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As filed with the Securities and Exchange Commission on August 28, 2008
File No. 000-53280
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 6
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
Ascent Media Corporation
(exact name of registrant as specified in its charter)
     
Delaware   26-2735737
(State of incorporation
or organization)
  (I.R.S. Employer
Identification No.)
     
12300 Liberty Blvd.
Englewood, CO

(Address of principal
executive offices)
  80112
(Zip Code)
Registrant’s telephone number, including area code: (720) 875-5622
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Series A Common Stock, $0.01 par value
(Title of class)
Series B Common Stock, $0.01 par value
(Title of class)
Series A Preferred Share Purchase Rights
(Title of class)
Series B Preferred Share Purchase Rights
(Title of class)
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer oAccelerated filer o Non-accelerated filer þ
(Do not check if a smaller reporting company)
Smaller reporting company o
 
 


TABLE OF CONTENTS

SIGNATURES
EXHIBIT INDEX
Information Statement


Table of Contents

Ascent Media Corporation
     Our Information Statement is filed as Exhibit 99.1 to this Form 10. For your convenience, we have provided below a cross-reference sheet identifying where the items required by Form 10 can be found in the Information Statement.
         
Item        
No.   Item Caption   Location in Information Statement
 
       
1.
  Business.   Summary; Risk Factors; Cautionary Statement Concerning Forward Looking Statements; The Spin-Off; Selected Financial Data; Management’s Discussion and Analysis of Financial Condition and Results of Operations; Description of Our Business; and Certain Inter-Company Agreements
 
       
1A.
  Risk Factors.   Risk Factors
 
       
2.
  Financial Information.   Summary; Risk Factors; Capitalization; Selected Financial Data; and Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
       
3.
  Properties.   Description of our Business—Properties
 
       
4.
  Security Ownership of Certain Beneficial Owners and Management.   Management—Security Ownership of Management; and Security Ownership of Certain Beneficial Owners
 
       
5.
  Directors and Executive Officers.   Management
 
       
6.
  Executive Compensation.   Management; and Executive Compensation
 
       
7.
  Certain Relationships and Related Transactions.   Summary; Risk Factors; Management; Certain Relationships and Related Party Transactions; and Certain Inter-Company Agreements
 
       
8.
  Legal Proceedings.   Description of our Business—Legal Proceedings
 
       
9.
  Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.   Summary; The Spin-Off; Risk Factors; and Description of our Capital Stock
 
       
10.
  Recent Sales of Unregistered Securities.   Not Applicable
 
       
11.
  Description of Registrant’s Securities to be Registered.   Description of our Capital Stock
 
       
12.
  Indemnification of Directors and Officers.   Indemnification of Directors and Officers
 
       
13.
  Financial Statements and Supplementary Data.   Summary; Selected Financial Data; and Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item        
No.   Item Caption   Location in Information Statement
 
       
14.
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.   Not Applicable
 
       
15.
  Financial Statements and Exhibits.    
(a)   Financial Statements: The following financial statements are included in the Information Statement and filed as part of this Registration Statement:
 
    Ascent Media Corporation
 
    Unaudited Condensed Pro Forma Combined Financial Statements
 
    Unaudited Condensed Pro Forma Combined Balance Sheet as of June 30, 2008
 
    Unaudited Condensed Pro Forma Combined Balance Sheet as of December 31, 2007
 
    Unaudited Condensed Pro Forma Combined Statement of Operations for the six months ended June 30, 2008
 
    Unaudited Condensed Pro Forma Combined Statement of Operations for the six months ended June 30, 2007
 
    Unaudited Condensed Pro Forma Combined Statement of Operations for the year ended December 31, 2007
 
    Unaudited Condensed Pro Forma Combined Statement of Operations for the year ended December 31, 2006
 
    Ascent Media Group
 
    Unaudited Condensed Combined Balance Sheets as of June 30, 2008 and December 31, 2007
 
    Unaudited Condensed Combined Statements of Operations and Comprehensive Loss for the six months ended June 30, 2008 and 2007
 
    Unaudited Condensed Combined Statements of Cash Flows for the six months ended June 30, 2008 and 2007
 
    Unaudited Condensed Combined Statement of Parent’s Investment for the six months ended June 30, 2008
 
    Notes to Condensed Combined Financial Statements (unaudited)
 
    Report of Independent Registered Public Accounting Firm
 
    Combined Balance Sheets as of December 31, 2007 and 2006
 
    Combined Statements of Operations and Comprehensive Loss for the years ended December 31, 2007, 2006 and 2005
 
    Combined Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
 
    Combined Statements of Parent’s Investment for the years ended December 31, 2007, 2006 and 2005
 
    Notes to Combined Financial Statements
 
(b)   Exhibits. The following documents are filed as exhibits hereto:
     
Exhibit Number   Exhibit Description
 
   
2.1
  Reorganization Agreement, dated as of June 4, 2008, among Discovery Holding Company, Discovery Communications, Inc., the Registrant, Ascent Media Group, LLC, and Ascent Media Creative Sound Services, Inc.*
 
   
2.2
  Purchase Agreement, dated as of August 8, 2008, by and among the Registrant, Ascent Media CANS, LLC and AccentHealth Holdings, LLC*
 
   
3.1
  Form of Amended and Restated Certificate of Incorporation of the Registrant to be in effect at the time of the spin-off*
 
   
3.2
  Form of Bylaws of the Registrant to be in effect at the time of the spin-off*
 
   
4.1
  Specimen Certificate for shares of Series A common stock, par value $.01 per share, of the Registrant*
 
   
4.2
  Specimen Certificate for shares of Series B common stock, par value $.01 per share, of the Registrant*
 
   
4.3
  Form of Rights Agreement, dated as of [_________], between the Registrant and Computershare Trust Company, N.A.*

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Exhibit Number   Exhibit Description
 
   
10.1
  Form of Services Agreement, dated as of [_________], 2008, between Ascent Media Group, LLC and Ascent Media Creative Sound Services, Inc.*
 
   
10.2
  Form of Tax Sharing Agreement, dated as of [_________], 2008, by and among Discovery Holding Company, Discovery Communications, Inc., Ascent Media Corporation, Ascent Media Group, LLC and Ascent Media Creative Sound Services, Inc.*
 
   
10.3
  Ascent Media Group, LLC 2006 Long-Term Incentive Plan (As Amended and Restated Effective August 15, 2008)*
 
   
10.4
  Ascent Media Group, LLC 2007 Management Incentive Plan*
 
   
10.5
  Form of Ascent Media Corporation 2008 Incentive Plan*
 
   
10.6
  Services Agreement, dated as of July 21, 2005, by and between Discovery Holding Company and Liberty Media Corporation (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of Discovery Holding Company filed on August 10, 2005).
 
   
10.7
  Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers*
 
   
10.8
  Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and William E. Niles*
 
   
10.9
  Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and George C. Platisa*
 
   
10.10
  Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
 
   
10.11
  Amendment, dated as of July 17, 2007, to Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
 
   
10.12
  Employment Agreement, dated as of February 11, 2008, by and between Ascent Media Group, LLC and Jose A. Royo*
 
   
21
  List of Subsidiaries*
 
   
99.1
  Information Statement, Subject to Completion, dated August 28, 2008
 
*   Previously filed.

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SIGNATURES
     Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 28, 2008
         
  ASCENT MEDIA CORPORATION
 
 
  By:   /s/ Charles Y. Tanabe  
    Name:   Charles Y. Tanabe  
    Title:   Senior Vice President  

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EXHIBIT INDEX
     
Exhibit Number   Exhibit Description
 
   
2.1
  Reorganization Agreement, dated as of June 4, 2008, among Discovery Holding Company, Discovery Communications, Inc., the Registrant, Ascent Media Group, LLC, and Ascent Media Creative Sound Services, Inc.*
 
   
2.2
  Purchase Agreement, dated as of August 8, 2008, by and among the Registrant, Ascent Media CANS, LLC and AccentHealth Holdings, LLC*
 
   
3.1
  Form of Amended and Restated Certificate of Incorporation of the Registrant to be in effect at the time of the spin-off*
 
   
3.2
  Form of Bylaws of the Registrant to be in effect at the time of the spin-off*
 
   
4.1
  Specimen Certificate for shares of Series A common stock, par value $.01 per share, of the Registrant*
 
   
4.2
  Specimen Certificate for shares of Series B common stock, par value $.01 per share, of the Registrant*
 
   
4.3
  Form of Rights Agreement, dated as of [______], between the Registrant and Computershare Trust Company, N.A.*
 
   
10.1
  Form of Services Agreement, dated as of [______], 2008, between Ascent Media Group, LLC and Ascent Media Creative Sound Services, Inc.*
 
   
10.2
  Form of Tax Sharing Agreement, dated as of [______], 2008, by and among Discovery Holding Company, Discovery Communications, Inc., Ascent Media Corporation, Ascent Media Group, LLC and Ascent Media Creative Sound Services, Inc.*
 
   
10.3
  Ascent Media Group, LLC 2006 Long-Term Incentive Plan (As Amended and Restated Effective August 15, 2008)*
 
   
10.4
  Ascent Media Group, LLC 2007 Management Incentive Plan*
 
   
10.5
  Form of Ascent Media Corporation 2008 Incentive Plan*
 
   
10.6
  Services Agreement, dated as of July 21, 2005, by and between Discovery Holding Company and Liberty Media Corporation (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of Discovery Holding Company filed on August 10, 2005).
 
   
10.7
  Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers*
 
   
10.8
  Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and William E. Niles*
 
   
10.9
  Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and George C. Platisa*
 
   
10.10
  Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
 
   
10.11
  Amendment, dated as of July 17, 2007, to Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
 
   
10.12
  Employment Agreement, dated as of February 11, 2008, by and between Ascent Media Group, LLC and Jose A. Royo*
 
   
21
  List of Subsidiaries*
 
   
99.1
  Information Statement, Subject to Completion, dated August 28, 2008
 
*   Previously filed.

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exv99w1
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Information contained herein is subject to completion or amendment. A registration statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission.
 
 
EXHIBIT 99.1
 
SUBJECT TO COMPLETION, DATED AUGUST 28, 2008
 
INFORMATION STATEMENT
 
ASCENT MEDIA CORPORATION
12300 Liberty Boulevard
Englewood, Colorado 80112
 
Series A Common Stock
(par value $0.01 per share)
Series B Common Stock
(par value $0.01 per share)
 
We are currently a subsidiary of Discovery Holding Company, which we refer to as “DHC.” We are a holding company and, through our operating subsidiaries, primarily engaged in the business of providing creative and network services to the media and entertainment industries in the United States, the United Kingdom and Singapore. DHC has determined to spin-off our company by distributing to DHC’s shareholders, as a dividend, all of our common stock. We are sending this information statement to you in connection with that spin-off.
 
For each share of DHC Series A common stock or DHC Series B common stock held by you as of 5:00 p.m., New York City time, on the record date for the distribution, you will receive 0.05 of a share of the same series of our common stock. If as a result of the foregoing ratio you would be entitled to a fraction of a share of our common stock, you will receive cash in lieu of a fractional share interest.
 
No vote of DHC’s shareholders is required to authorize or effectuate the spin-off. No action is required of you to receive your shares of our common stock.
 
The spin-off was approved by the board of directors of DHC in connection with a proposed transaction (which we refer to as the “Discovery Transaction”) between DHC and Advance/Newhouse Programming Partnership, pursuant to which DHC and Advance/Newhouse will combine their respective indirect interests in Discovery Communications, LLC, a leading global media and entertainment company. It is a condition to the spin-off that the agreement between DHC and Advance/Newhouse relating to the Discovery Transaction shall be in effect and that all conditions precedent to that transaction (other than the spin-off of our company and certain conditions to be satisfied at the closing thereof) shall have been satisfied or, to the extent waivable, waived. We expect the shares of our common stock will be distributed by DHC to you on the day the Discovery Transaction becomes effective, which we refer to as the distribution date. The spin-off will not occur unless DHC’s shareholders approve the Discovery Transaction.
 
There is no current trading market for our common stock. Subject to the consummation of the spin-off, we have applied to list our Series A common stock on the Nasdaq Global Market under the symbol “ASCMA”. Although no assurance can be given, we currently expect that our Series B common stock will trade on the OTC Bulletin Board under the symbol “ASCMB”.
 
In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 6.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
 
This information statement does not constitute an offer to sell or a solicitation of an offer to buy any securities.
 
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
 
The date of this information statement is [          ], 2008.


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SUMMARY
 
The following is a summary of material information discussed in this information statement. It is included for convenience only and should not be considered complete. You should carefully review this entire information statement, including the risk factors, to better understand the spin-off and our business and financial position.
 
Our Company
 
We are a holding company. Our primary assets and businesses consist of (i) 100% of the outstanding ownership interests of Ascent Media Group, LLC, a Delaware limited liability company (“Ascent Media”), which is engaged primarily in the business of providing creative and network services to the media and entertainment industries in the United States, the United Kingdom and Singapore, and (ii) 100% of the outstanding ownership interests of Ascent Media CANS, LLC (dba AccentHealth), a Delaware limited liability company (“AccentHealth”), which operates an advertising-supported captive audience television network in doctor office waiting rooms nationwide. Prior to the spin-off, we will assume certain obligations of DHC and DHC will transfer to us approximately $150 million in cash. Ascent Media’s clients include major motion picture studios, independent producers, broadcast networks, cable programming networks, advertising agencies and other companies that produce, own and/or distribute entertainment, news, sports, corporate, educational, industrial and advertising content. AccentHealth’s clients include various advertisers that purchase commercial airtime on AccentHealth’s network, as well as certain ancillary marketing services provided by AccentHealth. On August 8, 2008, we entered into a definitive agreement to sell 100% of the ownership interests in AccentHealth to AccentHealth Holdings LLC, an unaffiliated third party, for approximately $120 million in cash. Such transaction is currently expected to close on or before September 15, 2008, subject to customary closing conditions. If the sale of AccentHealth is consummated prior to the spin-off, our assets at the time of the spin-off will include the cash proceeds we receive in such sale.
 
We are currently a wholly-owned subsidiary of DHC, a holding company that currently owns a 662/3% indirect interest in Discovery Communications, LLC, a leading global media and entertainment company, which we refer to as “Discovery.” DHC also owns 100% of Ascent Media Creative Sound Services, Inc., a leading provider of sound, music, mixing, sound effects and other audio post-production services in the United States, which operates under the brand names Soundelux, Todd-AO, Sound One, POP Sound, Modern Music, DMG and the Hollywood Edge. We refer to Ascent Media Creative Sound Services, Inc. in this information statement as “Ascent Sound.” Prior to a restructuring of DHC to be effected in connection with the spin-off, Ascent Sound is a business unit of Ascent Media. However, at the time of the spin-off, our company and Ascent Sound will operate independently, and neither will have any interest in the other. The restructuring of DHC in connection with the spin-off is sometimes referred to herein as the “internal restructuring” of DHC and is provided for in a reorganization agreement entered into by our company, DHC and Ascent Media. For a description of the reorganization agreement, see “Certain Inter-Company Agreements — Agreements with DHC — Reorganization Agreement.”
 
When we refer to “our business” in this information statement, we are referring to the business of Ascent Media and AccentHealth and their respective subsidiaries and affiliates. Following the spin-off from DHC, we will be an independent publicly traded company, DHC will not retain any ownership interest in us, and we will no longer be affiliated with Discovery or Ascent Sound. In connection with the spin-off, we and DHC are entering into certain agreements, including the reorganization agreement and a tax sharing agreement, pursuant to which we and DHC will, among other things, indemnify each other against certain liabilities that may arise from our respective businesses. See “Certain Inter-Company Agreements.”
 
Our principal executive offices are located at 12300 Liberty Blvd., Englewood, Colorado 80112. Our main telephone number is (720) 875-5622.
 
For more information regarding Ascent Media, see Ascent Media’s website at www.ascentmedia.com.


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The Spin-Off
 
The following is a brief summary of the terms of the spin-off. Please see “The Spin-Off” for a more detailed description of the matters described below.
 
Q: What is the spin-off?
 
A: In the spin-off, DHC will distribute to its shareholders all the shares of our common stock that it owns. Following the spin-off, we will be a separate company from DHC, and DHC will not have any ownership interest in us. You do not have to pay any consideration or give up any portion of your DHC common stock to receive shares of our common stock in the spin-off.
 
Q: What is being distributed in the spin-off?
 
A: Approximately 13,402,982 shares of our Series A common stock and 659,912 shares of our Series B common stock will be distributed in the spin-off, based on the number of shares of DHC Series A common stock and DHC Series B common stock outstanding on June 30, 2008. The shares of our common stock to be distributed by DHC will constitute all the issued and outstanding shares of our common stock immediately after the distribution.
 
Q: When will the spin-off be effective?
 
A: DHC intends to effect the spin-off immediately prior to the closing of the Discovery Transaction. The Discovery Transaction is subject to approval by the stockholders of DHC, regulatory approvals and other customary conditions. DHC currently expects the closing of the Discovery Transaction to occur as soon as possible following the satisfaction or, if applicable, waiver of such closing conditions.
 
DHC has fixed September 16, 2008, as the date of its annual meeting of stockholders. Assuming the Discovery Transaction is approved at such meeting by the DHC stockholders, and that the other conditions to the Discovery Transaction are satisfied or, if applicable, waived, the spin-off will occur shortly after such date. We refer to the date that the spin-off becomes effective as the “distribution date”.
 
Q: What is the record date for the spin-off?
 
A: DHC intends to establish the distribution date as the record date for the spin-off. This means that each holder of record of shares of DHC common stock as of the close of business on the record date will be entitled to receive the spin-off distribution, which will be made effective shortly following the close of business on that same date. You must be a holder of record of shares of DHC common stock on the record date to receive the spin-off distribution.
 
Q: When will the record date for the spin-off be announced?
 
A: DHC will announce the record date and distribution date for the spin-off at least 10 days prior to such record date. The announcement will be made by press release, which will be filed as an exhibit to a Current Report on Form 8-K. See “Where You Can Find More Information”. In order to minimize the time between the satisfaction (or, if applicable, waiver) of all closing conditions to the Discovery Transaction and the effective date thereof, the board of directors of DHC may declare the record date for the spin-off prior to the satisfaction or waiver of such closing conditions, in which case such record date shall be contingent upon the satisfaction (or, if applicable, waiver) of such closing conditions, other than those closing conditions that, by their terms, are intended to be satisfied at or immediately prior to the closing of the Discovery Transaction. If any such contingent record date for the spin-off is cancelled or postponed after the announcement thereof, such cancellation or postponement shall be announced by press release, which will be filed as an exhibit to a Current Report on Form 8-K.
 
Q: What will I receive in the spin-off?
 
A: Holders of DHC Series A common stock will receive a dividend of 0.05 of a share of our Series A common stock for each share of DHC Series A common stock held by them on the record date, and holders of DHC Series B common stock will receive a dividend of 0.05 of a share of our Series B common stock for each share of DHC Series B common stock held by them on the record date. At the time of the spin-off, each share of our Series A


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common stock and our Series B common stock will have attached to it one preferred share purchase right of the corresponding series, as more fully described in this information statement. See “Description of Our Capital Stock — Shareholder Rights Plan.”
 
Q: What will the relationship be between Ascent Media and DHC after the spin-off?
 
A: Following the spin-off, our company and DHC will operate independently, and neither will have any ownership interest in the other. In connection with the spin-off, however, we and DHC (and certain affiliates of DHC) are entering into certain agreements in order to govern the ongoing relationships between our company and DHC (and such affiliates) after the spin-off and to provide for an orderly transition. See “Certain Inter-Company Agreements.”
 
Q: What are the reasons for the spin-off?
 
