been made against Station or its radio station(s), then Station or its radio station(s) shall submit a written response to Arbitron’s inquiry concerning the allegations within seven (7) days from the receipt of Arbitron’s notice, which time may be shortened by Arbitron for reasons relating to the Report publication schedule. Arbitron shall then advise Station or its radio station(s) of its decision following its receipt of Station’s or its radio station(s)’ written response or oral presentation. All such writings shall be addressed and

KPER-UNI 10/03 r2 3             JH  LP
Initials here

sent to the respective party by facsimile, overnight courier service, or certified mail with return receipt requested. In the event that estimates of listening to Station and/or its radio station(s) are deleted from a Report(s) (and/or other Arbitron services) following the procedure set forth above, Station and its radio station(s) agree that the only remedy for such deletion shall be a credit of the License Charge paid by Station for such Report(s) or other affected services and that in no event shall Arbitron be liable for special, incidental, consequential or punitive damages or be subject to injunctive relief with respect to any such deletion of estimates of listening to Station and/or its radio station(s). In the event that estimates of listening to Station and/or its radio stations are deleted from a Report pursuant to this Section, Arbitron agrees that it will give Station and its radio station(s) an opportunity to submit to Arbitron a written statement (not exceeding 200 words) of Station’s and/or its radio station(s)’s views concerning its alleged activities, with such written statement to be published in the Report subject to such reasonable editing deemed necessary by Arbitron. In addition, Station and its radio station(s) agree to abide by the Arbitron policies and procedures governing various special station activities, including, but not limited to, rating bias.

14. Information to be Provided by Station and Its Radio Station(s): Station and its radio station(s) agree to provide to Arbitron, within ten (10) days of receipt of Arbitron’s request, such information which Arbitron deems necessary for the publication of a Report, including, but not limited to, accurate descriptions of the following information for Station and its radio station(s): (a) facilities; (b) broadcast station names; (c) broadcast hours; (d) simulcast hours; (e) radio frequency; (f) operating power; (g) format; (h) height of antenna above average terrain; and (i) programming information. Station and its radio station(s) further understand and agree to notify Arbitron of any changes to the above-referenced information. Station and its radio station(s) hereby hold Arbitron harmless and agree to indemnify Arbitron from and against any and all loss, cost or expense (including reasonable attorneys’ fees) arising out of any omission or error in information provided, or the failure to provide such information to Arbitron by Station and its radio station(s) pursuant to this Section.

15. General:

(a) All notices to either party shall be in writing and shall be directed to the addresses stated hereafter unless written notice of an address change has been provided.

(b) This Agreement shall be deemed to be an agreement made under, and to be construed and governed by, the laws of the State of New York, exclusive of its choice of law rules. The parties expressly agree that any and all disputes arising out of or concerning this Agreement or the Arbitron Data or Reports licensed hereunder shall be litigated and adjudicated exclusively in State and/or Federal Courts located in either the State of New York or the State of Maryland, at Arbitron’s option, and each party consents to and submits to both such jurisdictions.

(c) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof, notwithstanding any previous discussions and understandings; and shall not be deemed to have been

modified in whole or in part except by written instruments signed hereafter by officers of all of the parties or other persons to whom the parties have delegated such authority.

(d) Any litigated question regarding the legality, enforceability or validity of any section or part hereof shall not affect any other section, and if any section or part hereof is ultimately determined illegal, invalid, unconstitutional or unenforceable, that section or part hereof shall be severed from this Agreement and the balance of the Agreement shall thereafter remain in full force and effect for the remainder of the Term.

(e) In addition to the rights of termination stated elsewhere in this Agreement, this Agreement, and the license provided hereunder, may be terminated by Arbitron for any or all of the Data, Reports and/or services in any or all of the Markets in which they are licensed, for any reason, on thirty (30) days’ written notice to Station. Station agrees that this Agreement shall continue for the markets and services not named in such notice.

(f) The provisions governing payment of taxes, confidentiality of the Data and Reports, and confidentiality of respondents shall survive the termination of this Agreement.