A: The principal reason for the spin-off is to facilitate the proposed transaction between DHC and Advance Newhouse Programming Partnership (“Advance/Newhouse”), pursuant to which DHC and Advance/Newhouse will combine their respective indirect interests in Discovery. We refer to that transaction as the “Discovery Transaction”. The spin-off will resolve differing views with respect to the value of Ascent Media that could otherwise preclude the consummation of the Discovery Transaction on terms acceptable to both DHC and Advance/Newhouse. The board of directors of DHC has determined that the Discovery Transaction is in the best interests of DHC and cannot be consummated on terms acceptable to DHC without the spin-off. The obligations of DHC and Advance/Newhouse to complete the Discovery Transaction are, therefore, subject to the completion of the spin-off.
 
Further, the spin-off will provide certain benefits for our company and our stockholders, including making it easier for investors to understand and value the Ascent Media assets, which DHC’s board of directors believes are currently overshadowed by DHC’s interest in Discovery, thus enhancing our ability to raise capital against our business to pursue our business strategy and fund acquisitions, including, possibly, acquisitions using our own publicly traded equity as currency, and internal growth. The spin-off will also enhance our ability to attract and retain qualified personnel, by enabling us to grant equity incentive awards based on our own publicly traded equity, which will directly reflect the performance of our businesses, and will further enable us to more effectively tailor employee benefit plans and retention programs, when compared with current alternatives, to provide improved incentives to the employees and future hires of our company that will better and more directly align the incentives for our management with their performance.
 
For a discussion of additional factors, costs and risks associated with the spin-off considered by the board, see “The Spin-Off — Reasons for the Spin-Off.” The Discovery Transaction is described in the definitive proxy statement/prospectus DHC mailed to its stockholders on August 8, 2008 (which we refer to as the “DHC proxy statement/prospectus”). The DHC proxy statement/prospectus forms a part of the registration statement on Form S-4 of Discovery Communications, Inc., Registration No. 333-151586, as amended. Please review the DHC proxy statement/prospectus for the principal terms of the Discovery Transaction and other material information relating to such transaction. See “Where You Can Find More Information.”
 
Q: Why will Ascent Sound be excluded from the spin-off?
 
A: Ascent Sound is not a necessary or integral component of our other businesses and retaining it at DHC allows the spin-off to be structured to meet the requirements for treatment as a transaction under Sections 368(a) and 355 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes.
 
Q: What do I have to do to participate in the spin-off?
 
A: Nothing. Shareholders of DHC on the record date for the spin-off are not required to pay any cash or deliver any other consideration, or give up any shares of DHC common stock, to receive the shares of our common stock distributable to them in the spin-off.


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Q: How will DHC distribute shares of Ascent Media Corporation common stock to me?
 
A: Holders of shares of either series of DHC common stock on the record date will receive shares of the same series of our common stock in the same form, certificated or book entry, as the form in which the recipient shareholder held its shares of DHC common stock on the record date.
 
Q: Will I be entitled to receive shares of Ascent Media Corporation common stock in connection with the distribution if I sell my shares of DHC common stock prior to the distribution date?
 
A: No. You must be a record holder of DHC common stock on the distribution date to receive our shares of common stock in connection with the spin-off. If you own shares of either series of DHC common stock and sell those shares prior to the distribution date so that you are not the record holder on the distribution date, you will also be selling the shares of our common stock that would have been distributed to you in the spin-off with respect to the shares of DHC common stock you sell.
 
Q: How will fractional shares be treated in the spin-off?
 
A: If you would otherwise be entitled to receive a fractional share of our common stock in the spin-off, you will instead receive a cash payment. See “The Spin-Off — Treatment of Fractional Shares” for an explanation of how the cash payments will be determined.
 
Q: What are the federal income tax consequences to me of the spin-off?
 
A: In connection with the filing of this registration statement, Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, has provided an opinion as to the material U.S. federal income tax consequences of the spin-off. Generally, as set forth in further detail in “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off”, for U.S. federal income tax purposes, no gain or loss should be recognized by, and no amount should be included in the income of, a holder of DHC common stock upon the receipt of shares of our common stock. A holder of DHC common stock should generally recognize gain or loss with respect to cash received in lieu of a fractional share of our common stock.
 
The Discovery Transaction is conditioned, among other things, upon the receipt of the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC (which opinion will confirm the conclusions set forth in “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off”) substantially to the effect that, on the basis of facts and representations and assumptions as to factual matters set forth or referred to in such opinion, for U.S. federal income tax purposes, the spin-off should qualify as a transaction under Section 368(a) and 355 of the Code. DHC may irrevocably waive the condition of the receipt of the tax opinion relating to the spin-off under the terms of the transaction agreement, but we do not expect that DHC will consummate the Discovery Transaction or the spin-off without the receipt of such opinion.
 
Please see “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off” and “Risk Factors — Factors Relating to the Spin-Off — The spin-off could result in significant tax liability” and “— Potential liabilities associated with certain assumed obligations under the tax sharing agreement cannot be precisely quantified at this time” for more information regarding the tax opinion and the potential tax consequences to you of the spin-off.
 
Q: Does Ascent Media Corporation intend to pay cash dividends?
 
A: No. We currently intend to retain future earnings, if any, to finance the expansion of our businesses. As a result, we do not expect to pay any cash dividends in the foreseeable future. All decisions regarding the payment of dividends by our company will be made by our board of directors, from time to time, in accordance with applicable law.
 
Q: Will Ascent Media Corporation common stock trade on a stock market?
 
A: Currently, there is no public market for our common stock. Subject to the consummation of the spin-off, we have applied to list our Series A common stock on the Nasdaq Global Market under the symbol “ASCMA”. We currently expect that our Series B common stock will trade on the OTC Bulletin Board under the symbol “ASCMB”. We cannot predict the trading prices for common stock when such trading begins.


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As of the date hereof, there are no plans for our common stock to trade on a when-issued basis; however, a when-issued trading market in our common stock may commence prior to the distribution date. When-issued trading of our common stock, in the context of the spin-off, refers to a transaction effected before the distribution date and made conditionally because the securities of the spun-off entity have not yet been distributed. When-issued trades generally settle within two days after the distribution date. On the distribution date, any when-issued trading in respect of our common stock will end and regular way trading will begin. Regular way trading refers to trading after the security has been distributed and typically involves a trade that settles on the third full trading day following the date of the sale transaction.
 
Q: Will I have appraisal rights in connection with the spin-off?
 
A: No. Holders of DHC common stock are not entitled to appraisal rights in connection with the spin-off.
 
Q: Who is the transfer agent for your common stock?
 
A: Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
 
Q: Who is the distribution agent for the spin-off?
 
A: Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
 
Q: Whom can I contact for more information?
 
A: If you have questions relating to the mechanics of the distribution of DHC shares, you should contact the distribution agent:
 
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Telephone: (877) 453-1510
 
Before the spin-off, if you have questions relating to the spin-off, you should contact:
 
Discovery Holding Company
12300 Liberty Blvd.
Englewood, CO 80112
Telephone: (877) 772-1518
 
After the spin-off, if you have questions relating to Ascent Media, you should contact:
 
Ascent Media Corporation
12300 Liberty Blvd.
Englewood, CO 80112
Telephone: (720) 875-5622


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RISK FACTORS
 
An investment in our common stock involves risk. You should carefully consider the risks described below, together with all the other information included in this information statement in evaluating our company and our common stock. Any of the following risks, if realized, could have a material adverse effect on the value of our common stock.
 
Factors Relating to our Business
 
We have a history of losses and may incur losses in the future, which could materially and adversely affect the market price of our common stock.  On a combined basis, our subsidiaries incurred losses in three out of the last five fiscal years. In future periods, we may not be able to increase or sustain profitability on a consistent quarterly or annual basis. Failure to maintain profitability in future periods may materially and adversely affect the market price of our common stock. If we seek external debt financing to meet capital expenditures in the future, there can be no assurance that we will be able to obtain such financing on terms acceptable to us.
 
We have no operating history as a separate company upon which you can evaluate our performance.  Although our subsidiary Ascent Media was a separate public company prior to June 2003, we do not have an operating history as a separate public company, as currently constituted. There can be no assurance that our business strategy will be successful on a long-term basis. We may not be able to grow our businesses as planned and may not be profitable.
 
Our historical financial information may not be representative of our results as a separate company.  The historical financial information included in this information statement may not necessarily reflect what our results of operations, financial condition and cash flows would have been had we been a separate, stand-alone entity pursuing independent strategies during the periods presented.
 
We are a holding company with no direct operations.  We are a holding company with no direct operations of our own. Our principal assets are the equity interests we hold in our operating subsidiaries, which are separate legal entities. The ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or may become subject.
 
We cannot be certain that we will be successful in integrating any acquired businesses.  Our businesses may grow through acquisitions in selected markets. Integration of new businesses may present significant challenges, including: realizing economies of scale; eliminating duplicative overheads; and integrating networks, financial systems and operational systems. We cannot assure you that, with respect to any acquisition, we will realize anticipated benefits or successfully integrate any acquired business with our existing operations. In addition, while we intend to implement appropriate controls and procedures as we integrate acquired companies, we may not be able to certify as to the effectiveness of these companies’ disclosure controls and procedures or internal control over financial reporting (as required by U.S. federal securities laws and regulations) until we have fully integrated them.
 
Our businesses are subject to risks of adverse government regulation.  The industries in which we operate, and those of our customers, are subject to varying degrees of regulation in the United States by the Federal Communications Commission and other entities and in foreign countries by similar entities. There can be no assurance that our business, either directly or through Ascent Media’s reliance on customers or vendors impacted by such regulations, will not be adversely affected by any future legislation, new regulation or deregulation.
 
A loss of any of Ascent Media’s large customers would reduce its revenue.  Although Ascent Media serviced over 3,800 customers during the year ended December 31, 2007, its ten largest customers accounted for approximately 45% of its consolidated revenue. The ten largest customers of the Creative Services group accounted for approximately 44% of the revenue of the Creative Services operating segment during the 2007 fiscal year. The ten largest customers of the Network Services group accounted for approximately 62% of the revenue of the Network Services operating segment during the 2007 fiscal year. For the six months ended June 30, 2008, the Network Services group’s largest customer, Motorola, Inc., accounted for approximately 28% of the Network Services group revenue. The loss of, and failure to replace, any significant portion of the revenue generated from sales to any of Ascent Media’s largest customers could have a material adverse effect on the business of Ascent


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Media or on the affected operating segment. The Creative Services group’s revenue generated by Ascent Media’s largest customers represents various types of services provided by various facilities within the group for multiple points of contact at the corporate customer. Network origination services are generally provided pursuant to contracts with terms of one to three years or longer. Ascent Media’s ten largest customers include, among others, the parent companies of six major motion picture studios.
 
Discovery and its subsidiaries accounted for approximately 6% of Ascent Media’s consolidated revenue, including 15% of Network Services group revenue during 2007. Discovery is a subsidiary of DHC. Sales by Ascent Media to Discovery in 2007 consisted primarily of $7.3 million in systems integration projects and $34.5 million in content distribution. Ascent Media provides content distribution services to Discovery primarily in Asia and Europe pursuant to contracts that currently extend to 2010 and 2011, respectively.
 
Ascent Media’s business depends on certain client industries.  Ascent Media derives substantially all its revenue from services provided to the motion picture, television and advertising industries. Fundamental changes in the business practices of any of these client industries could cause a material reduction in demand by Ascent Media’s clients for the services offered by Ascent Media. Ascent Media’s business benefits from the volume of motion picture and television content being created and distributed as well as the success or popularity of an individual television show. Accordingly, a decrease in either the supply of, or demand for, original entertainment content would have a material adverse effect on Ascent Media’s results of operations. Because spending for television advertising drives the production of new television programming, as well as the production and deployment of television commercials and the sale of existing content libraries for syndication, a reduction in television advertising spending would adversely affect Ascent Media’s business. Factors that could impact television advertising and the general demand for original entertainment content include the growing use of personal video recorders and video-on-demand services, continued fragmentation of and competition for the attention of television audiences, the proliferation of alternatives to traditional television viewing (including Internet video services) and general economic conditions.
 
Because Ascent Media uses third-party satellite and terrestrial connectivity services to provide certain of its creative, media management and network services, a material disruption to such connectivity services could have a negative impact on Ascent Media’s operations.  Ascent Media obtains satellite transponder capacity, fiber-optic capacity and Internet connectivity pursuant to long-term contracts and other arrangements with third-party vendors. Such connectivity services are used in connection with many aspects of Ascent Media’s business, including network origination, teleport services, digital media management, dailies, telecine services, distribution of advertising, syndicated television programming and other content, and various Web-based services and interfaces, as well as AccentHealth’s business. Although Ascent Media believes that its arrangements with connectivity suppliers are adequate, disruptions in such services may occur from time to time as a result of technical malfunction, disputes with suppliers, force majeure or other causes. In the event of any such disruption in satellite or terrestrial connectivity services, Ascent Media or AccentHealth may incur additional costs to supplement or replace the affected service, and may be required to compensate its own customers for any resulting declines in service levels.
 
A significant labor dispute in Ascent Media’s client industries could have a material adverse effect on its business.  An industry-wide strike or other job action by or affecting the Writers Guild, Screen Actors Guild or other major entertainment industry union could reduce the supply of original entertainment content, which would in turn reduce the demand for Ascent Media’s services. An extensive work stoppage would affect feature film production as well as episodic television and commercial production and could have a material adverse effect on the creative services group, including the potential loss of key personnel and the possibility that broadcast and cable networks will seek to reduce the proportion of their schedules devoted to scripted programming.
 
On November 5, 2007, Writers Guild of America West and Writers Guild of America East (which we refer to collectively as the “Writers Guild”) declared a strike affecting the script writing for television shows and films. During the fourth quarter of 2007 and the first quarter of 2008, the strike had a significant adverse effect on the revenue generated by Ascent Media’s creative services business for services provided on new entertainment projects utilizing scripted content and the production of new television commercials. The strike was terminated on February 12, 2008, after the Writers Guild negotiated the terms of a proposed new contract with the Alliance of


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Motion Picture and Television Producers (“AMPTP”). On February 26, 2008, the Writers Guild announced that its members had ratified the new contract, the term of which runs through May 1, 2011.
 
The 2007-2008 television season was significantly affected by the strike. Networks and producers resumed production of some scripted television programming interrupted by the strike. However, certain programming did not resume production this season and we expect that certain programming will not resume production at all. We do not know if the Writers Guild strike will be a significant factor in connection with the changing viewing habits of television consumers and/or industry programming and production trends. Accordingly, the full impact of the strike cannot currently be determined.
 
On February 21, 2008, the Directors Guild of America announced that its members had ratified a new contract with the AMPTP for a term ending June 30, 2011.
 
The contract between the Screen Actors Guild and AMPTP for theatrical motion picture and television performances expired on June 30, 2008. A failure by the Screen Actors Guild to finalize and ratify a new agreement with the AMPTP within a reasonable period of time after expiration of the prior contract could lead to a strike or other job action. Any such labor dispute could have an adverse effect on the television and motion picture production industries, including Ascent Media’s business, and in the case of a severe or prolonged work stoppage, the adverse effect on Ascent Media’s business, operations, results of operations and/or financial condition could be material.
 
Changes in technology may limit the competitiveness of and demand for Ascent Media’s services.  The post-production industry is characterized by technological change, evolving customer needs and emerging technical standards, and the network origination and data transmission industries are currently saturated with companies providing services similar to Ascent Media’s. Historically, Ascent Media has expended significant amounts of capital to obtain equipment using the latest technology. Obtaining access to any new technologies that may be developed in Ascent Media’s industries will require additional capital expenditures, which may be significant and may have to be incurred in advance of any revenue that may be generated by such new technologies. In addition, the use of some technologies may require third party licenses, which may not be available on commercially reasonable terms. Although we believe that Ascent Media will be able to continue to offer services based on the newest technologies, we cannot assure you that Ascent Media will be able to obtain any of these technologies, that Ascent Media will be able to effectively implement these technologies on a cost-effective or timely basis or that such technologies will not render obsolete Ascent Media’s role as a provider of motion picture and television production services. If Ascent Media’s competitors providing network services have technology that enables them to provide services that are more reliable, faster, less expensive, reach more customers or have other advantages over the network origination and content distribution services Ascent Media provides, then the demand for Ascent Media’s network services may decrease.
 
While Ascent Media believes that its business methods and technical processes do not infringe upon the proprietary rights of any third parties, there can be no assurances that third parties will not assert infringement claims against Ascent Media.  Ascent Media’s business of providing creative and network services is highly dependent upon the technical abilities and knowledge of its personnel and business methods and processes developed by Ascent Media and its subsidiaries and their respective predecessors over time. There can be no assurance that third parties will not bring trade secret, copyright infringement or other proprietary rights claims against Ascent Media, or claim that Ascent Media’s use of certain technologies violates a patent. There can be no assurances as to the outcome of any such claims. However, even if these claims are not meritorious, they could be costly and could divert management’s attention from other more productive activities. If it is determined that Ascent Media has infringed upon or misappropriated a third party’s proprietary rights, there can be no assurance that any necessary license or rights could be obtained on terms satisfactory to Ascent Media, if at all. The inability to obtain any such license or rights could result in the incurrence of expenses and changes in the way Ascent Media operates its business.
 
Loss of key personnel could negatively impact Ascent Media’s business.  Ascent Media’s future success depends in large part on the retention, continued service and specific abilities of its key creative, technical and management personnel. A significant percentage of our revenue can be attributed to services that can only be performed by certain highly compensated, specialized employees, and in certain instances, our customers have


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identified by name those personnel requested to work on such customers’ projects. Competition for highly qualified employees in the entertainment and media services industry is intense and the process of locating and recruiting key creative, technical and management personnel with the combination of skills and abilities required to execute Ascent Media’s strategy is time-consuming. Ascent Media has employment agreements with many of its key creative, technical and management personnel. However, there can be no assurance that Ascent Media will continue to attract, motivate and retain key personnel, and any inability to do so could negatively impact our business and our ability to grow.
 
Risk of loss from earthquakes or other catastrophic events could disrupt Ascent Media’s business.  Some of Ascent Media’s purpose-built facilities are located in Southern California, a region known for seismic activity. Due to the extensive amount of specialized equipment incorporated into specially designed editorial suites, digital intermediates suites and theaters, and other post-production facilities, as well as teleports, Ascent Media’s operations in this region may not be able to be temporarily relocated to mitigate the impacts of a catastrophic event. Ascent Media carries insurance for property loss and business interruption resulting from such events, including earthquake insurance, subject to deductibles, and for certain operations has facilities in other geographic locations. Although we believe Ascent Media has adequate insurance coverage relating to damage to its property and the temporary disruption of its business from casualties, and that it could provide services at other geographic locations, there can be no assurance that such insurance and other facilities would be sufficient to cover all of Ascent Media’s costs or damages or Ascent Media’s loss of income resulting from its inability to provide services in Southern California for an extended period of time.
 
Failure to obtain renewal of FCC licenses could disrupt Ascent Media’s business.  Ascent Media holds licenses, authorizations and registrations from the FCC required for the conduct of its network services business, including earth station and various classes of wireless licenses and an authorization to provide certain services. Most of the FCC licenses held by Ascent Media are for transmit/receive earth stations, which cannot be operated without individual licenses. The licenses for these stations are granted for a period of fifteen years and, while the FCC generally renews licenses for satellite earth stations routinely, there can be no assurance that Ascent Media’s licenses will be renewed at their expiration dates. Registration with the FCC, rather than licensing, is required for receiving transmissions from satellites from points within the United States. Ascent Media relies on third party licenses or authorizations when it transmits domestic satellite traffic through earth stations operated by third parties. Our failure, and the failure of third parties, to obtain renewals of such FCC licenses could disrupt the network services segment of Ascent Media and have a material adverse effect on Ascent Media. Further material changes in the law and regulatory requirements must be anticipated, and there can be no assurance that our businesses will not be adversely affected by future legislation, new regulation, deregulation or court decisions.
 
Ascent Media operates in an increasingly competitive market, and there is a risk that it may not be able to compete effectively with other providers in the future.  The entertainment and media services industries in which Ascent Media competes are highly competitive and service-oriented. Ascent Media has few long-term or exclusive service agreements with its creative services customers. Business generation in these markets is based primarily on the reputation of the provider’s creative talent and customer satisfaction with reliability, timeliness, quality and price. The major motion picture studios, which are Ascent Media’s customers, such as Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, The Walt Disney Company and Warner Bros. Entertainment, have the capability to perform similar services in-house. These studios also have substantially greater financial resources than Ascent Media’s, and in some cases significant marketing advantages. Thus, depending on the in-house capacity available to some of these studios, a studio may be not only a customer but also a competitor. There are also numerous independent providers of services similar to Ascent Media’s and we actively compete with certain industry participants that have a unique operating niche or specialty business. If there were a significant decline in the number of motion pictures or the amount of original television programming produced, or if the studios or Ascent Media’s other clients either established in-house post-production facilities or significantly expanded their in-house capabilities, Ascent Media’s operations could be materially and adversely affected. For the year ended December 31, 2007, 19.2% of Ascent Media’s total revenue was derived from creative services provided to Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, The Walt Disney Company and Warner Bros. Entertainment.


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Factors Relating to the Spin-Off
 
We may incur material costs as a result of our separation from DHC.  As a result of our separation from DHC, we may incur costs and expenses greater than those we currently incur. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with the federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), tax administration, employee benefit related functions and fees relating to the listing of our Series A common stock on the Nasdaq Global Market. We cannot assure you that these costs will not be material to our business.
 
The spin-off could result in significant tax liability.  At the effective time of the spin-off, DHC expects to have received the tax opinions of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, to the effect that, taking into account, among other things, the issuance of convertible preferred stock to Advance/Newhouse in the Discovery Transaction and the governance rights associated with such convertible preferred stock, the spin-off should qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes. The Discovery Transaction is conditioned, among other things, upon the receipt of such opinion. DHC may irrevocably waive the condition of the receipt of the tax opinion relating to the spin-off under the terms of the transaction agreement, but we do not expect that DHC will consummate the Discovery Transaction or the spin-off without the receipt of such opinion.
 
The conclusions in the tax opinions are and will be based on existing legal authority and the lack of any authority directly on point. The tax opinions also are and will be based on, among other things, assumptions and representations as to factual matters and certain undertakings that have and will be received from our company, DHC and certain DHC stockholders, including those contained in certificates of officers of our company and DHC and certain DHC stockholders, as requested by counsel. If any of those factual representations or assumptions were to be untrue or incomplete in any material respect, any undertaking was not complied with, or the facts upon which the opinions are and will be based were to be materially different from the facts at the time of the spin-off, the spin-off may not qualify for tax-free treatment. Opinions of counsel are not binding on the U.S. Internal Revenue Service (the “IRS”). As a result, the conclusions expressed in the opinions of tax counsel could be challenged by the IRS, and if the IRS were to prevail in such challenge, the tax consequences to you could be materially less favorable.
 
If the spin-off does not qualify as a transaction under Sections 368(a) and 355 for U.S. federal income tax purposes, then, in general, DHC would be subject to tax as if it had sold its shares of common stock of our company in a taxable sale for their fair market value and would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of such shares over its tax basis in such shares. A DHC stockholder that received shares of our common stock in the spin-off would be treated as having received a distribution of property in an amount equal to the fair market value of such shares (including any fractional shares for which cash is received) on the distribution date. That distribution would be taxable to such stockholder as a dividend to the extent of DHC’s current and accumulated earnings and profits. Any amount that exceeded DHC’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DHC stock with any remaining amount being taxed as a capital gain. As discussed below, pursuant to the tax sharing agreement between us and DHC, we have agreed to be responsible for and indemnify DHC with respect to all taxes arising as a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the tax sharing agreement. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off” for more information regarding the tax consequences of the spin-off and “Certain Inter-Company Agreements — Agreements with DHC — Tax Sharing Agreement” for more information regarding the tax sharing agreement and our obligations thereunder.
 
Potential liabilities associated with certain assumed obligations under the tax sharing agreement cannot be precisely quantified at this time.  In the tax sharing agreement with DHC, we have agreed to be responsible for all taxes attributable to us or any of our subsidiaries, whether accruing before, on or after the spin-off (other than any such taxes for which DHC is responsible under the tax sharing agreement). We have also agreed to be responsible for and indemnify DHC with respect to (i) all taxes attributable to DHC or any of its subsidiaries (other than Discovery) for any tax period that ends on or before the date of the spin-off (and for any tax period that begins on or before and ends after the date of the spin-off, for the portion of that period on or before the date of the spin-off), other than such taxes arising as a result of the spin-off and related internal restructuring of DHC and (ii) all taxes arising as


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a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the tax sharing agreement. This means that we will bear the liability for any taxes arising as a result of the spin-off failing to qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes (which could result, for example, from a merger or other transaction involving an acquisition of our stock) unless such tax liability arises as a result of any breach on or after the date of the spin-off of any representation, warranty, covenant or other obligation of DHC or of a subsidiary or shareholder of DHC made in connection with the issuance of the tax opinion relating to the spin-off or in the tax sharing agreement, in which case DHC would bear the liability for such taxes under the terms of the tax sharing agreement. As described above, such tax liability would be calculated as though DHC had sold its shares of common stock of our company in a taxable sale for their fair market value, and DHC would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of such shares over its tax basis in such shares. Depending on the fair market value of DHC’s shares in our company at the time of the spin-off, such tax liability could be significant and any corresponding indemnification obligation could have a material adverse effect on our company. Our indemnification obligations to DHC and its subsidiaries, officers and directors are not limited in amount or subject to any cap. If we are required to indemnify DHC and its subsidiaries and their respective officers and directors under the circumstances set forth in the tax sharing agreement, we may be subject to substantial liabilities. At this time, we cannot precisely quantify the amount of these liabilities assumed pursuant to the tax sharing agreement and there can be no assurances as to their final amounts. For a more detailed discussion, see “Certain Inter-Company Agreements — Agreements with DHC — Tax Sharing Agreement.”
 
Potential indemnification liabilities to DHC pursuant to the reorganization agreement could materially adversely affect our company.  On June 4, 2008, we entered into a reorganization agreement with DHC and Ascent Media that provides for, among other things, the principal corporate transactions required to effect the spin-off, certain conditions to the spin-off and provisions governing the relationship between our company and DHC with respect to and resulting from the spin-off. For a description of the reorganization agreement, see “Certain Inter-Company Agreements — Agreements with DHC — Reorganization Agreement.” Among other things, the reorganization agreement provides for indemnification obligations designed to make our company financially responsible for substantially all liabilities that may exist relating to the business of Ascent Media and AccentHealth, whether incurred prior to or after the spin-off, as well as those obligations of DHC assumed by us pursuant to the reorganization agreement. If we are required to indemnify DHC under the circumstances set forth in the reorganization agreement, we may be subject to substantial liabilities.
 
Factors Relating to our Common Stock and the Securities Market
 
We cannot be certain that an active trading market will develop or be sustained after the spin-off, and following the spin-off our stock price may fluctuate significantly.  We cannot assure you that an active trading market will develop or be sustained for our common stock after the spin-off. Nor can we predict the prices at which either series of our common stock may trade after the spin-off. We cannot predict the effect of the spin-off on the trading prices of DHC’s common stock or whether the market value of the shares of a series of our common stock and the shares of the same series of DHC’s common stock held by a shareholder after the spin-off (as such shares of DHC common stock are adjusted in the Discovery Transaction) will be less than, equal to or greater than the market value of the shares of that series of DHC’s common stock held by such shareholder prior to the spin-off.
 
The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:
 
  •  actual or anticipated fluctuations in our operating results;
 
  •  changes in earnings estimated by securities analysts or our ability to meet those estimates;
 
  •  the operating and stock price performance of comparable companies; and
 
  •  domestic and foreign economic conditions.
 
If, following the spin-off, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.  Section 404 of the Sarbanes-Oxley Act of 2002 requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its


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and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will be required to document and test our internal control procedures; our management will be required to assess and issue a report concerning our internal control over financial reporting; and our independent auditors will be required to issue an attestation regarding our internal control over financial reporting. Our compliance with Section 404 of the Sarbanes-Oxley Act will first be tested in connection with the filing of our Annual Report on Form 10-K for the fiscal year ending December 31, 2009. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex, subject to change, and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal control, investor confidence in our financial results may weaken, and our stock price may suffer.
 
It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders.  Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a change in control of our company that a shareholder may consider favorable. These provisions include the following:
 
  •  authorizing a capital structure with multiple series of common stock: a Series B that entitles the holders to ten votes per share, a Series A that entitles the holders to one vote per share and a Series C that, except as otherwise required by applicable law, entitles the holders to no voting rights;
 
  •  authorizing the issuance of “blank check” preferred stock, which could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
 
  •  classifying our board of directors with staggered three-year terms, which may lengthen the time required to gain control of our board of directors;
 
  •  limiting who may call special meetings of shareholders;
 
  •  prohibiting shareholder action by written consent (subject to certain exceptions), thereby requiring shareholder action to be taken at a meeting of the shareholders;
 
  •  establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings;
 
  •  requiring shareholder approval by holders of at least 80% of our voting power or the approval by at least 75% of our board of directors with respect to certain extraordinary matters, such as a merger or consolidation of our company, a sale of all or substantially all of our assets or an amendment to our certificate of incorporation;
 
  •  requiring the consent of the holders of at least 75% of the outstanding Series B common stock (voting as a separate class) to certain share distributions and other corporate actions in which the voting power of the Series B common stock would be diluted by, for example, issuing shares having multiple votes per share as a dividend to holders of Series A common stock; and
 
  •  the existence of authorized and unissued stock which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of its management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us.
 
Our board of directors has approved the adoption of a shareholder rights plan in order to encourage anyone seeking to acquire our company to negotiate with our board of directors prior to attempting a takeover. While the plan is designed to guard against coercive or unfair tactics to gain control of our company, the plan may have the effect of making more difficult or delaying any attempts by others to obtain control of our company. See “Description of Our Capital Stock — Shareholder Rights Plan.”
 
After the spin-off, John C. Malone will have the power to direct approximately 31% of the aggregate voting power in our company.  Mr. Malone beneficially owns shares of DHC common stock representing approximately 31% of DHC’s voting power. Following the consummation of the spin-off, Mr. Malone will beneficially own shares


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of our common stock that may represent up to approximately 31% of our aggregate voting power, based upon his beneficial ownership of DHC common stock, as of June 30, 2008.
 
Holders of a single series of our common stock may not have any remedies if an action by our directors or officers has an adverse effect on only that series of our common stock.  Principles of Delaware law and the provisions of our certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any single series of our common stock. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our shareholders, including the holders of all series of our common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common shareholders regardless of class or series and does not have separate or additional duties to any group of shareholders. As a result, in some circumstances, our directors may be required to make a decision that is adverse to the holders of one series of our common stock. Under the principles of Delaware law referred to above, you may not be able to challenge these decisions if our board of directors is disinterested and adequately informed with respect to these decisions and acts in good faith and in the honest belief that it is acting in the best interests of all our shareholders.
 
Our Series B common stock will likely be traded on the OTC Bulletin Board, which is often characterized by volatility and illiquidity.  We expect that our Series B common stock will trade on the OTC Bulletin Board, rather than on a national exchange or quotation system. The OTC Bulletin Board tends to be highly illiquid, in part, because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make markets in particular stocks. There is also a greater chance of market volatility for securities that trade on the OTC Bulletin Board as opposed to a national exchange or quotation system. This volatility is due to a variety of factors, including a lack of readily available price quotations, lower trading volume, absence of consistent administrative supervision of “bid” and “ask” quotations, and market conditions. The potential for illiquidity and volatility with respect to our Series B common stock may also be adversely affected by (i) the relatively small number of shares of our Series B common stock held by persons other than our officers, directors and persons who hold in excess of 10% of the Series B common stock outstanding, (ii) the relatively small number of such unaffiliated shareholders, and (iii) the expected low trading volume of such shares on the OTC Bulletin Board. There can be no assurance that the Series B common stock will ever be listed for trading on Nasdaq or another stock exchange or quotation system. However, holders of shares of our Series B common stock may convert such shares at any time into shares of our Series A common stock, on a one-for-one basis, and such shares of Series A common stock will be listed for trading on the Nasdaq Global Market.


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CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
 
Certain statements in this information statement and in the documents incorporated by reference herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including certain statements relating to our business strategies, market potential, future financial performance and other matters. In particular, information included under “The Spin-Off,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of our Business” contain forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. In addition to the risk factors described herein under the headings “Risk Factors,” the following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:
 
  •  general economic and business conditions and industry trends including the timing of, and spending on, feature film, television and television commercial production;
 
  •  spending on domestic and foreign television advertising and spending on domestic and foreign first-run and existing content libraries;
 
  •  the regulatory and competitive environment of the industries in which we operate;
 
  •  continued consolidation of the broadband distribution and movie studio industries;
 
  •  uncertainties inherent in the development of new business lines and business strategies;
 
  •  integration of acquired operations;
 
  •  uncertainties associated with product and service development and market acceptance, including the development and provision of programming for new television and telecommunications technologies;
 
  •  changes in the distribution and viewing of television programming, including the expanded deployment of personal video recorders, video-on-demand and Internet protocol-based television and their impact on television advertising revenue;
 
  •  rapid technological changes;
 
  •  future financial performance, including availability, terms and deployment of capital;
 
  •  fluctuations in foreign currency exchange rates and political unrest in international markets;
 
  •  the ability of suppliers and vendors to deliver products, equipment, software and services;
 
  •  the outcome of any litigation;
 
  •  availability of qualified personnel;
 
  •  the possibility of an industry-wide strike or other job action affecting a major entertainment industry union, or the duration of any existing strike or job action;
 
  •  changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings;
 
  •  changes in the nature of key strategic relationships with partners and joint venturers;
 
  •  competitor responses to our products and services, and the products and services of the entities in which we have interests; and
 
  •  threatened terrorist attacks and ongoing military action in the Middle East and other parts of the world.


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These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this information statement, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Neither the Private Securities Litigation Reform Act of 1995 nor Section 21E of the Securities Exchange Act of 1934 provides any protection for forward-looking statements made in this information statement.


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THE SPIN-OFF
 
Background
 
We are currently a wholly owned subsidiary of DHC. We were formed on May 29, 2008 to hold DHC’s 100% ownership interests in Ascent Media and AccentHealth. In addition to the businesses and assets of our company, DHC currently owns, indirectly, 662/3% of the equity of Discovery and 100% of Ascent Sound.
 
On June 4, 2008, DHC and Advance/Newhouse entered into a transaction agreement, which provides for the terms and conditions of the Discovery Transaction. The Discovery Transaction, which is subject to approval by the stockholders of DHC, is described in the DHC proxy statement/prospectus. A copy of the DHC proxy statement/prospectus was mailed to stockholders of DHC on August 8, 2008. Please review the DHC proxy statement/prospectus for the principal terms of the proposed transaction between DHC and Advance/Newhouse and other material information relating to such transaction. See “Where You Can Find More Information.”
 
It is a condition to the Discovery Transaction that, prior to the closing of such transaction, DHC will separate its interest in Ascent Media from its other businesses and assets. The board of directors of DHC has determined to separate its interest in Ascent Media from its other businesses and assets by means of a spin-off. To accomplish the spin-off, DHC is distributing all of its equity interest in our company, consisting of shares of our Series A common stock and our Series B common stock, to DHC’s shareholders on a pro rata basis. Following the spin-off, DHC will cease to own any equity interest in our company, and we will be an independent, publicly traded company. No vote of DHC’s shareholders is required or being sought in connection with the spin-off, and DHC’s shareholders have no appraisal rights in connection with the spin-off.
 
As described above, on August 8, 2008, we entered into an agreement to sell AccentHealth. Our board approved the sale of AccentHealth based on its determination that AccentHealth is a non-core asset of our company. This sale is not related to, and would have occurred irrespective of, the spin-off.
 
Reasons for the Spin-Off
 
The board of directors of DHC considered the following potential benefits in making its determination to consummate the spin-off:
 
  •  The spin-off will facilitate completion of the Discovery Transaction by resolving differing views with respect to the value of Ascent Media that could otherwise preclude the consummation of the Discovery Transaction on terms acceptable to both DHC and Advance/Newhouse. The board of directors of DHC has determined that the Discovery Transaction is in the best interests of DHC and cannot be consummated on terms acceptable to DHC without the spin-off. The obligations of DHC and Advance/Newhouse to complete the Discovery Transaction are, therefore, subject to the completion of the spin-off. The spin-off will also eliminate the potential distraction of DHC management with respect to the administration of our businesses.
 
  •  The spin-off will provide certain benefits to our investors, including making it easier for investors to understand and value the Ascent Media assets, which DHC’s board of directors believes are currently overshadowed by DHC’s interest in Discovery, thus enhancing our ability to raise capital against our business to pursue our business strategy and fund acquisitions, including, possibly, acquisitions using our own publicly traded equity as currency, and internal growth.
 
  •  Having our own common stock outstanding following the spin-off will provide us with greater flexibility in structuring acquisitions by enabling us to use our own publicly traded equity as acquisition currency, thus enhancing our ability to take advantage of any acquisition opportunities that our management determines may advance our business strategy.
 
  •  The spin-off will enhance our ability to attract and retain qualified personnel, by enabling us to grant equity incentive awards based on our own publicly traded equity, which will directly reflect the performance of our businesses, and will further enable us to more effectively tailor employee benefit plans and retention programs, when compared with current alternatives, to provide improved incentives to the employees and


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  future hires of our company that will better and more directly align the incentives for our management with their performance.
 
DHC’s board of directors also considered a number of costs and risks associated with the spin-off, including:
 
  •  that after the spin-off our company will have significantly smaller market capitalization than DHC, which may adversely affect its ability to raise capital as compared to a company with a larger market capitalization;
 
  •  the risk of being unable to achieve the benefits expected from the spin-off, including the possibility that the combined market values of the separate company stocks may be lower than the market value of DHC’s stock prior to the spin-off;
 
  •  the loss of synergies, particularly in administrative and support functions, as a result of no longer operating as one company;
 
  •  the potential disruption to the business of Ascent, as its management and employees devote time and resources to completing the spin-off; and
 
  •  the substantial costs of effecting the spin-off and of continued compliance with legal and other requirements applicable to public reporting companies.
 
The board evaluated the costs and benefits of the transaction as a whole and did not find it necessary to assign relative weights to the specific factors considered. DHC’s board of directors concluded, however, that the potential benefits of the spin-off outweighed its potential costs, and that separating our business from that of DHC in the form of a distribution to DHC’s stockholders that is generally tax-free is appropriate, advisable, and in the best interests of DHC and its stockholders.
 
Manner of Effecting the Spin-Off
 
DHC will effect the spin-off by distributing to its shareholders as a dividend:
 
  •  0.05 of a share of our Series A common stock for each share of DHC Series A common stock, and
 
  •  0.05 of a share of our Series B common stock for each share of DHC Series B common stock,
 
in each case, owned of record by each shareholder on the record date.
 
At the time of the spin-off, DHC will deliver all of the issued and outstanding shares of our Series A common stock and Series B common stock to the distribution agent. On or about the distribution date, the distribution agent will effect delivery of the shares of our common stock issuable in the spin-off in the same form, certificated or book-entry, as the form in which the recipient shareholder held its shares of DHC common stock on the record date. Please note that if any shareholder of DHC sells shares of DHC common stock before the distribution date, so that such shareholder is not the record holder on the distribution date, the buyer of those shares, and not the seller, will become entitled to receive the shares of our common stock issuable in respect of the shares sold. See “— Trading Prior to the Distribution Date” below for more information.
 
After the distribution, some of our shareholders may hold odd lots, or blocks not evenly divisible by 100, of our shares. A shareholder selling an odd lot may be required to pay a higher commission rate than a shareholder selling round lots or blocks of 100 shares.
 
Shareholders of DHC are not being asked to take any action in connection with the spin-off. No shareholder approval of the spin-off is required or being sought. We are not asking you for a proxy, and you are requested not to send us a proxy. You do not have to pay any consideration or give up any portion of your DHC common stock to receive shares of our common stock in the spin-off.
 