16. Calculation of License Charges:

Individual Station Gross Annual Rate: Percent:

Station *	$*	*
Station	$
Station	$
Station	$
Station	$
Station	$
Station	$
Station	$
Station	$
Station	$

First Term Year Gross Annual Rate (Combined):	$	*
LESS DISCOUNTS (Per Section 3):
X Continuous Service (10%):	$	*
X Group (at beginning of Term)
o 10%    o 7.5%    o 5%    o 2.5%	$	*
X Long-Term Discount:
[****] % in months 1-12
(see Section 3(c) above)	$	*
	$	*
FIRST TERM YEAR NET ANNUAL RATE:	$	*

Station further understands and agrees that the Net Annual Rate payable during any Term year subsequent to the first Term year will vary in accordance with an applicable Group Discount, any other applicable discount, or any adjustment as specified in Sections 2, 3, 4, 6 and 11 of this Agreement.

AGREED TO:

Clear Channel Communications

BROADCASTER (“STATION”)

*See Attached Schedule 1

FOR USE ONLY BY STATION(S)

200 E Basse Road

ADDRESS

San Antonio	TX		78209
CITY	STATE	ZIP

/S/ JOHN HOGAN

BY (AUTHORIZED SIGNATURE)

John Hogan

NAME (TYPE OR PRINT NAME OF PERSON SIGNING ABOVE)

CEO/Radio Division	12/20/2004
TITLE	DATE

ACCEPTED BY:

/S/ LAURA PIOSO

CONTRACT MANAGER

12/27/04

DATE

Arbitron Inc.

9705 Patuxent Woods Drive

Columbia, Maryland 21046-1572

*See Attached Schedule 1

KPER-UNI 10/03 r2 4

Exhibit 10.26

ADDENDUM ONE

     This is Addendum One to the “Station License Agreement to Receive and Use Arbitron Radio Listening Estimates” dated December 27, 2004 between Clear Channel Communications, Inc. (hereinafter referred to as “Clear Channel”) for use by its Radio Station(s) listed on Schedule “A” (hereinafter referred to as “Station(s)”) and Arbitron Inc. (hereinafter referred to as “Arbitron”), for a Term commencing January 1, 2005 ending December 31, 2008 **(hereinafter referred to as the “Agreement”) and an Addendum to the “Arbitron Supplementary Services (“Specials”) License Agreement,” the “Radio Station License Agreement to Receive and Use the Arbitron Retail Direct Service,” the “License to Receive and Use Scarborough Reports,” the “Arbitron Network License Agreement to Receive and Use the Arbitron Radar Service”, the “Arbitron Network License Agreement to Receive and Use the Arbitron Nationwide Service” and the “License Agreement to Use the Tapscan Services,” all of the same date above referenced.

The parties agree as follows:

1. This is an overview of the material financial terms of the above referenced agreements. In the event of any inconsistency, the terms of the separate documents titled “Addendum” and Schedule ‘A’ to the Arbitron License Agreements shall control.

2. The services licensed under the above agreements are as follows:

					Subsequent Years’
			Initial Annual		Percentages of
Services	Term Period **		Payment *		Annual Increase
Radio Market Report Service for Stations, including Radio Market Report, Maximi$er, Arbitrends, PD Advantage, National Regional Database, Sample Surcharge, RetailDirect## and Tapscan Software***		1/1/05 – 12/31/08	$	54,000,000	[****]% over preceding year’s fee
Replacement contracts for existing services to stations, networks and radio representative firms, including Radio Market Report, Maximi$er, Arbitrends, PD Advantage, Scarborough, Radar, Nationwide and National Regional Database		1/1/05 – 12/31/08	$	4,500,000	[****]% over preceding year’s fee
Scarborough		1/1/05 – 12/31/08	$	3,400,000	[****]% over preceding year’s fee

*	Indicates Initial Annual Payment commencing with start of term period as indicated. Additional terms relating to the services licensed under the above agreements, including data access fees, are set forth in a separate document titled “Addendum” to the above agreements.
**	Certain agreements may extend to 3/31/09 or 6/30/09 in certain circumstances, including for two book markets.
***	Subject to early termination in 2006 under certain circumstances as set forth in the separate document titled “Addendum” to the above agreements.
##	RetailDirect percentage of annual increase is [****]% over preceding year’s fees; Sample Surcharge percentage of annual increase is generally flat.