Treatment of Fractional Shares
 
If any shareholder would be entitled to receive a fractional share of our common stock in the spin-off, that shareholder will instead receive a cash payment from us. As soon as practicable following the record date, the distribution agent will determine the fractional share interests in our common stock that would be attributable to


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each holder of record of DHC common stock on the record date as a result of the spin-off, but such fractional shares will not be issued. In lieu thereof, each such holder will receive a cash amount equal to the product of such applicable fraction multiplied by the average of the closing prices of the applicable series of our common stock on the Nasdaq Global Market over the first ten consecutive trading days that our common stock trades in the regular way market. The distribution agent will calculate such amounts and distribute a check to each such record holder as soon as practicable following such ten trading day period. No interest will be paid on any cash distributed in lieu of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient shareholders. See “— Material U.S. Federal Income Tax Consequences of the Spin-Off” below for more information.
 
Effect of the Spin-Off on Outstanding DHC Options
 
Pursuant to the anti-dilution provisions of certain plans pursuant to which options to purchase shares of DHC common stock have been granted, as in effect as of the date of this Information Statement, the compensation committee of the board of directors of DHC has the authority to make equitable adjustments to such outstanding DHC options in the event of certain transactions, including the spin-off and the Discovery Transaction. Pursuant to the agreement between DHC and Advance/Newhouse with respect to the Discovery Transaction, upon the consummation of the spin-off and the Discovery Transaction, all then outstanding DHC options (other than the DHC options held by Robert R. Bennett, a director of DHC) will be converted into options or stock appreciation rights of the new public parent company that results from the Discovery Transaction (which we call “New Discovery”), in a manner so that the aggregate intrinsic value of the awards resulting from such adjustments (based on average stock prices over the first 10 trading days following consummation of the Discovery Transaction) will equal the aggregate intrinsic value of the DHC options so adjusted (based on average stock prices over the 5 trading days immediately prior to consummation of the Discovery Transaction). Outstanding DHC options held by Mr. Bennett will be converted into (i) options to purchase shares of New Discovery common stock and (ii) options to purchase shares of our common stock, in a manner so that the aggregate intrinsic value of the New Discovery options resulting from such adjustment, plus the aggregate intrinsic value of the options to purchase our common stock resulting from such adjustment (in each case based on average stock prices over the first 10 trading days following the Discovery Transaction) equals the aggregate intrinsic value of the DHC options so adjusted (based on average stock prices over the 5 trading days immediately prior to the Discovery Transaction).
 
By way of illustration, the chart below shows, for each outstanding option to acquire shares of DHC Series A common stock or DHC Series B common stock held by Mr. Bennett, the aggregate number of shares of our Series A common stock and our Series B common stock, as applicable, subject to the converted options to purchase shares of our common stock and the exercise price for each such converted option. For purposes of the illustration, and in lieu of a volume weighted average price of the applicable common stock, we used the closing prices of DHC Series A and DHC Series B common stock as of a recent date (which were $21.18 and $21.40, respectively), as applicable, and assumed hypothetical post-closing trading prices for our Series A and Series B common stock. Because the value of our Series A and Series B common stock and the value of the DHC Series A and Series B common stock are likely to differ from the prices used in this example, the number of shares subject to, and the exercise price for, each converted option will probably be different.
 
                             
DHC Series A Options     Our Series A Options  
No. of DHC
          No. of Our
       
Series A
    Exercise
    Series A
    Exercise
 
Shares     Price     Shares     Price  
 
  100,000     $ 11.84       5,000     $ 23.68  
  100,000     $ 13.00       5,000     $ 26.00  
  10,000     $ 22.90       500     $ 45.80  
 
                             
DHC Series B Options     Our Series B Options  
No. of DHC
          No. of Our
       
Series B
    Exercise
    Series A
    Exercise
 
Shares     Price     Shares     Price  
 
  1,667,985     $ 19.06       83,399     $ 38.12  


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The options to purchase stock of our company issued to Mr. Bennett in such adjustment shall be the responsibility of our company following the spin-off. All options to purchase stock of New Discovery issued in such adjustments shall be the responsibility of New Discovery following the spin-off and consummation of the Discovery Transaction.
 
Material U.S. Federal Income Tax Consequences of the Spin-Off
 
Subject to the limitations and qualifications described herein, the following discussion constitutes the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, as to the material U.S. federal income tax consequences to DHC stockholders resulting from the spin-off. This discussion is based upon the Code, existing and proposed Treasury regulations promulgated thereunder and current administrative rulings and court decisions, all as in effect as of the date of this information statement, and all of which are subject to change, possibly with retroactive effect. This discussion is limited to DHC stockholders that are U.S. holders, as defined below, that hold their shares of DHC stock as a capital asset within the meaning of Section 1221 of the Code. Further, this discussion does not address all U.S. federal income tax considerations that may be relevant to particular stockholders in light of their particular circumstances, such as tax-exempt entities, partnerships (including entities treated as partnerships for U.S. federal income tax purposes), holders who acquired their shares of DHC stock pursuant to the exercise of employee stock options or otherwise as compensation, financial institutions, insurance companies, dealers or traders in securities, holders who are subject to alternative minimum tax, and holders who hold their shares of DHC stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes. In addition, the following discussion does not address the tax consequences of the spin-off under U.S. state or local or non-U.S. tax laws. Accordingly, DHC stockholders are encouraged to consult their tax advisors concerning the U.S. federal, state and local and non-U.S. tax consequences to them of the spin-off.
 
For purposes of this discussion, a U.S. holder is a beneficial owner of DHC stock that is, for U.S. federal income tax purposes:
 
  •  an individual who is a citizen or a resident of the United States;
 
  •  a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state or political subdivision thereof;
 
  •  an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
 
  •  a trust, if (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more United States persons have the authority to control all of its substantial decisions, or (ii) in the case of a trust that was treated as a domestic trust under the law in effect before 1997, a valid election is in place under applicable Treasury regulations.
 
If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds shares of DHC stock, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships holding shares of DHC stock are encouraged to consult their tax advisors regarding the tax consequences of the spin-off.
 
Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, is of the opinion that for U.S. federal income tax purposes:
 
  •  no gain or loss should be recognized by DHC upon the distribution of shares of our common stock to DHC stockholders pursuant to the spin-off;
 
  •  no gain or loss should be recognized by, and no amount should be included in the income of, a DHC stockholder upon the receipt of shares of our common stock pursuant to the spin-off, other than with respect to fractional shares of our common stock for which cash is received;
 
  •  a DHC stockholder that receives shares of our common stock in the spin-off should have an aggregate adjusted basis in its shares of our common stock (including any fractional share in respect of which cash is received) and its shares of DHC stock immediately after the spin-off equal to the aggregate adjusted basis of such stockholder’s shares of DHC stock held prior to the spin-off, which should be allocated in accordance with their relative fair market values;


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  •  the holding period of the shares of our common stock received in the spin-off by a DHC stockholder should include the holding period of such stockholder’s shares of DHC stock, provided that such shares of DHC stock were held as a capital asset on the distribution date;
 
  •  if a DHC stockholder holds different blocks of DHC stock (generally shares of DHC stock purchased or acquired on different dates or at different prices), the aggregate basis for each block of DHC stock purchased or acquired on the same date and at the same price should be allocated, to the greatest extent possible, between such block of DHC stock and the shares of our common stock (including any fractional share) received in the spin-off in respect of such block of DHC stock, in proportion to their respective fair market values, and the holding period of the shares of our common stock (including any fractional share) received in the spin-off in respect of such block of DHC stock should include the holding period of such block of DHC stock, provided that such block of DHC stock was held as a capital asset on the distribution date. If a DHC stockholder is not able to identify which particular shares of our common stock (including any fractional share) are received in the spin-off with respect to a particular block of DHC stock, the stockholder may designate which shares of our common stock (including any fractional share) are received in the spin-off in respect of a particular block of DHC stock, provided that such designation is consistent with the terms of the spin-off. DHC stockholders that hold different blocks of DHC stock are encouraged to consult their tax advisors regarding the application of these rules to their particular circumstances; and
 
  •  a DHC stockholder that receives cash in lieu of a fractional share of our common stock pursuant to the spin-off should be treated as though it first received a distribution of the fractional share in the spin-off and then sold it for the amount of such cash. Such stockholder should generally recognize capital gain or loss, provided that the fractional share is considered to be held as a capital asset, measured by the difference between the cash received for such fractional share and the stockholder’s tax basis in that fractional share, as determined above. Such capital gain or loss should generally be a long-term capital gain or loss if the stockholder’s holding period for its share of DHC stock exceeds one year on the distribution date.
 
The conclusions in the tax opinion set forth above are based on existing legal authority and the lack of any authority directly on point. The tax opinion also is based on, among other things, assumptions and representations as to factual matters (including the possible consummation of the sale of 100% of the ownership interests in AccentHealth prior to the spin-off) and certain undertakings that have been received from our company, DHC and certain DHC stockholders, including those contained in certificates of officers of our company and DHC and certain DHC stockholders, as requested by counsel. If any of those factual representations or assumptions were to be incorrect or untrue in any material respect, any undertaking was not complied with, or the facts upon which the opinion is based were to be materially different from the facts at the time of the spin-off, the spin-off may not qualify for tax-free treatment. DHC has not sought and does not intend to seek a ruling from the IRS as to the U.S. federal income tax treatment of the spin-off. The tax opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS will not challenge the qualification of the spin-off as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes or that any such challenge would not prevail.
 
Treasury regulations require certain “significant” DHC stockholders (who immediately before the Distribution own 5% or more, by vote or value, of the total outstanding DHC stock) that receive shares of our common stock pursuant to the spin-off to attach to their U.S. federal income tax returns for the year in which the stock is received a detailed statement setting forth such data as may be appropriate to demonstrate the applicability of Section 355 of the Code to the distribution. Within a reasonable period of time after the spin-off, DHC will provide the information necessary to comply with this requirement.
 
Material U.S. Federal Income Tax Consequences if the Distribution is Taxable
 
At the effective time of the spin-off, DHC expects to receive a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP to the effect that, taking into account, among other things, the issuance of convertible preferred stock to Advance/Newhouse and the governance rights associated with such convertible preferred stock, the spin-off should qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes. Receipt of such opinion is a condition to closing of the Discovery Transaction, and such opinion will confirm the conclusions set forth in the opinion of Skadden, Arps, Slate, Meagher & Flom LLP above.


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An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or any court. If the IRS were to assert successfully that the spin-off was taxable, the above consequences would not apply and both DHC and its stockholders that received shares of our common stock in the spin-off could be subject to tax, as described below. In addition, future events that may or may not be within DHC’s or our control, including extraordinary purchases of DHC stock or our stock, could cause the spin-off not to qualify as tax free to DHC and/or DHC stockholders. Depending on the circumstances, we may be required to indemnify DHC for some or all of the taxes and losses resulting from the spin-off not qualifying as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes.
 
If the spin-off did not qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes, then DHC would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by DHC immediately prior to the spin-off over DHC’s tax basis in such shares. In addition, a DHC stockholder that received shares of our common stock in the spin-off would be treated as having received a distribution of property in an amount equal to the fair market value of such shares (including any fractional shares for which cash is received) on the distribution date. That distribution would be taxable to such stockholder as a dividend to the extent of DHC’s current and accumulated earnings and profits. Any amount that exceeded DHC’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DHC stock with any remaining amount being taxed as a capital gain. Certain stockholders may be subject to additional special rules governing distributions, such as those that relate to the dividends received deduction and extraordinary dividends.
 
Even if the spin-off otherwise qualifies for tax-free treatment to the DHC stockholders, it may be disqualified as tax-free to DHC under Section 355(e) of the Code if 50% or more of either the total combined voting power or the total fair market value of our stock or the stock of DHC is acquired as part of a plan or series of related transactions that includes the spin-off. Any acquisitions of our stock or DHC stock after the spin-off are generally part of such a plan only if there was an agreement, understanding, arrangement or substantial negotiations regarding the acquisition or a similar acquisition at some time during the two-year period ending on the date of the spin-off. All of the facts and circumstances must be considered to determine whether the spin-off and any acquisition of stock are part of such a plan, and certain acquisitions of stock pursuant to public sales are exempted by applicable Treasury regulations. In this regard, while the issuance of convertible preferred stock to Advance/Newhouse in the Discovery Transaction should generally be treated as part of a plan or series of related transactions that includes the spin-off, such issuance by itself, taking into account the governance rights associated with such convertible preferred stock, should not result in DHC recognizing gain in connection with the spin-off. If Section 355(e) of the Code applies as a result of such an acquisition of our stock or DHC stock, DHC would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by DHC immediately prior to the spin-off over DHC’s tax basis in such shares, but the spin-off would nevertheless generally be tax-free to each DHC stockholder that received shares of our common stock in the spin-off.
 
Under the tax sharing agreement between DHC and our company, we will be responsible for all taxes attributable to us or one of our subsidiaries, whether accruing before, on or after the spin-off (other than any such taxes for which DHC is responsible under the tax sharing agreement). We have also agreed to be responsible for and to indemnify DHC with respect to (i) all taxes attributable to DHC or any of its subsidiaries (other than Discovery) for any tax period that ends on or before the date of the spin-off (and for any tax period that begins on or before and ends after the date of the spin-off, for the portion of that period on or before the date of the spin-off), other than such taxes arising as a result of the spin-off and related internal restructuring of DHC and (ii) all taxes arising as a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the tax sharing agreement. This means that we will bear the liability for any taxes arising as a result of the spin-off failing to qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes (which could result, for example, from a merger or other transaction involving an acquisition of our stock) unless such tax liability arises as a result of any breach on or after the date of the spin-off of any representation, warranty, covenant or other obligation of DHC or of a subsidiary or shareholder of DHC made in connection with the issuance of the tax opinion relating to the spin-off or in the tax sharing agreement, in which case DHC would bear the liability for such taxes under the terms of the tax sharing agreement. See “Certain Inter-Company Agreements —


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Agreements with DHC — Tax Sharing Agreement” for a more detailed discussion of the tax sharing agreement between DHC and our company.
 
Material Tax Considerations of the Distribution of the Rights
 
For U.S. federal income tax purposes, the distribution of the rights that will be attached to our common stock pursuant to the shareholders rights plan will not be taxable to us, and the receipt in the spin-off of such rights will not be taxable to the DHC stockholders. Depending upon the circumstances, holders of the rights could recognize taxable income or gain on or after the date that the rights become exercisable or in the event that the rights are redeemed by us. See “Description of Our Capital Stock — Shareholder Rights Plan.”
 
State Income Tax Matters
 
As noted above, this discussion does not address any tax consequences of the spin-off other than the material U.S. federal income tax consequences set forth above. DHC stockholders are encouraged to consult their tax advisors concerning all possible state tax consequences to them of the spin-off.
 
Results of the Spin-Off
 
Immediately following the spin-off, we expect to have outstanding approximately 13,402,982 shares of our Series A common stock and approximately 659,912 shares of our Series B common stock, based upon the number of shares of DHC Series A common stock and DHC Series B common stock outstanding on June 30, 2008. The actual number of shares of our Series A common stock and Series B common stock to be distributed in the spin-off will depend upon the actual number of shares of DHC Series A common stock and DHC Series B common stock outstanding on the record date, as well as the effects of rounding.
 
Immediately following the spin-off, we expect to have approximately 3,000 holders of record of our Series A common stock and 140 holders of record of our Series B common stock, based upon the number of record holders of such series of DHC common stock on June 30, 2008 (which amount does not include the number of shareholders whose shares are held of record by banks, brokerage houses or other institutions, but includes each such institution as one shareholder).
 
Listing and Trading of our Common Stock
 
On the date of this information statement, we are a wholly owned subsidiary of DHC. Accordingly, there is currently no public market for our common stock. We have applied to list our shares of Series A common stock on the Nasdaq Global Market under the symbol “ASCMA” and we expect that our Series B common stock will trade on the OTC Bulletin Board under the symbol “ASCMB.”.
 
Neither we nor DHC can assure you as to the trading price of either series of our common stock after the spin-off or as to whether the combined trading prices of a series of our common stock and the same series of DHC’s common stock after the spin-off will be less than, equal to or greater than the trading prices of that series of DHC’s common stock prior to the spin-off. See “Risk Factors — Factors Relating to Our Common Stock and the Securities Market.”
 
The shares of our common stock distributed to DHC’s shareholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the spin-off include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. This may include some or all of our executive officers and directors. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Section 4(2) of the Securities Act or Rule 144 thereunder. Our affiliates will not be permitted to sell shares of our common stock under Rule 144 until 90 days after the date on which the registration statement of which this information statement forms a part becomes effective.


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Trading Prior to the Distribution Date
 
Prior to the distribution date, DHC common stock will continue to trade on the Nasdaq Global Select Market in the regular way market. During this time, shares of either series of DHC common stock that trade on the regular way market will trade with an entitlement to receive shares of the same series of our common stock distributable in the spin-off. Therefore, if you own shares of either series of DHC common stock and sell those shares prior to the distribution date, so that you are not the record holder on the distribution date, you will also be selling the shares of our common stock that would have been distributed to you in the spin-off with respect to the shares of DHC common stock you sell. On the first trading day following the distribution date, shares of Series A common stock, Series B common stock and Series C common stock of New Discovery (as the successor to DHC) will begin trading regular way and without any entitlement to receive shares of our common stock. Shares of DHC Series A common stock and DHC Series B common stock trade under the symbols “DISCA” and “DISCB,” respectively. Shares of New Discovery Series A common stock, Series B common stock and Series C common stock are expected to trade under the symbols “DISCA,” “DISCB” and “DISCK,” respectively.
 
As of the date hereof, there are no plans for our common stock to trade on a when-issued basis, but a when-issued trading market in our common stock may develop prior to the distribution date. Our Series A common stock is expected to be listed for trading on the Nasdaq Global Market. The when-issued trading market, if any, is a market for the shares of our common stock that will be distributed in the spin-off. If you own shares of either series of DHC common stock (and do not sell those shares of DHC common stock) before the distribution date, then you are entitled to a number of shares of the same series of our common stock based upon the number of shares of such series of DHC common stock you held at that time. If a when-issued trading market develops, you may trade this entitlement to receive shares of our common stock, without the shares of DHC common stock you own, on the when-issued trading market. We expect any when-issued trades of our common stock to settle within two trading days after the distribution date. On the first trading day following the distribution date, any when-issued trading with respect to our common stock will end and regular way trading will begin. The listing for our common stock for when-issued trading, if any, is expected to be under trading symbols different from our regular way trading symbols. We will endeavor to announce any when-issued trading symbol for our common stock if it becomes available. Following the distribution date, shares of our Series A common stock are expected to be listed under the trading symbol “ASCMA” and shares of our Series B common stock are expected to trade on the OTC Bulletin Board under the symbol “ASCMB”. If the spin-off does not occur, any when-issued trading will be null and void.
 
Reasons for Furnishing this Information Statement
 
This information statement is being furnished solely to provide information to DHC shareholders who will receive shares of our common stock in the spin-off. It is not and is not to be construed as an inducement or encouragement to buy or sell any of our securities or any securities of DHC. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and neither our company nor DHC undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.


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CAPITALIZATION
 
The following table sets forth (i) our historical capitalization as of June 30, 2008, and (ii) our adjusted capitalization assuming the spin-off was effective on June 30, 2008. The table should be read in conjunction with our historical combined financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.
 
                 
    June 30,
 
    2008  
    Historical     As Adjusted  
    amounts in thousands  
 
Cash(1)
  $ 224,866       226,007  
                 
Total liabilities(1)
  $ 163,284       165,127  
                 
Equity(2):
               
Common Stock ($.01 par value)(3):
               
Series A; 45,000,000 shares authorized; 13,402,982 shares assumed issued on a pro forma basis
          134  
Series B; 5,000,000 shares authorized; 659,912 shares assumed issued on a pro forma basis
          7  
Series C; 45,000,000 shares authorized; no shares assumed issued on a pro forma basis
           
Additional paid-in capital(1)
          1,436,823  
Accumulated other comprehensive earnings
    11,280       11,280  
Accumulated deficit
    (767,395 )     (767,395 )
Parent’s investment
    1,437,666        
                 
Total equity
    681,551       680,849  
                 
Total liabilities and equity
  $ 844,835       845,976  
                 
 
 
Notes:
 
(1) In accordance with the Reorganization Agreement, we will become financially responsible for obligations of DHC assumed by us pursuant to this agreement. These liabilities assumed by us will not include any liability of or related to Discovery or any of its subsidiaries. The obligations of DHC as of June 30, 2008, as well as DHC’s cash on the same date, have been included in the “As Adjusted” presentation. For further discussion of our obligations under the Reorganization Agreement, see “Certain Inter-Company Agreements — Agreements with DHC — Reorganization Agreement.”
 
(2) Our board of directors has approved the adoption of a shareholder rights plan. For terms and provisions of this plan, as well as a description of the distribution of our common stock to DHC stockholders of record on the record date for the spin-off, please refer to the section in this document entitled “Description of Our Capital Stock.”
 
(3) Each share of our Series B common stock is convertible, at the option of the holder, into one share of our Series A common stock. Our Series A common stock and Series C common stock are not convertible.


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SELECTED FINANCIAL DATA
 
The following tables present selected combined financial statement information of Ascent Media Group (“AMG”), which includes Ascent Media Group, LLC, Ascent Media CANS, LLC and cash and investment assets of DHC, collectively referred to as the “Spinco Entities” in the Reorganization Agreement filed as Exhibit 2.1 to the Form 10 registration statement of which this information statement is a part. The selected historical information relating to AMG’s combined financial condition and results of operations is presented for the six months ended June 30, 2008 and 2007 and for each of the years in the five-year period ended December 31, 2007. The financial data for the three years ended December 31, 2007 has been derived from AMG’s audited combined financial statements for the respective periods. Data for the other periods presented has been derived from unaudited information. The data should be read in conjunction with AMG’s combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.
 
                                                 
    June 30,
    December 31,  
    2008     2007     2006     2005     2004     2003  
          Amounts in thousands  
 
Summary Balance Sheet Data:
                                               
Current assets
  $ 418,001       363,476       316,504       385,869       197,945       116,038  
Goodwill
  $ 127,293       127,293       292,259       351,100       353,028       330,479  
Total assets
  $ 844,835       830,986       952,919       996,626       816,506       716,030  
Current liabilities
  $ 142,372       122,508       114,201       84,782       108,422       62,702  
Parent’s investment
  $ 681,551       686,896       814,696       890,030       687,646       637,248  
 
                                                         
    Six Months Ended
                               
    June 30,     Years Ended December 31,  
    2008     2007     2007     2006     2005     2004     2003  
    Amounts in thousands, except per share amounts  
 
Summary Statement of Operations Data:
                                                       
Net revenue
  $ 348,151       307,315       631,425       608,153       612,774       548,075       428,037  
Operating income (loss)(1)
  $ (905 )     (3,976 )     (160,236 )     (104,906 )     6,103       16,990       234  
Net earnings (loss)(1)
  $ (6,058 )     (5,985 )     (132,331 )     (83,008 )     8,970       15,147       (73,935 )
Unaudited pro forma earnings (loss) per common share — Series A and Series B(2)
  $ (0.43 )     (0.43 )     (9.42 )     (5.91 )     0.64       1.08       (5.26 )
 
 
(1) Includes impairment of goodwill of $165,347,000 and $93,402,000 for the years ended December 31, 2007 and 2006, respectively.
 
(2) Unaudited pro forma earnings (loss) per common share is based on 14,062,894 common shares for the six months ended June 30, 2008 and 2007 and 14,051,481 common shares for the years ended December 31, 2007, 2006 and 2005, which is the number of shares that would have been issued on June 30, 2008 and December 31, 2007, respectively, if the spin-off had been completed on such dates.


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SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
 
The following table presents (i) Ascent Media Group’s unaudited pro forma combined financial position as of June 30, 2008 and December 31, 2007 as if AccentHealth was accounted for as a discontinued operation on such dates and (ii) Ascent Media Group’s unaudited pro forma combined results of operations for the six months ended June 30, 2008 and 2007 and for the years ended December 31, 2007 and 2006, as if AccentHealth was accounted for as a discontinued operation since the original date of acquisition in January 2006. The unaudited pro forma combined data does not purport to be indicative of the results of operations or financial position that may be obtained in the future or that actually would have been obtained had such transaction occurred on such dates. The following information should be read in conjunction with the “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Ascent Media Group and is qualified in its entirety by reference to the Unaudited Condensed Pro Forma Combined Financial Statements of Ascent Media Group included elsewhere herein.
 
                 
    June 30,
    December 31,
 
    2008     2007  
    Amounts in thousands  
 
Summary Pro Forma Balance Sheet Data:
               
Current assets
  $ 398,372       346,094  
Goodwill
  $ 95,069       95,069  
Total assets
  $ 844,835       830,986  
Current liabilities
  $ 140,071       120,248  
Parent’s investment
  $ 681,551       686,896  
 
                                 
    Six Months Ended June 30,     Years Ended December 31,  
    2008     2007     2007     2006  
 
Summary Pro Forma Statement of Operations Data:
                               
Net revenue
  $ 333,595       296,594       605,060       587,280  
Operating loss
  $ (5,987 )     (7,646 )     (169,961 )     (111,174 )
Loss from continuing operations
  $ (9,154 )     (8,219 )     (138,230 )     (86,751 )
Unaudited pro forma loss from continuing operations per common share — Series A and Series B:
  $ (.65 )     n/a       (9.84 )     n/a  


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying combined financial statements and the notes thereto included elsewhere herein.
 
Overview
 
We are a holding company with two wholly-owned operating subsidiaries, Ascent Media Group, LLC (“Ascent Media”) and Ascent Media CANS, LLC (dba AccentHealth) (“AccentHealth”).
 
Ascent Media
 
Ascent Media provides creative and network services to the media and entertainment industries in the United States, the United Kingdom (“UK”) and Singapore. Ascent Media’s clients include major motion picture studios, independent producers, broadcast networks, programming networks, advertising agencies and other companies that produce, own and/or distribute entertainment, news, sports, corporate, educational, industrial and advertising content. Ascent Media’s operations are organized into the following two groups: the creative services group and the network services group.
 
On November 5, 2007, the Writers Guild declared a strike affecting the script writing for television shows and films. The strike, which lasted until February 12, 2008, had a significant adverse effect on the revenue generated by Ascent Media’s creative services business for services provided on new entertainment projects utilizing scripted content and the production of new television commercials. The 2007-2008 television season was significantly affected by the strike. Networks and producers resumed production of some scripted television programming interrupted by the strike. However, some programming never resumed production this season.
 
The contract between the Screen Actors Guild and the Alliance of Motion Picture and Television Producers (“AMPTP”) for theatrical motion picture and television performances expired on June 30, 2008. A failure by the Screen Actors Guild to finalize and ratify a new agreement with the AMPTP within a reasonable period of time after expiration of the prior contract could lead to a strike or other job action. Any such labor dispute could have an adverse effect on the television and motion picture production industries, including Ascent Media’s business, and in the case of a severe or prolonged work stoppage, the adverse effect on Ascent Media’s business, operations, results of operations and/or financial condition could be material.
 
In recent years, Ascent Media has been challenged by increasing competition and resulting downward rate pressure for certain of its networks services. Such factors have caused some margin compression and lower operating income. Ascent Media believes that while its networks margins in 2007 and 2008 are lower than in some previous years, they have stabilized for the time being, and Ascent Media is continuing to focus on leveraging its broad array of traditional media and file-based services to be a full service provider to new and existing customers within the feature film, television production and advertising industries. Its strategy focuses on providing a unified portfolio of business-to-business services intended to enable media companies to realize increasing benefits from digital distribution. With facilities in the U.S., the U.K. and Singapore, Ascent Media hopes to increase its services to multinational companies on a worldwide basis. The challenges that it faces include continued development of end to end file-based solutions, increased competition in both its creative and network services, differentiation of products and services to help maintain or increase operating margins and financing capital expenditures for equipment and other items to meet customers’ requirements for integrated and file-based workflows.
 
AccentHealth
 
AccentHealth, which we acquired on January 27, 2006, operates an advertising-supported captive audience television network in doctor office waiting rooms nationwide. For financial reporting purposes, the results of operations of AccentHealth have been included in our combined results as part of our network services group since the date of acquisition. AccentHealth’s clients include various advertisers who purchase commercial airtime on AccentHealth’s network and certain ancillary marketing services provided by AccentHealth.


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On August 8, 2008, we entered into a definitive agreement to sell 100% of the ownership interests in AccentHealth to AccentHealth Holdings LLC, an unaffiliated third party, for approximately $120 million in cash. We expect to recognize a pre-tax gain on the sale transaction of approximately $65 to $70 million. Our board of directors determined that AccentHealth was a non-core asset, and the sale of AccentHealth would be consistent with our strategy of seeking opportunities to divest our non-core assets. The sale of AccentHealth is currently expected to close on or before September 15, 2008, subject to customary closing conditions. If the sale of AccentHealth is consummated prior to the AMC Spin-off (as defined below), our assets at the time of the AMC Spin-off will include the cash proceeds we receive in such sale.
 
AccentHealth generated $26,365,000 and $20,873,000 of revenue for the years ended December 31, 2007 and 2006, respectively. We do not anticipate that the sale of AccentHealth will materially impact our remaining businesses and assets.
 
AMC Spin-Off
 
DHC has determined to spin off all of our capital stock to the holders of DHC Series A and Series B common stock (the “AMC Spin-Off”). The AMC Spin-Off will be effected as a distribution by DHC to holders of its Series A and Series B common stock of shares of our Series A and Series B common stock. The AMC Spin-Off will not involve the payment of any consideration by the holders of DHC common stock and is intended to qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes. The AMC Spin-Off is expected to be accounted for at historical cost due to the pro rata nature of the distribution. The AMC Spin-Off is expected to occur in the third quarter of 2008, and will be made as a dividend to holders of record of DHC common stock as of the close of business on the record date for the AMC Spin-Off. The AMC Spin-Off was approved by the board of directors of DHC in connection with a proposed transaction between DHC and Advance/Newhouse, pursuant to which DHC and Advance/Newhouse will combine their respective indirect interests in Discovery Communications, LLC. It is a condition to the AMC Spin-Off that the agreement between DHC and Advance/Newhouse relating to that transaction shall be in effect and that all conditions precedent to that transaction (other than the AMC Spin-Off and certain conditions to be satisfied at the closing thereof) shall have been satisfied or, to the extent waivable, waived. Following the AMC Spin-Off, we will be a separate publicly traded company, and we and DHC will operate independently.
 
As a result of becoming a separate publicly traded company, we expect to incur costs and expenses greater than those we currently incur as a subsidiary of DHC. These increased costs and expenses will arise from various factors, including, but not limited to:
 
  •  costs associated with complying with the federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002;
 
  •  increased professional fees for annual and quarterly public reporting requirements, tax consulting and legal counseling;
 
  •  fees paid to our board of directors; and
 
  •  fees associated with public company requirements, such as listing our Series A common stock on the Nasdaq Global Market, filing and printing our reporting requirements, stockholder related expenses and investor relations related expenses.
 
We estimate that these costs and expenses, in the aggregate, could result in approximately $5 to $7 million of additional annual expense.
 
Adjusted OIBDA
 
We evaluate the performance of our operating segments based on financial measures such as revenue and adjusted OIBDA. We define adjusted OIBDA as revenue less cost of services and selling, general and administrative expense (excluding stock and other equity-based compensation and accretion expense on asset retirement obligations). We believe this is an important indicator of the operational strength and performance of our businesses, including each business’ ability to invest in ongoing capital expenditures and service any debt. In addition, this


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measure is used by management to view operating results and perform analytical comparisons and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock and other equity-based compensation, accretion expense on asset retirement obligations, restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP.
 
Results of Operations
 
Our operations are organized into the following two groups: the creative services group and the network services group.
 
Ascent Media’s creative services group generates revenue primarily from fees for post production, special effects and editorial services for the television, feature film and advertising industries. Generally, these services pertain to the completion of feature films, television programs and television commercials. These projects normally span from a few days to three months or more in length, and fees for these projects typically range from $10,000 to $1,000,000 per project. Additionally, the creative services group provides owners of film libraries a broad range of restoration, preservation, archiving, professional mastering and duplication services. The scope of these creative services vary in duration from one day to several months depending on the nature of the service, and fees typically range from less than $1,000 to $100,000 per project. The creative services group includes Ascent Media’s digital media distribution center, which provides file-based services in areas such as digital imaging, digital vault, distribution services and interactive media to new and existing distribution platforms.
 
The network services group’s revenue consists of fees relating to facilities and services necessary to assemble and transport programming for cable and broadcast networks across the world via fiber, satellite and the Internet. The group also includes the Ascent Media Systems & Technology Services division (“S&TS”), which derives revenue from systems integration and field support services, technology consulting services, design and implementation of advanced video systems and engineering project management, and a facility that provides technical help desk and field service. This operating segment also includes the operations of AccentHealth, which operates an advertising-supported captive audience television network in doctor office waiting rooms nationwide. Approximately 44% of the network services group’s revenue relates to AccentHealth, broadcast services, satellite operations and fiber services that are earned monthly under long-term contracts ranging generally from one to seven years. Additionally, approximately 56% of revenue relates to systems integration and engineering services that are provided on a project basis over terms generally ranging from three to twelve months.
 
Six Months ended June 30, 2008 and 2007
 
                 
    Six Months Ended
 
    June 30,  
    2008     2007  
    dollar amounts in thousands  
 
Segment Revenue
               
Creative Services group
  $ 158,082       172,655  
Network Services group
  $ 190,069       134,660  
                 
Segment Adjusted OIBDA
               
Creative Services group
  $ 11,690       21,317  
Network Services group
  $ 33,185       19,101  
                 
Segment Adjusted OIBDA as a percentage of Revenue
               
Creative Services group
    7.4%       12.3%  
Network Services group
    17.5%       14.2%  
 
Included in the foregoing amounts for the network services group is AccentHealth, which generated $14,556,000 and $10,721,000 of revenue for the six months ended June 30, 2008 and 2007, respectively, and $5,679,000 and $4,168,000 of adjusted OIBDA for such periods.


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Revenue.  Our combined revenue increased $40,836,000 or 13.3% for the six months ended June 30, 2008, as compared to the corresponding prior year period. The network services group revenue increased $55,409,000 or 41.1% for the six-month period, while the creative services group revenue decreased $14,573,000 or 8.4% for such period. The decrease in creative services group revenue was due to (i) a decrease of $9,841,000 in television post production services in the U.S. driven primarily by the Writers Guild strike, (ii) a decrease of $1,832,000 in commercial revenue driven by stronger worldwide demand in the prior year period, and (iii) a decrease of $1,568,000 in U.K. television revenue driven by declines in the broadcast work.
 
The increase in the network services group revenue was due to (i) an increase in system integration services revenue of $47,539,000, reflecting a significant number of larger projects in 2008 primarily from one customer, (ii) an increase of $3,289,000 in content distribution revenue in the U.S. and U.K., (iii) an increase of $3,835,000 driven by AccentHealth due to continued growth in the digital network and (iv) favorable changes in foreign currency exchange rates of $1,202,000. For the six months ended June 30, 2008, $52,500,000 of the system integration services revenue was generated by one customer, Motorola, Inc., under a contract which expires in July 2009. We could only sustain this level of revenue in the future if we enter into other contracts of this same magnitude, of which there is no guarantee. Additionally, for the six months ended June 30, 2008 and 2007, the network services group earned revenue from Discovery of $19,080,000 and $22,481,000, respectively.
 
Cost of Services.  Cost of services increased $35,590,000 or 16.7% for the six months ended June 30, 2008, as compared to the corresponding prior year period. A significant portion of the increase was attributable to network services resulting from higher volumes of system integration services, which have a higher percentage of production material costs. The increase was partially offset by lower cost of services in creative services driven by decreases in television production services impacted by the Writers Guild strike. As a percent of revenue, cost of services was 71.6% and 69.5% for the six months ended June 30, 2008 and 2007, respectively. The percentage increase is mainly a result of revenue mix primarily driven by the higher production material costs for systems integration projects. Additionally, creative services labor costs decreased to a lesser degree than revenue during the period of the Writers Guild strike, with certain fixed costs remaining regardless of the decline in revenue.
 
Selling, General and Administrative.  Our selling, general and administrative expenses (“SG&A”) are comprised of the following:
 
                 
    Six Months Ended
 
    June 30,  
    2008     2007  
    amounts in thousands  
 
Ascent Media and AccentHealth SG&A
  $ 66,299       64,466  
Stock-based compensation
    (284 )     907  
Loss on asset dispositions
    180       11  
Accretion expense on asset retirement
               
obligations
    129       156  
                 
Total SG&A
  $ 66,324       65,540  
                 
 
Ascent Media’s and AccentHealth’s combined SG&A increased $1,833,000 or 2.8% for the six months ended June 30, 2008 as compared to the corresponding prior year period. The increase was mainly driven by higher facility costs and consulting fees. As a percent of revenue, Ascent Media’s and AccentHealth’s combined SG&A was 19.0% and 21.0% for the six months ended June 30, 2008 and 2007, respectively.
 
Adjusted OIBDA.  Total adjusted OIBDA as a percentage of revenue (“OIBDA Margin”) was 9.4% and 9.5% for the six months ended June 30, 2008 and 2007, respectively. The OIBDA Margin for the creative services group was 7.4% and 12.3% for such periods, and the OIBDA Margin for the network services group was 17.5% and 14.2%. The services provided by the creative services group are very labor intensive and incur high facility costs, with labor and facility costs representing over 71% of revenue. The creative services group’s other primary cost components are production equipment, materials cost and general and administrative expenses. Because of the higher labor and facility costs for the creative services group, as well as slightly higher production equipment costs, the OIBDA Margin for the creative services group is lower than such margin for the network services group for the


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six months ended June 30, 2008 and 2007. The creative services group OIBDA Margin was lower for 2008 compared to 2007 mainly due to the impact of the Writers Guild strike, as certain fixed costs remained regardless of the decline in revenue.
 
The primary cost components for the network services group are labor and materials, with these costs comprising over 68% of the networks’ revenue. The other primary cost components for the network services group are facility costs, production equipment and general and administrative expenses. The network services group OIBDA Margin was higher for 2008 compared to 2007 mainly due to lower labor and facility costs which did not fully offset the increase in material costs as the networks revenue mix shifted toward more systems integration projects. See footnote 9 in the accompanying condensed combined financial statements for the six months ended June 30, 2008 for a reconciliation of combined segment adjusted OIBDA to earnings (loss) before income taxes.
 
Restructuring Charges.  During the six months ended June 30, 2008, Ascent Media recorded restructuring charges of $1,263,000 related to severance and facility costs in conjunction with closing its operations in Mexico during the first quarter of 2008. No such charges were recorded in 2007.
 
Depreciation and Amortization.  Depreciation and amortization expense for the six months ended June 30, 2008 was relatively flat compared to the corresponding prior year period due to depreciation on new assets placed in service offset by assets becoming fully depreciated.
 
Stock-Based Compensation.  Stock-based compensation was a benefit of $284,000 and an expense of $907,000 for the six months ended June 30, 2008 and 2007, respectively, and is included in SG&A in our combined statement of operations. Effective August 3, 2006, Ascent Media adopted its 2006 Long-Term Incentive Plan (the “2006 Plan”). The 2006 Plan provides the terms and conditions for the grant of, and payment with respect to, Phantom Appreciation Rights (“PARs”) granted to certain officers and other key personnel of Ascent Media. The value of the PARs is based on a formula set forth in the 2006 Plan and is tied to cumulative free cash flow and a calculation based on certain operating and financial results of Ascent Media. We record compensation based on the vesting and value of the PARs. Ascent Media recorded 2006 Plan benefit of $276,000 and expense of $919,000 for the six months ended June 30, 2008 and 2007, respectively.
 