EX-21

Exhibit 21

ARBITRON INC.

SUBSIDIARIES

	State or Other
Subsidiaries and Their Affiliates:	Jurisdiction of Incorporation
Arbitron Holdings Inc.	Delaware
CSW Research Limited (1)	United Kingdom
Euro Fieldwork Limited (2)	United Kingdom
Ceridian Infotech (India) Private Limited	India
Audience Research Bureau S.A. de C.V.	Mexico

(1)	CSW Research Limited is a subsidiary of Arbitron Holdings, Inc.
(2)	Euro Fieldwork Limited is a subsidiary of CSW Research Limited.

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Arbitron Inc.:

We consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-82522) and Registration Statements on Form S-8 (File Nos. 33-49601, 33-61551, 33-34035, 2-9757, 33-56833, 33-54379, 33-56325, 33-62319, 33-64913, 333-01793, 333-01887, 333-03661, 333-28069, 333-58143, 333-58145, 333-66643, 333-50757, 333-83455, 333-89565, 333-39384, 333-56296, 333-56826 and 333-85492) of Arbitron Inc. of our reports dated March 3, 2005, with respect to the consolidated balance sheets of Arbitron Inc., as of December 31, 2004 and 2003 and the related consolidated statements of income, stockholders’ equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 2004 and the related financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of Arbitron Inc.

Baltimore, Maryland
March 8, 2005

EX-24

Exhibit 24

POWER OF ATTORNEY

     The undersigned, a Director of Arbitron Inc. (the “Company”), a Delaware corporation, does hereby make, nominate and appoint WILLIAM J. WALSH and DOLORES L. CODY, and each of them, to be my attorney-in-fact for six months from the date hereof, with full power and authority to execute for and on behalf of the undersigned the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended; provided that such Form 10-K is first reviewed by the Audit Committee of the Board of Directors of the Company and by my attorney-in-fact, and his/her name, when thus signed, shall have the same force and effect as though I had manually signed such Form 10-K.

     I have signed this Power of Attorney as of February 23, 2005.

/s/ Alan W. Aldworth

Alan W. Aldworth

/s/ Erica Farber

Erica Farber

/s/ Kenneth F. Gorman

Kenneth F. Gorman

/s/ Philip Guarascio

Philip Guarascio

/s/ Larry E. Kittelberger

Larry E. Kittelberger

/s/ Luis G. Nogales

Luis G. Nogales

/s/ Lawrence Perlman

Lawrence Perlman

/s/ Richard A. Post

Richard A. Post

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Stephen B. Morris, President and Chief Executive Officer of Arbitron Inc., certify that:

      1. I have reviewed this annual report on Form 10-K of Arbitron Inc.;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

      (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Stephen B. Morris

Stephen B. Morris

President and Chief Executive Officer

Date: March 8, 2005

EX-31.2

Exhibit 31.2

CERTIFICATION

I, William J. Walsh, Executive Vice President of Finance and Planning and Chief Financial Officer of Arbitron Inc. certify that:

      1. I have reviewed this annual report on Form 10-K of Arbitron Inc.;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

      (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ William J. Walsh

William J. Walsh

Executive Vice President of Finance and

Planning and Chief Financial Officer

Date: March 8, 2005

EX-32.1

Exhibit 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer and the Chief Financial Officer of Arbitron Inc. (the “Company”), each hereby certifies that, to his knowledge, on the date hereof:

(a)	the Annual Report on Form 10-K of the Company for the year ended December 31, 2004 filed on the date hereof with the Securities and Exchange Commission (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(b)	the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen B. Morris
Stephen B. Morris
Chief Executive Officer
Date: March 8, 2005

/s/ William J. Walsh
William J. Walsh
Chief Financial Officer
Date: March 8, 2005