Income Taxes.  For the six months ended June 30, 2008, we had pre-tax income of $1,403,000, but incurred $7,461,000 of income tax expense mainly due to (i) an adjustment to our valuation allowance of $3,058,000 related to current U.K. losses and certain state net operating losses which are expected to expire unused, (ii) a settlement with the IRS which reduced net operating losses that had been allocated from Liberty Media and (iii) $1,618,000 in foreign and state tax expense. During the first quarter of 2008, Liberty Media reached an agreement with the IRS with respect to certain tax items that related to periods prior to DHC’s spin off from Liberty Media in July 2005. The IRS agreement resulted in a reduction of $5,370,000 and $30,808,000 to the amount of federal and California net operating losses (“NOLs”), respectively, that Liberty Media allocated to us at the time of the 2005 spin off. The reduction in our federal NOLs resulted in tax expense of $1,880,000 (35% of $5,370,000). We had no expectation that we would be able to utilize the California NOLs, and had thus recorded a valuation allowance with respect to such NOLs. Therefore, reduction in California NOLs was offset by a reduction in the corresponding valuation allowance and resulted in no net tax expense.
 
For the six months ended June 30, 2007, we had pre-tax income of $617,000, but incurred income tax expense of $6,602,000 mainly due to federal and state tax expense related to certain Singapore entities and from an increase in our valuation allowance related to U.K. losses.
 
Net Loss.  Our net loss increased from $5,985,000 for the six months ended June 30, 2007 to $6,058,000 for the six months ended June 30, 2008. Such increase is due to the aforementioned changes in revenue, expenses and other income.
 
Years ended December 31, 2007, 2006 and 2005
 
Our combined results of operations for the year ended December 31, 2006 include eleven months of results for AccentHealth.
 


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    Years Ended December 31,  
    2007     2006     2005  
    Amounts in thousands  
 
Segment Revenue
                       
Creative Services group
  $ 344,715       337,942       340,062  
Network Services group
  $ 286,710       270,211       272,712  
Segment Adjusted OIBDA
                       
Creative Services group
  $ 44,861       44,511       61,229  
Network Services group
  $ 49,256       47,005       52,797  
 
Included in the foregoing amounts for the network services group is AccentHealth, which generated $26,365,000 and $20,873,000 of revenue for the years ended December 31, 2007 and 2006, respectively and $10,617,000 and $7,869,000 of adjusted OIBDA for such periods.
 
Revenue.  Our combined revenue increased from $608,153,000 to $631,425,000, or 3.8%, and decreased from $612,774,000 to $608,153,000, or 0.8%, for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior year. In 2007, creative services group revenue increased $6,773,000 due to (i) an increase of $4,137,000 in commercial revenue driven primarily by strong worldwide demand in the first quarter, (ii) an increase of $3,042,000 in media services driven by growth in file-based digital vaulting and digital distribution services, offset by lower traditional lab and DVD services, (iii) an increase of $1,553,000 in feature revenue driven by increased titles for post production services and (iv) favorable changes in foreign currency exchange rates of $6,284,000. These increases were partially offset by an $8,365,000 decrease in television post production services in the U.S. and U.K. In addition, creative services revenue was negatively impacted by the Writers Guild of America strike, which primarily impacted television production in the fourth quarter of 2007.
 
Network services group’s 2007 revenue increased $16,499,000 due to (i) an increase of $16,377,000 in system integration services revenue due to an increase in the number of projects, (ii) an increase of $5,175,000 in content distribution revenue in the U.S. and Singapore, (iii) an increase of $5,492,000 in AccentHealth revenue mainly due to growth in advertising rates and (vi) favorable changes in foreign currency exchange rates of $4,519,000. These increases in revenue for the network services group were partially offset by (i) a decrease of $10,500,000 primarily due to the expiration of certain distribution contracts in the U.K. which were not renewed and (ii) a decrease of $4,352,000 due to a one-time project in 2006. For the year ended December 31, 2007, the network services group earned revenue of $41,216,000 from Discovery, which represented an increase of $7,996,000 as compared to the corresponding prior year period.
 
In 2006, creative services group revenue decreased $2,120,000 as a result of (i) an $8,400,000 decline in media services due to lower traditional media and DVD services from major studios partially offset by continued growth in new digital services and (ii) lower television revenue of $3,354,000 driven by declines in U.K. broadcast work. These creative services revenue decreases were partially offset by a $6,535,000 increase in commercial services, driven primarily by strong U.S. demand, and higher feature revenue of $3,814,000, driven by an increased number of titles for post production services. Network services group’s 2006 revenue decreased $2,501,000 as a result of (i) a decline in systems integration and services revenue of $11,060,000, reflecting significant one-time projects in 2005 and (ii) lower revenue in the U.K. of $15,080,000, primarily as a result of termination of content distribution contracts. These network services revenue decreases were partially offset by the acquisition of AccentHealth in 2006, which generated $20,873,000 of revenue, and by increased content distribution activity in the U.S. and Singapore.
 
Cost of Services.  Our cost of services increased $26,748,000 or 6.6% and $7,835,000 or 2.0% for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior year. A significant portion of the 2007 increase related to network services resulting from higher volumes of system integration services, which have a higher percentage of equipment and labor costs. Creative services was slightly higher driven by revenue increases in commercial, features and new digital services. Additionally, changes in foreign currency exchange rates resulted in an increase of $7,220,000. In 2006, the increase in cost of services is driven by the AccentHealth acquisition, which contributed costs of $6,439,000, and by changes in foreign currency exchange rates of $1,367,000.

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As a percent of revenue, cost of services was 68.3%, 66.5% and 64.8% for the years ended December 31, 2007, 2006 and 2005, respectively. The increase in cost of services as a percent of revenue is driven by the higher system integration services revenue, which has lower margins. Additionally, in each year, labor costs have increased as the revenue mix moves toward more labor intensive feature services and as projects have become increasingly more integrated, with complex work flows requiring higher levels of production labor and project management.
 
Selling, General and Administrative.  Our selling, general and administrative expenses (“SG&A”) are comprised of the following:
 
                         
    Years Ended December 31,  
    2007     2006     2005  
    Amounts in thousands  
 
Ascent Media and AccentHealth SG&A
  $ 128,505       139,310       135,217  
Stock-based compensation
    262       934       3,517  
Accretion expense on asset retirement obligations
    296       673        
                         
Total SG&A
  $ 129,063       140,917       138,734  
                         
 
Ascent Media’s and AccentHealth’s combined SG&A decreased $10,805,000 or 7.8% and increased $4,093,000 or 3.0% for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior years. For 2007, the decline is driven by lower personnel costs, resulting from Ascent Media’s restructuring in the third and fourth quarters of 2006, and lower professional fees. For 2006, the acquisition of AccentHealth added $6,565,000 of SG&A expense, slightly offset by lower personnel costs and professional fees. As a percent of revenue, Ascent Media’s and AccentHealth’s combined SG&A was 20.4%, 22.9% and 22.1% for the years ended December 31, 2007, 2006 and 2005, respectively.
 
Adjusted OIBDA.  Creative services group adjusted OIBDA as a percentage of revenue was 13.0%, 13.2% and 18.0% for the years ended December 31, 2007, 2006 and 2005, respectively. Network services group adjusted OIBDA as a percentage of revenue was 17.2%, 17.4% and 19.4% for the years ended December 31, 2007, 2006 and 2005, respectively. The services provided by the creative services group are very labor intensive, with labor costs representing over 60% of revenue. The creative services group’s other primary cost components are facility costs, production equipment, materials cost and general and administrative expenses. The primary cost components for the network services group are labor and materials, which each individually comprise over 30% of the networks revenue but in the aggregate are still less than the labor costs alone for the creative services group, as a percent of revenue. The other primary cost components for the network services group are facility costs, production equipment and general and administrative expenses. Because of the higher labor and facility costs for the creative services group, as well as slightly higher general administrative expenses, the adjusted OIBDA margin for the creative services group is lower than such margin for the network services group. For both the creative services group and network services group, the decrease in adjusted OIBDA as a percentage of revenue from 2005 to 2006 is mainly attributable to higher personnel and equipment rental costs incurred with the transition to new digital and High Definition technology. See footnote 15 in the accompanying combined financial statements for the year ended December 31, 2007 for a reconciliation of combined segment adjusted OIBDA to earnings (loss) before income taxes.
 
Restructuring Charges.  During 2007, Ascent Media recorded restructuring charges of $761,000 related to severance in conjunction with ongoing restructuring efforts primarily within the U.K. creative services business. During 2006, Ascent Media recorded restructuring charges of $10,832,000 primarily related to severance from the realignment of its operating divisions. These restructuring activities were primarily in the Corporate and other group in the United States and United Kingdom. During 2005, Ascent Media recorded a restructuring charge of $3,695,000 related to the consolidation of certain operating facilities resulting in excess leased space, consolidation expenses and severance from reductions in headcount.
 
Depreciation and Amortization.  Depreciation and amortization expense increased less than 1% and decreased 9.5% for the years ended December 31, 2007 and 2006, respectively, as compared to the corresponding prior year. The 2007 increase is due to depreciation on new assets placed in service in 2007 partially offset by assets


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becoming fully depreciated. The 2006 decrease in depreciation and amortization expense is due to assets becoming fully depreciated in 2006 partially offset by capital expenditures and the AccentHealth acquisition.
 
Stock-based Compensation.  Stock-based compensation was $262,000, $934,000 and $3,517,000 for the years ended December 31, 2007, 2006 and 2005, respectively, and is included in SG&A in our combined statements of operations. Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“Statement 123R”). Statement 123R requires that we amortize the grant date fair value of our stock option and SAR Awards that qualify as equity awards as stock compensation expense over the vesting period of such Awards. Statement 123R also requires that we record our liability awards at fair value each reporting period and that the change in fair value be reflected as stock compensation expense in our combined statement of operations. Prior to adoption of Statement 123R, the amount of expense associated with stock-based compensation was generally based on the vesting of the related stock options and stock appreciation rights and the market price of the underlying common stock. The expense reflected in our combined financial statements was based on the market price of the underlying common stock as of the date of the financial statements.
 
In 2001, Ascent Media granted to certain of its officers and employees stock options (the “Ascent Media Options”) with exercise prices that were less than the market price of Ascent Media common stock on the date of grant. The Ascent Media Options became exercisable for Liberty Media shares in connection with Liberty Media’s acquisition in 2003 of the Ascent Media shares that it did not already own. Prior to January 1, 2006, we amortized the “in-the-money” value of these options over the 5-year vesting period. Certain Ascent Media employees also hold options and stock appreciation rights granted by companies acquired by Ascent Media in the past several years and exchanged for Liberty Media options and stock appreciation rights (“SARs”). Prior to January 1, 2006, we recorded compensation expense for the SARs based on the underlying stock price and vesting of such awards. All Liberty Media-based stock options and SARs were fully vested as of December 31, 2006 and 2005, respectively.
 
Effective August 3, 2006, Ascent Media adopted its 2006 Long-Term Incentive Plan (the “2006 Plan”). The 2006 Plan provides the terms and conditions for the grant of, and payment with respect to, Phantom Appreciation Rights (“PARs”) granted to certain officers and other key personnel of Ascent Media. The value of the PARs is based on a formula set forth in the 2006 Plan and is tied to cumulative free cash flow and a calculation based on certain operating and financial results of Ascent Media. We record compensation based on the vesting and value of the PARs. Ascent Media recorded 2006 Plan expense of $276,000 for the year ended December 31, 2007, with no expense recorded in 2006.
 
Impairment of Goodwill.  In connection with our 2007 annual evaluation of the recoverability of our goodwill, we estimated the value of our reporting units using a discounted cash flow analysis. The result of this valuation indicated that the fair value of the network services reporting unit was less than its carrying value. The network services reporting unit fair value was then used to calculate an implied value of the goodwill related to this reporting unit. The $165,347,000 excess of the carrying amount of the network services goodwill over its implied value was recorded as an impairment charge in the fourth quarter of 2007. The impairment charge is the result of lower future expectations for network services operating cash flow due to a continued decline in operating cash flow margins as a percent of revenue, resulting from competitive conditions in the entertainment and media services industries and increasingly complex customer requirements that are expected to continue for the foreseeable future.
 
In 2006, as a result of restructuring activities and the declining financial performance of the former media management services group, including ongoing operating losses driven by technology and customer requirement changes in the industry, the former media management services group was tested for goodwill impairment in the third quarter, prior to Ascent Media’s annual goodwill valuation assessment. Ascent Media estimated the fair value of that reporting unit principally by using trading multiples of revenue and operating cash flows of similar companies in the industry. This test resulted in a goodwill impairment loss for the former media management services group of $93,402,000, which represents the excess of the carrying value over the implied fair value of such goodwill.
 
Income Taxes.  Our effective tax rate was 12.2%, 12.7% and 8.7% for the years ended December 31, 2007, 2006 and 2005, respectively. For 2007 and 2006, our income tax rates were lower than the federal income tax rate of 35% primarily from goodwill impairment charges of $165,347,000 and $93,402,000, respectively, for which we did not receive full tax benefits. In 2006, the impact of not receiving a tax benefit on the impairment charge was partially


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offset by a $7,663,000 tax benefit resulting from a change in the valuation allowance. In 2005, our income tax rate was lower than the federal income tax rate of 35% also due to the tax benefit impact of a change in the valuation allowance.
 
Net Earnings (Loss).  We recorded net earnings (loss) of ($132,331,000), ($83,008,000) and $8,970,000 for the years ended December 31, 2007, 2006 and 2005, respectively. The changes between these years are the result of the aforementioned changes in revenue and expenses.
 
Liquidity and Capital Resources
 
Our primary sources of funds are cash on hand and cash flows from operating activities. During the six months ended June 30, 2008 and 2007, our cash from operating activities was $15,796,000 and $35,935,000, respectively. During the years ended December 31, 2007, 2006 and 2005, our cash from operating activities was $60,859,000, $79,217,000 and $88,162,000, respectively. The primary drivers of our cash flow from operating activities are adjusted OIBDA and changes in working capital. Fluctuations in our adjusted OIBDA are discussed in “Results of Operations” above under the captions Revenue, Cost of Services and Selling, General and Administrative. For the six months ended June 30, 2008 and 2007, the net change in working capital was a decrease of $10,272,000 and an increase of $6,342,000, respectively. Changes in working capital are generally due to the timing of purchases and payments for equipment and the timing of billings and collections for revenue. The $30,384,000 increase in accounts receivable from December 31, 2007 to June 30, 2008 is mainly driven by systems integration contract billings and U.K. network services contracts. The $20,168,000 increase in payables and other liabilities is mainly the result of equipment purchases on large systems integration contracts.
 
During the six months ended June 30, 2008 and 2007, we used cash of $17,696,000 and $24,154,000, respectively, to fund our capital expenditures. During the years ended December 31, 2007, 2006 and 2005, we used cash of $45,095,000, $75,264,000 and $87,821,000, respectively, to fund our capital expenditures. These expenditures relate to the purchase of new equipment, the upgrade of facilities and the buildout of Ascent Media’s existing facilities to meet customer contracts, which are capitalized as additions and remain the property of Ascent Media, not the specific customer. During the year ended December 31, 2006, we used cash of $51,837,000 to purchase marketable securities. During the six months ended June 30, 2008 and the year ended December 31, 2007, we then sold those marketable securities for cash of $23,545,000 and $28,292,000, respectively. At June 30, 2008, we have approximately $225 million of cash on hand, and for the foreseeable future, we expect to have sufficient available cash balances and net cash from operating activities to meet our working capital needs and capital expenditure requirements. We intend to seek external equity or debt financing in the event any new investment opportunities, additional capital expenditures or our operations require additional funds, but there can be no assurance that we will be able to obtain equity or debt financing on terms that are acceptable to us.
 
In 2008, we expect to spend approximately $45,000,000 for capital expenditures, which we expect will be funded with their cash from operations and cash on hand.
 
If the sale of AccentHealth is consummated, of which there can be no assurance, we would have additional cash of approximately $120 million.
 
Our ability to seek additional sources of funding depends on our future financial position and results of operations, which, to a certain extent, are subject to general conditions in or affecting our industry and our customers and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.


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Off-Balance Sheet Arrangements and Contractual Obligations
 
Information concerning the amount and timing of required payments under our contractual obligations at December 31, 2007 is summarized below:
 
                                         
    Payments Due by Period  
    Less than
                After 5
       
    1 Year     1-3 Years     3-5 Years     Years     Total  
    Amounts in thousands  
 
Operating leases
  $ 26,549       50,350       35,348       56,006       168,253  
Capital lease
    1,080       2,160       2,160       1,080       6,480  
Other
    6,100                         6,100  
                                         
Total contractual obligations
  $ 33,729       52,510       37,508       57,086       180,833  
                                         
 
We have contingent liabilities related to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible we may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying combined financial statements.
 
Recent Accounting Pronouncements
 
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (R), “Business Combinations” (“SFAS No. 141 (R)”). The statement will significantly change the accounting for business combinations, and under this statement, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141 (R) will change the accounting treatment for certain specific items, including acquisition costs, noncontrolling interests, acquired contingent liabilities, in-process research and development, restructuring costs and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date. The adoption of the requirements of SFAS No. 141 (R) applies prospectively to business combinations for which the acquisition date is on or after fiscal years beginning after December 15, 2008. Early adoption is prohibited.
 
Critical Accounting Estimates
 
Valuation of Long-lived Assets and Amortizable Other Intangible Assets.  We perform impairment tests for our long-lived assets if an event or circumstance indicates that the carrying amount of our long-lived assets may not be recoverable. In response to changes in industry and market conditions, we may also strategically realign our resources and consider restructuring, disposing of, or otherwise exiting businesses. Such activities could result in impairment of our long-lived assets or other intangible assets. We are subject to the possibility of impairment of long-lived assets arising in the ordinary course of business. We regularly consider the likelihood of impairment and recognize impairment if the carrying amount of a long-lived asset or intangible asset is not recoverable from its undiscounted cash flows in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. Impairment is measured as the difference between the carrying amount and the fair value of the asset. We use both the income approach and market approach to estimate fair value. Our estimates of fair value are subject to a high degree of judgment. Accordingly, any value ultimately derived from our long-lived assets may differ from our estimate of fair value.
 
Valuation of Goodwill and Non-amortizable Other Intangible Assets.  We assess the impairment of goodwill annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include significant underperformance to historical or projected future operating results, substantial changes in our strategy or the manner of use of our assets, and significant negative industry or economic trends. Fair value of each reporting unit is determined through a combination of discounted cash flow models and comparisons to similar businesses in the industry.
 
Valuation of Trade Receivables.  We must make estimates of the collectibility of our trade receivables. Our management analyzes the collectibility based on historical bad debts, customer concentrations, customer credit-


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worthiness, current economic trends and changes in our customer payment terms. We record an allowance for doubtful accounts based upon specifically identified receivables that we believe are uncollectible. In addition, we also record an amount based upon a percentage of each aged category of our trade receivables. These percentages are estimated based upon our historical experience of bad debts. Our trade receivables balance was $142,577,000, net of allowance for doubtful accounts of $8,457,000, as of December 31, 2007.
 
Valuation of Deferred Tax Assets.  In accordance with SFAS No. 109, “Accounting for Income Taxes”, we review the nature of each component of our deferred income taxes for reasonableness. After consideration of all available evidence, we have determined that it is more likely than not that we will not realize the tax benefits associated with certain cumulative net operating loss carry forwards and impairment reserves, and as such, we have established a valuation allowance of $17,470,000 and $14,034,000 as of December 31, 2007 and 2006, respectively.
 
Quantitative and Qualitative Disclosure about Market Risk
 
Foreign Currency Risk
 
We continually monitor our economic exposure to changes in foreign exchange rates and may enter into foreign exchange agreements where and when appropriate. Substantially all of our foreign transactions are denominated in foreign currencies, including the liabilities of our foreign subsidiaries. Although our foreign transactions are not generally subject to significant foreign exchange transaction gains or losses, the financial statements of our foreign subsidiaries are translated into United States dollars as part of our combined financial reporting. As a result, fluctuations in exchange rates affect our financial position and results of operations.


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DESCRIPTION OF OUR BUSINESS
 
OVERVIEW
 
We are a holding company. Through our wholly-owned subsidiary Ascent Media, we are primarily engaged in the business of providing creative and network services to the media and entertainment industries in the United States, the United Kingdom and Singapore. Our wholly-owned subsidiary AccentHealth operates an advertising-supported captive audience television network in doctor office waiting rooms nationwide.
 
We are currently a wholly-owned subsidiary of DHC. DHC is a holding company, which holds, in addition to our business, a 662/3% ownership interest in Discovery and 100% of Ascent Sound, a leading provider of sound, music, mixing, sound effects and other audio post-production services in the United States. DHC is separating its interests in our company from its other businesses by means of a spin-off of our company. Following the spin-off, we will be an independent, publicly traded company, and DHC will not retain any ownership interest in us.
 
ASCENT MEDIA
 
Ascent Media provides a wide variety of creative and network services to the media and entertainment industries in the United States, the United Kingdom and Singapore. Ascent Media provides solutions for the creation, management and distribution of content to major motion picture studios, independent producers, broadcast networks, programming networks, advertising agencies and other companies that produce, own and/or distribute entertainment, news, sports, corporate, educational, industrial and advertising content. Services are marketed to target industry segments through Ascent Media’s internal sales force and may be sold on a bundled or individual basis.
 
Ascent Media was originally formed as a Delaware corporation in 1952. The assets and operations of Ascent Media are composed primarily of the assets and operations of various businesses acquired from 2000 through 2004, including The Todd-AO Corporation, Four Media Company, Video Services Corporation, Group W Network Services, London Playout Centre and the systems integration business of Sony Electronics. The combination and integration of these and other acquired entities allows Ascent Media to offer integrated outsourcing solutions for the technical and creative requirements of its clients, from content creation and other post-production services to media management and transmission of the final product to broadcast television stations, cable system head-ends and other destinations and distribution points.
 
In 2000, a subsidiary of Liberty Media Corporation (including its predecessors, “Liberty Media”) acquired a controlling equity interest in Ascent Media (which was then named The Todd-AO Corporation), and subsequently made additional debt and equity investments in Ascent Media, including both cash infusions and contributions in-kind. In 2003, Liberty Media acquired all the outstanding shares of Ascent Media not already owned by Liberty Media and its subsidiaries, through the merger of a wholly owned subsidiary of Liberty Media with and into Ascent Media. In December 2003, Ascent Media acquired a systems integration business from Sony Electronics, and in March 2004, Ascent Media acquired London Playout Centre, a leading provider of channel origination and transmission services in Europe, from Fremantle Media. In July 2005, Liberty Media contributed the equity of Ascent Media to DHC and distributed 100% of the outstanding shares of DHC to the stockholders of Liberty Media in a spin-off.
 
Prior to the internal restructuring of DHC to be effected in connection with the spin-off, Ascent Sound is a business unit of Ascent Media. However, to facilitate the spin-off of our company, the businesses of Ascent Sound, which operate under the brand names Soundelux, Todd-AO, Sound One, POP Sound, Modern Music, DMG and The Hollywood Edge, will be separated from the other businesses of Ascent Media pursuant to the reorganization agreement. Accordingly, at the time of the spin-off, our company and Ascent Sound will operate independently, and neither will have any interest in the other. See “Certain Inter-Company Agreements — Agreements with DHC — Reorganization Agreement.”
 
Ascent Media’s operations are organized into two main categories: creative services and network services.


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Creative Services
 
Ascent Media’s creative services group provides various technical and creative services necessary to complete principal photography into final products, such as feature films, movie trailers and TV spots, documentaries, independent films, scripted and reality television, TV movies and mini-series, television commercials, internet and new media advertising, music videos, interactive games and new digital media, promotional and identity campaigns and corporate communications. These services are referred to generally in the entertainment industry as “post-production” services. In addition, the creative services group provides a full complement of facilities and services necessary to optimize, archive, manage, and reformat and repurpose completed media assets for global distribution via freight, satellite, fiber and the Internet.
 
Ascent Media markets its creative services under various brand names that are generally well known in the entertainment industry, including Blink Digital, Cinetech, Company 3, Digital Symphony, Encore Hollywood, FilmCore, Level 3 Post, Method, One Post, RIOT, Rushes, Soho Images, St. Anne’s Post and VisionText.
 
The creative services client base comprises major motion picture studios and their international divisions, independent television production companies, broadcast networks, cable programming networks, advertising agencies, creative editorial companies, corporate media producers, independent owners of television and film libraries and emerging new media distribution channels. The principal facilities of the creative services group are in Los Angeles, the New York metropolitan area and London, with additional facilities in Atlanta and San Francisco.
 
Key services provided by Ascent Media’s creative services group include the following:
 
Dailies.  Clients that are in production require daily screening of their previous day’s footage captured on film, video or data in order to evaluate technical and aesthetic qualities of the production and to facilitate the creative editorial process. Ascent Media provides the services necessary for clients to view principal photography on a daily basis (known as “dailies” in the United States and “rushes” in Europe), including film processing and digital transfer, which is the transfer of film negatives to video or digital data. Dailies may be delivered to customers in a variety of videotape or file based formats. The Company also provides dailies viewing environments at client locations and in editorial cutting rooms for their clients’ productions.
 
Digital intermediates.  Ascent Media’s digital intermediate service provides customers with the ability to convert film to a high resolution digital master file for color correction, creative editorial and electronic assembly of masters in other formats. The digital intermediate process provides filmmakers and commercial producers with greater creative control through enhanced visual manipulation options and the ability to see their creative decisions applied in real time.
 
Color correction.  The color correction process allows for the development of a creative look and feel for media content, which can then be applied to different source elements that are assembled in sequence to allow for consistency of visual presentation, notwithstanding variations in the original source material and the differing color spectrums of film and other media. Ascent Media employs highly-skilled creative talent who utilize creative colorizing techniques, equipment and processes to enable its clients to achieve desired results for creative content including television commercials, music videos, feature films and television shows.
 
Creative editorial.  After principal photography of advertising content has been completed, Ascent Media’s editors assemble various elements into a cohesive story consistent with the messaging, branding and creative direction of Ascent Media’s advertising clients. Ascent Media provides the tools and talent required through all stages of the “finishing” process necessary for creation, and primary and secondary distributions, of completed advertising content. Ascent Media also provides the rental of editorial equipment for use in the creation of feature film and episodic television content.
 
Visual effects.  Visual effects can be used to create images that cannot be created physically through a more cost-effective means, to digitally remove elements captured in principal photography, and to enhance or supplement original visual images by integrating computer generated images with images captured during principal photography. Ascent Media provides its visual effects services with teams of artists utilizing an array of graphics and animation workstations and using a variety of software to accomplish unique effects.


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Assembly, formatting and master creation and duplication.  Ascent Media implements clients’ creative decisions, including decisions regarding the integration of sound and visual effects, to assemble source material into its final form. In addition, Ascent Media uses sophisticated computer graphics equipment to generate titles and character imagery and to format certain entertainment media content to meet specific production and distribution requirements, including time compression and commercial breaks. Finally, Ascent Media creates and delivers multiple master copies of the applicable final product for distribution, broadcast, archival and other purposes designated by the customer.
 
Digital media management services.  Ascent Media’s Digital Media Data Center provides services that enable content owners to digitize content once, then store, manage, re-purpose and distribute such content globally in multiple formats and languages to numerous providers. These file-based services can help Ascent Media’s clients exploit existing and emerging global revenue streams, including broadband, mobile and other digital outlets and devices, reducing time-to-market while providing increased security, flexibility and database functionality. Such services can be implemented as a fully outsourced platform or individual managed services. As used in the media services industry, the term “element” refers to a unit of created content of any length, such as a feature film, television episode, commercial spot, movie trailer, promotional clip or other unique product, such as a foreign language version or alternate format of any of the foregoing.
 
Advertising distribution.  Once a television commercial has been completed, Ascent Media provides support services required to manufacture and deliver commercials to specific television broadcasters or radio stations, including format conversion, video and audio duplication, distribution, and storage and asset management, for advertising agencies, corporate advertisers and other content owners. Ascent Media uses satellite, fiber-optic and Integrated Services Digital Network, or ISDN, Internet access, terrestrial broadband, and conventional air freight for the delivery of television and radio spots to broadcasters and radio stations. Ascent Media’s commercial television distribution facilities in Los Angeles and San Francisco, California enable Ascent Media to service any regional or national client.
 
Restoration, preservation and asset protection of existing and damaged content.  Ascent Media provides film restoration, preservation and asset protection services. Ascent Media’s technicians use photochemical and digital processes to clean, repair and rebuild a film’s elements in order to return the content to its original and sometimes to an improved image quality. Ascent Media also protects film element content from future degradation by transferring the film’s image to newer archival film stocks or digital files. Ascent Media also provides asset protection services for its clients’ color library titles, which is a preservation process whereby B/W, silver image, polyester, positive and color separation masters are created, sufficiently protecting the images of new and older films.
 
Transferring film to video or digital media masters.  A considerable amount of film content is ultimately distributed to the home video, broadcast, cable or pay-per-view television markets. This requires film images to be transferred to a video or digital file format. Each frame must be color corrected and adapted to the desired aspect ratio to meet the required distribution specifications and ensure the highest level of conformity to the original film version. Because certain film formats require transfers with special characteristics, it is not unusual for a motion picture to be mastered in many different versions. Technological developments, such as the domestic introduction of television sets with a 16 X 9 aspect ratio and the implementation of advanced and high definition digital television systems for terrestrial and satellite broadcasting, have contributed to the growth of Ascent Media’s film transfer business. Ascent Media also digitally removes dirt and scratches from a damaged film master that is transferred to a digital file format.
 
Professional duplication and standards conversion.  Ascent Media provides professional duplication, which is the process of creating broadcast quality and resolution independent sub-masters for distribution to professional end users. Ascent Media uses master elements to make sub-masters in numerous domestic and international broadcast standards as well as up to 22 different tape formats. Ascent Media also provides standards conversion, which is the process of changing the frame rate of a video signal from one video standard, such as the United States standard (NTSC), to another, such as a European standard (PAL or SECAM). Content is regularly copied, converted and checked by quality control for use in intermediate processes, such as editing, on-air backup and screening and for final delivery to cable and pay-per-view


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programmers, broadcast networks, television stations, airlines, home video duplicators and foreign distributors. Ascent Media’s duplication and standards conversion facilities are technically advanced with unique characteristics that significantly increase equipment capacity while reducing error rates and labor cost.
 
DVD compression and authoring and menu design.  Ascent Media provides all stages of DVD production, including creative menu design, special feature production, interactive features, compression, authoring, multi channel audio mixing, and quality control. Ascent Media supports DVD production in traditional DVD formats as well as Blu Ray and HD DVD formats. Ascent Media also prepares and optimizes content for evolving formats of digital distribution, such as video-on-demand and interactive television.
 
Storage of elements and working masters.  Ascent Media’s physical archives are designed to store working master videotapes and film elements in a highly controlled environment protected from temperature and humidity variation, seismic disturbance, fire, theft and other external events. In addition to the physical security of the archive, content owners require frequent and regular access to their libraries. Physical elements stored in Ascent Media’s archive are uniquely bar-coded and maintained in a library management database offering rapid access to elements, concise reporting of element status and element tracking throughout its travel through Ascent Media’s operations. Ascent Media also provides file-based digital archive services, as discussed under the heading Digital media management services above.
 
Syndicated television distribution.  Ascent Media’s syndication services provide AMOL-encoding and closed-captioned sub-mastering, commercial integration, library distribution, station list management and v-chip encoding. Ascent Media distributes syndicated television content by freight, satellite, fiber or the Internet, in formats ranging from low-resolution proxy streams to full-bandwidth high-definition television and streaming media.
 
Network Services
 
Ascent Media’s network services group provides the facilities, technical infrastructure, and operating staff necessary to assemble programming content for cable and broadcast networks, and provides services for distributing media signals via satellite and terrestrial networks. Ascent Media’s network services group operates from facilities located in California, Connecticut, Florida, Minnesota, New York, New Jersey, Virginia and the United Kingdom and Singapore.
 
Key services provided by Ascent Media’s network services group include the following:
 
Network origination and master control.  The network services group provides outsourced network origination services to cable, satellite and pay-per-view programming networks. This suite of services involves the digitization and management of client-provided media assets (programs, advertisements, promotions and secondary events) and their aggregation into a continuous playout stream in accordance with the programming schedule. Currently, over two hundred programming feeds — running 24 hours a day, seven days a week — are supported by Ascent Media’s facilities in the United States, London and Singapore. Network origination services are provided from large-scale technical platforms with integrated asset management, hierarchical storage management (a data storage technique which automatically moves data between high-cost and low-cost storage media), and broadcast automation capabilities. These platforms, which are designed, built, owned and operated by Ascent Media, require Ascent Media to incorporate and integrate hardware and software from multiple third-party suppliers into a coordinated service solution. Associated services include cut-to-clock and compliance editing, tape library management, ingest & quality control, format conversion, and tape duplication. For multi-language television services, Ascent Media facilitates the collection, aggregation, and playout of languaging materials, including subtitles and foreign language dubs. On-air graphics and other secondary events are also integrated with the content by Ascent Media. In conjunction with network origination services, Ascent Media operates television production studios and provides complete post-production services for on-air promotions for some clients.
 
Transport and connectivity.  Ascent Media operates satellite earth station facilities in Singapore, California, New York, New Jersey, Minnesota and Connecticut. Ascent Media’s facilities are staffed 24 hours a day and may be used for uplink, downlink and turnaround services. Ascent Media accesses various “satellite


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neighborhoods,” including basic and premium cable, broadcast syndication, direct-to-home and DBS markets. Ascent Media resells transponder capacity for occasional and full-time use and operates a global fiber network with both real-time and file-transport capabilities. Ascent Media’s “teleports” are high-bandwidth communications gateways with video switches and facilities for satellite, optical fiber and microwave transmission. Ascent Media’s facilities offer satellite antennae capable of transmitting and receiving feeds in both C-Band and Ku-Band frequencies. Ascent Media operates a global fiber network to carry real-time video and data services between its various locations in the US, London, and Singapore. This network is used to provide full-time program feeds and ad hoc services to clients and to transport files and real-time signals between Ascent Media locations. Ascent Media also operates industry-standard encryption and/or compression systems as needed for customer satellite transmission. Ascent Media’s transport and connectivity services may be directly associated with network origination services or may be provided on a stand-alone basis.
 
Engineering and systems integration.  Ascent Media, through S&TS, designs, builds, installs and services advanced technical systems for production, management and delivery of rich media content to the worldwide broadcast, cable television, broadband, government and telecommunications industries. Ascent Media’s engineering and systems integration business operates out of facilities in New Jersey, California, Virginia, and London, and services global clients including major broadcasters, cable and satellite networks, telecommunications providers, and corporate television networks, as well as numerous production and post-production facilities. Services offered include program management, engineering design, equipment procurement, software integration, construction, installation, service and support.
 
Consulting services.  Ascent Media, through S&TS, provides strategic, technology and business consulting services to the media and entertainment industry. Key practice areas include: digital migration, content delivery strategies, workflow analysis and design, emerging delivery platforms (such as Internet-protocol television, mobile and broadband), technology assessment, and technology-enabled business strategies.
 
Network Operations, Field Service and Call Center.  The network services group, out of its Palm Bay, Florida facility, provides field service operations — 24 hours a day, seven days a week — through an on-staff network of approximately 50 field engineers located throughout the United States. Services include preventative and reactive maintenance of satellite earth stations, satellite networks, fiber-based digital transmission facilities, cable and telecommunications stations (also called head ends), and other technical facilities for the distribution of video content. The group operates a call center — 24 hours a day, seven days a week, providing outsourced services for technology manufacturing companies, networks and telecoms. In addition, the group operates a network operations center, providing outsourced services relating to monitoring and management of satellite and terrestrial distribution networks and remote monitoring and control of technical facilities. End users for field service, call center and network operation center services include major US broadcast and cable networks, telecommunications providers, digital equipment manufacturers, and government and corporate operations.
 
The network services group has entered into long-term contracts mainly for its content distribution services and its systems integration services. At December 31, 2007, service commitments that are deemed to be firm under long-term contracts was $374,500,000, with approximately $137,700,000 of this amount expected to be earned in calendar year 2008. At December 31, 2006, service commitments under these types of contracts was $374,800,000.
 
Industry
 
The entertainment and media services industry supports the entertainment and media industries in the creation, management and distribution of various forms of media content, including motion pictures, movie trailers, television programs, television commercials, music videos, interactive games, new digital media, promotional and identity campaigns and corporate communications. Motion pictures are generally released in a “first-run” distribution, such as in a theatrical or straight-to-DVD release, or on broadcast or cable networks, and later in one or more additional distribution channels, such as home video, online media providers, pay-per-view, or domestic or international syndication. Television content is generally initially distributed over broadcast or cable networks, and may be concurrently distributed over secondary networks or via the Internet on network websites or by online media providers. Television content may be subsequently distributed or repurposed in the form of network re-broadcasts,


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clip shows, syndicated reruns, on-demand programming, additional online programming or home video distributions (including series or season DVD releases).
 
Ascent Media’s business segments benefit from the volume of content being created and distributed as well as the success or popularity of an individual motion picture, television program or other stand-alone media property. The following trends in the creative media services industry are expected to have an impact on Ascent Media’s business and operations:
 
Growing worldwide demand for original entertainment content.  The global demand for entertainment content continues to increase, and the entertainment and media industry is increasingly reliant on international revenue. Accordingly, the need for the associated technical and creative services Ascent Media offers is expanding. At the same time, the pace of technological change continues to accelerate. This may lead to an increased demand for capital expenditures in order to meet the industry demand for technological innovation. If Ascent Media meets these technological challenges, Ascent Media may benefit from the ability to provide an increasingly complex mix of content formats and broadcast standards to various geographic locations and cultures.
 
The development of new business opportunities for existing content libraries.  The vast libraries of the major film and television studios are an ongoing source of programming for traditional and new channels of media distribution. For exploitation in a digital environment, these libraries must be re-mastered, augmented, restored, re-colored, converted and reformatted. In addition, current and developing digital media formats have contributed to the lack of uniformity in worldwide motion picture and television format, distribution and presentation standards, thus creating the need for the creation of new master elements in unique formats.
 
Continued proliferation of new distribution channels.  Advances in technology and the creation and market acceptance of such content distribution channels as video-on-demand, mobile video over cell phones, and Internet distribution, as well as the government-mandated transition to digital television, facilitating the deployment of high-definition and/or multiple standard definition broadcast feeds, require new technical and operational infrastructure to create, manage and distribute content. The industry requires technical facilities and operational management that facilitates the creation, management, formatting and delivery of that content to the applicable markets and viewing audiences. At the same time, such changes have provided content owners the opportunity to create multiple distribution outlets and revenue streams from the same programming.
 
Increased demand for innovation, technical and creative quality and format options.  Advances in technology, new broadcast standards, growing adoption by consumers of personal video recorders, which facilitate “time shifting” of programming by the television consumer, and increasing audience fragmentation require content owners, producers and distributors to cost-effectively increase image and audio quality and create increasingly innovative, compelling viewing experiences for audiences. Such advances have also resulted in audience acceptance of and demand for multiple content format options, including, in certain markets, standard and high-definition motion picture and television content, and variant audio tracks and aspect ratios associated with such content.
 
Reality-based programming.  Broadcast and cable programmers continue to rely on reality-based programming for significant portions of their daytime, primetime and pre-primetime schedules. Although many such shows have tended to have lower post-production budgets and costs than scripted programming, Ascent Media does not believe that the demand for its services has been negatively impacted by recent increases in primetime reality-based programming. However, further increased reliance on such reality-based programming could reduce industry demand for some of the services that Ascent Media provides.
 
Content repurposing.  Broadcast and cable programmers have continued to show and distribute more regular-season reruns in regular time slots, at alternative viewing times and on-line. To the extent that this practice may reduce demand for original programming, or erode the traditional concept of the 24-week television season, such trends could reduce industry demand for some of Ascent Media’s services, potentially offsetting in whole or in part other industry trends.


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Extended use of advertising spots.  Although television commercials have traditionally had a relatively short “shelf-life,” with spots updated frequently within a given advertising campaign, some advertisers have begun to re-use the same television commercials for longer periods. If it becomes more widespread, this practice may negatively impact the production of new short-form television commercials.
 
Demands of studios and independent production companies.  While the domestic motion picture industry continues to be dominated by the major studios, including Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, The Walt Disney Company, and Warner Bros. Entertainment, smaller studios or “mini-majors” and independent production companies also play an important role in the production of motion pictures for domestic and international feature film markets. Ascent Media markets its services to the full-range of content creators, owners and distributors.
 
Strategy
 
Ascent Media’s goal is to be the premier end-to-end digital media supply chain services provider to the media and entertainment industry — creating, managing and distributing rich media content across all distribution channels on a global basis. Ascent Media believes it can optimize its position in the market by pursuing the following strategies:
 
Provide a broad range of media services.  The entertainment services industry has historically been fragmented, with numerous providers offering discrete, geographically-limited, non-integrated services. Ascent Media provides a broad range of services from the creation and management of media content to the distribution of content via multiple transmission paths, including satellite, fiber and Internet Protocol-based networks on a global basis. Ascent Media believes its range of service offerings and in-depth knowledge of media workflows provide it with a strategic advantage over less-diversified service providers in developing deep, long-term relationships with creators, owners and distributors of creative content. In addition, Ascent Media believes that the reputations of its highly-respected creative boutiques, which operate under their own well-known brand names, help distinguish Ascent Media from commodity suppliers.
 
Grow digital media management business.  Ascent Media seeks to increase business with major media and entertainment clients by creating, storing, managing, repurposing and distributing their digital media content through traditional channels as well as emerging new media outlets on a global basis. Ascent Media believes that the technical complexity and scale issues associated with providing these services will make outsourcing of activities more attractive to Ascent Media’s client base, creating opportunities for increased market share. In 2007, Ascent Media extended the geographical reach of its proprietary digital media management system, adding capabilities in the New York metropolitan area and the United Kingdom to the original center in Los Angeles. The digital media management system was deployed in Singapore during 2008.
 
Deploy an interconnected global media network.  Ascent Media plans to provide clients access to a fiber-based network integrated with its creative and management services. The network will provide global connectivity and file transport capabilities, which will make client workflows more efficient and enhance Ascent’s end-to-end portfolio of services.
 
Invest in core business operations.  Ascent Media intends to increase its capabilities through internal investments to improve the capacity, utilization and throughput of its existing facilities. Ascent Media will also consider opportunities that may arise to add scale or service offerings, or to increase market share, through strategic acquisitions (including, possibly, acquisitions using our equity as currency) or joint ventures. Consistent with this strategy, Ascent Media will also seek opportunities to divest non-core assets, when appropriate.
 
Seek opportunities to offer new services within core competencies.  Ascent Media intends to expand its market share by applying its core capabilities to develop new value-added service offerings, participating in emerging high revenue-generating services such as re-versioning content for distribution to new platforms. In that regard, Ascent Media will endeavor to develop service offerings that meet unique needs of its customers.
 
For a description of the risks associated with the foregoing strategies, and with Ascent Media’s business in general, see “Risk Factors” beginning on page 6.


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Seasonality
 
The demand for Ascent Media’s core motion picture services, primarily in its creative services group, has historically been seasonal, with higher demand in the spring (second fiscal quarter) and fall (fourth fiscal quarter), and lower demand in the winter and summer. Similarly, demand for Ascent Media’s television program services, primarily in its creative services group, is higher in the first and fourth quarters and lowest in the summer, or third quarter. Demand for Ascent Media’s commercial services, primarily in its creative services group, are fairly consistent with slightly higher activity in the third quarter. However, changes in the timing of the demand for television program services may result in increased business for Ascent Media in the summer. In addition, the timing of long-term projects in Ascent Media’s creative services group are beginning to offset the quarters in which there has been historically lower demand for Ascent Media’s motion picture and television services. Accordingly, Ascent Media expects to experience less dramatic quarterly fluctuations in its operating performance in the future.
 
ACCENTHEALTH
 
DHC acquired the assets of AccentHealth in January 2006.
 
AccentHealth provides advertising-supported health education programming for distribution in doctor office waiting rooms via three AccentHealth Waiting Room TV Networks: the General Health Network, the Young Family Network and the Silver Network. The General Health Network targets general practice and family practice patients, and provides news and health information applicable to the general needs of that demographic. The Young Family Network targets pediatric and Ob-Gyn patients, and provides baby, child and parenting related programming. The Silver Network targets internal medicine, general practice and cardiology patients, and provides programming tailored to appeal to the specific interests of patients over the age of 50. Programming on the AccentHealth Waiting Room TV Networks is produced monthly by CNN and features customized content relating to a variety of topics, including medical breakthroughs, parenting issues, nutrition, fitness, safety and wellness.
 
AccentHealth’s programming content airs on television monitors installed in doctor office waiting rooms, and is provided at no cost to the practice. AccentHealth offers its advertising clients a number of products and services, including:
 
  •  selected commercial time slots on the AccentHealth Waiting Room TV Networks;
 
  •  print-display advertising space (traditionally used for product brochures, information pamphlets or coupons) alongside the Health Panels, AccentHealth’s wall-mounted educational print displays;
 
  •  turn-key literature distribution services; and
 
  •  certain services related to the production of commercial advertising spots or the customization of certain advertising services.
 
We believe that AccentHealth is the largest point-of-care media supplier in the U.S., with the AccentHealth Waiting Room TV networks reaching 11.7 million viewers per month in 11,200 waiting rooms nationwide.
 
On August 8, 2008, we entered into a definitive agreement to sell 100% of the ownership interests in AccentHealth to AccentHealth Holdings LLC for approximately $120 million in cash. Such transaction is currently expected to close on or before September 15, 2008, subject to customary closing conditions.
 
GEOGRAPHIC AREAS
 
Please see Note 9 — Information about Operating Segments of our Combined Financial Statements included in this information statement for certain financial information relating to our operations in each geographic area in which we conduct business.


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REGULATORY MATTERS
 
Some of Ascent Media’s subsidiary companies hold licenses and authorizations from the Federal Communications Commission, or FCC, required for the conduct of their businesses, including earth station and various classes of wireless licenses and an authorization to provide certain services pursuant to Section 214 of the Communications Act of 1934, as amended. Most of the FCC licenses held by such subsidiaries are for transmit/receive earth stations, which cannot be operated without individual licenses. The licenses for these stations are granted for a period of fifteen years and, while the FCC generally renews licenses for satellite earth stations, there can be no assurance that these licenses will be renewed at their expiration dates. Registration with the FCC, rather than licensing, is required for receiving transmissions from domestic satellites from points within the United States. Ascent Media relies on third party licenses or authorizations when it and its subsidiaries transmit domestic satellite traffic through earth stations operated by third parties. The FCC establishes technical standards for satellite transmission equipment that change from time to time and requires coordination of earth stations with land-based microwave systems at certain frequencies to assure non-interference. Transmission equipment must also be installed and operated in a manner that avoids exposing humans to harmful levels of radio-frequency radiation. The placement of earth stations or other antennae also is typically subject to regulation under local zoning ordinances.
 
COMPETITION
 
The entertainment and media services industry is highly competitive, with much of the competition centered in Los Angeles, California, the largest and most competitive market, particularly for domestic television and feature film production as well as for the management of content libraries. We expect that competition will increase as a result of industry consolidation and alliances, as well as from the emergence of new competitors. In particular, major motion picture studios such as Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, The Walt Disney Company, and Warner Bros. Entertainment, while Ascent Media’s customers, can perform similar services in-house with substantially greater financial resources than Ascent Media’s, and in some cases significant marketing advantages. These studios may also outsource their requirements to other independent providers like us or to other studios. Other major competitors of Ascent Media include: Thomson, a French corporation, particularly under its Technicolor brand; Kodak, through its Laser Pacific division; Deluxe Entertainment Services; and DG FastChannel, Inc. Ascent Media also actively competes with certain industry participants that have a unique operating niche or specialty business. There is no assurance that Ascent Media will be able to compete effectively against these competitors. Ascent Media’s management believes that important competitive factors include the range of services offered, reputation for quality and innovation, pricing and long-term relationships with customers.
 
EMPLOYEES
 
We, together with our subsidiaries, have approximately 3,400 employees, most of which work on a full-time basis. Approximately 2,450 of our employees are employed in the United States, with the remaining 950 employed outside the United States, principally in the United Kingdom and the Republic of Singapore.
 
Approximately 80 of Ascent Media’s employees belong to either the International Alliance of Theatrical Stage Employees in the United States or the Broadcasting Entertainment Cinematograph and Theatre Union in the United Kingdom.
 
PROPERTIES
 
All of our real and tangible personal property is owned or leased by our subsidiaries or affiliates.
 
Ascent Media’s operations are conducted at approximately 55 properties. Certain of these facilities are used by multiple operations within Ascent Media. In the United States, Ascent Media utilizes owned and leased properties in California, Connecticut, Florida, Georgia, New Jersey, New York and Virginia; the network services group also operates a satellite earth station and related facilities in Minnesota. Internationally, Ascent Media utilizes owned and leased properties in the United Kingdom, in London, Camden and Milton Keynes. In addition, the network


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services group operates two leased facilities in Singapore. Worldwide, Ascent Media leases approximately 1,200,000 square feet and owns another 285,000 square feet. In the United States, Ascent Media’s leased properties total approximately 900,000 square feet and have terms expiring between October 2008 and June 2018. Several of these agreements have extension options. The leased properties are used for our technical operations, office space and media storage. Ascent Media’s international leases total approximately 300,000 square feet and have terms that expire between July 2008 and June 2021, and are also used for technical operations, office space and media storage. The majority of the international leases have extension clauses. Approximately 210,000 square feet of Ascent Media’s owned properties are located in Southern California, with another 45,000 square feet located in Northvale, New Jersey, Tappan, New York, Minneapolis, Minnesota and Stamford, Connecticut. In addition, Ascent Media owns approximately 30,000 square feet in London, England. Nearly all of Ascent Media’s owned properties are purpose-built for its technical and creative service operations. Ascent Media’s facilities are adequate to support its current near-term growth needs.
 
LEGAL PROCEEDINGS
 
Neither our company nor any of our subsidiaries are currently a party to any material legal proceedings. However, we, and any of our subsidiaries, may from time to time be a defendant (or may be obligated to indemnify or reimburse a named defendant), in lawsuits and claims arising in the ordinary course of business. While the outcomes of such claims, lawsuits, or other proceedings cannot be predicted with certainty, management expects that such liability, to the extent not provided for by insurance or otherwise, will not have a material adverse effect on the financial condition of our company.


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MANAGEMENT
 
Directors and Executive Officers
 
The following sets forth certain information concerning the persons who are expected to serve as our directors and executive officers at the time the spin-off becomes effective, including the individual’s age at June 30, 2008, a five year employment history and any directorships held in public companies:
 
     
Name
 
Positions
 
William R. Fitzgerald
Age 50
  Director, Chairman of the Board and Chief Executive Officer. Mr. Fitzgerald has served as Chairman of Ascent Media since July 2000. Mr. Fitzgerald has been employed as a Senior Vice President of Liberty Media since July 2000. Mr. Fitzgerald also serves on the board of Expedia, Inc.
Philip J. Holthouse
Age 49
  Director. Mr. Holthouse is a partner with Holthouse Carlin & Van Trigt LLP, where he provides tax planning and tax consulting services for privately held businesses and high net-worth individuals primarily in the real estate, entertainment and service industries. Mr. Holthouse is currently on the board of Napster, Inc.
Brian C. Mulligan
Age 49
  Director. Mr. Mulligan is the chairman of Brooknol Advisors, LLC, an advisory and investment firm specializing in media and entertainment, and the chairman of Pacific Media Capital, LLC, an entertainment and media financing company. From April 2004 through January 2005, Mr. Mulligan was a senior executive advisor—media and entertainment with Cerberus Capital Management, L.P., an investment firm. From September 2002 to March 2004, Mr. Mulligan was a founder and principal with Universal Partners, a group formed to acquire Universal Entertainment. Prior to that, Mr. Mulligan held various senior-level positions, including senior executive advisor with The Boston Consulting Group, Inc., chairman for Fox Television, Inc., chief financial officer of The Seagram Company Ltd., an entertainment and beverage company, co-chairman of Universal Pictures, Inc., executive vice president of operations at Universal Entertainment and executive vice president—corporate development and strategy at MCA Inc., an entertainment and media conglomerate. Mr. Mulligan is currently on the board of Napster, Inc. and was a director of Ascent Media Group, Inc., a predecessor of Ascent Media, from December 2002 to September 2003.
William E. Niles
Age 44
  Executive Vice President, General Counsel and Secretary. Mr. Niles has served as the senior business affairs executive of Ascent Media since June 2000 and the general counsel of Ascent Media since January 2002.
John A. Orr
Age 45
  Senior Vice President, Corporate Development. Mr. Orr has served as Vice President of Liberty Media since 2003 and has been employed by Liberty Media since August 1996.
George C. Platisa
Age 51
  Executive Vice President and Chief Financial Officer. Mr. Platisa has served as the chief financial officer of Ascent Media since May 2001.
Michael J. Pohl
Age 57
  Director. Mr. Pohl has served as the interim Vice President/General Manager of the On Demand Systems Division at ARRIS Group, Inc., a communications technology company specializing in the design and engineering of broadband networks, since December 2007. Previously, Mr. Pohl was President of Global Strategies at C-COR Incorporated from January 2005 to December 2007 and the President and Chief Executive Officer of nCUBE Corporation from 1999 to 2005.
Jose A. Royo
Age 42
  Director, President and Chief Operating Officer. Mr. Royo has served as President and Chief Executive Officer of Ascent Media since February 2008. From July 2001 until his appointment as CEO, Mr. Royo served in various positions at Ascent Media, including Vice President of the New Products Division, Senior Vice President of the Digital Services Group, and Chief Technology Officer.


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The executive officers named above will serve in such capacities until the next annual meeting of our board of directors, and until their respective successors have been duly elected and have been qualified, or until their earlier death, resignation, disqualification or removal from office.
 
During the past five years, none of the above persons has had any involvement in any legal proceedings that would be material to an evaluation of his or her ability or integrity.
 
Board Composition
 
We currently expect that at the effective time of the spin-off, our board of directors will consist of five directors, divided among three classes. Our Class I director, whose term will expire at the annual meeting of our shareholders in 2009, is Michael J. Pohl. Our Class II directors, whose terms will expire at the annual meeting of our shareholders in 2010, are Philip J. Holthouse and Brian C. Mulligan. Our Class III directors, whose terms will expire at the annual meeting of our shareholders in 2011, are William R. Fitzgerald and Jose A. Royo. At each annual meeting of our shareholders, the successors of that class of directors whose term(s) expire at that meeting shall be elected to hold office for a term expiring at the annual meeting of our shareholders held in the third year following the year of their election. The directors of each class will hold office until their respective death, resignation or removal or until their respective successors are elected and qualified. There is no family relationship between any of the directors.
 
Director Independence
 
It is expected that a majority of the members of our board of directors will be independent of our management. For a director to be deemed independent, our board of directors will have to affirmatively determine that the director has no direct or indirect material relationship with our company. To assist our board of directors in determining which of our directors qualify as independent, we will apply The Nasdaq Stock Market listing standards as well as applicable rules and regulations adopted by the SEC.
 
In accordance with these criteria, it is expected that our board of directors will determine that each of Mr. Holthouse, Mr. Mulligan and Mr. Pohl will qualify as an independent director of our company.
 
Committees of the Board
 
At or before the effective time of the spin-off, our board of directors will establish an executive committee, whose members at the time of the spin-off are expected to be Mr. Fitzgerald and Mr. Royo. Except as specifically prohibited by the General Corporation Law of the State of Delaware, the executive committee may exercise all the powers and authority of our board in the management of our business and affairs, including the power and authority to authorize the issuance of shares of our capital stock.
 
Our board of directors will also establish an audit committee, whose members at the time of the spin-off are expected to be Mr. Holthouse, Mr. Mulligan and Mr. Pohl. The audit committee will review and monitor the corporate financial reporting and the internal and external audits of our company. The committee’s functions will include, among other things:
 
  •  appointing or replacing our independent auditors;
 
  •  reviewing and approving in advance the scope and the fees of our annual audit and reviewing the results of our audits with our independent auditors;
 
  •  reviewing and approving in advance the scope and the fees of non-audit services of our independent auditors;
 
  •  reviewing compliance with and the adequacy of our existing major accounting and financial reporting policies;
 
  •  reviewing our management’s procedures and policies relating to the adequacy of our internal accounting controls and compliance with applicable laws relating to accounting practices;
 
  •  reviewing compliance with applicable Securities and Exchange Commission, stock exchange and national association of securities dealers rules regarding audit committees; and


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  •  preparing a report for our annual proxy statement.
 
Our board of directors will also establish a compensation committee, whose members at the time of the spin-off are expected to be Mr. Holthouse, Mr. Mulligan and Mr. Pohl. The compensation committee will review and make recommendations to our board regarding all forms of compensation provided to our executive officers and directors. In addition, the compensation committee will review and make recommendations on bonus and stock compensation arrangements for all of our employees and will have sole responsibility for the administration of our incentive plan.
 
The board of directors, by resolution, may from time to time establish certain other committees of the board, consisting of one or more of our directors. Any committee so established will have the powers delegated to it by resolution of the board of directors, subject to applicable law.
 
EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
This Compensation Discussion and Analysis explains Ascent Media’s compensation program for:
 
  •  William Fitzgerald;
 
  •  George Platisa;
 
  •  William Niles;
 
  •  John Orr; and
 
  •  Jose Royo.
 
Mr. Fitzgerald is our principal executive officer; Mr. Platisa is our principal financial officer; and Messrs. Niles, Orr and Royo are executive officers of our company. Currently our company does not have any other executive officers. We sometimes refer to Messrs. Fitzgerald, Platisa, Niles, Orr and Royo in this information statement as our “named executive officers”.
 
Our company was formed in connection with the spin-off, and our principal operating subsidiary is Ascent Media. Mr. Fitzgerald has been Chairman of Ascent Media since July 2000. Mr. Royo was appointed president and chief executive officer of Ascent Media in February 2008. From August 2006 through February 2008, the responsibilities of the chief executive officer of Ascent Media were exercised by an executive committee that included Mr. Niles and Mr. Platisa. Mr. Platisa has been the chief financial officer of Ascent Media since prior to 2006.
 
The historical compensation described herein with respect to Messrs. Platisa, Royo and Niles represents amounts paid to such named executive officers during the relevant periods in their capacities as officers of Ascent Media. The compensation described herein with respect to Mr. Fitzgerald represents allocable amounts paid to him for such periods pursuant to a Services Agreement between Liberty Media and DHC. Prior to the date hereof, Mr. Orr has not performed, and has not received compensation with respect to, any services for Ascent Media.
 
The form and amount of the compensation to be paid to our named executive officers in any future period will be determined by our compensation committee, subject to any applicable employment agreement. As of the date hereof, no such determination has been made by our compensation committee with respect to any such future compensation.
 
Services Agreement with Liberty Media
 
Ascent Media was formerly a wholly-owned subsidiary of Liberty Media. In July 2005, Liberty Media contributed the equity of Ascent Media to DHC and distributed 100% of the outstanding shares of DHC to the stockholders of Liberty Media in a spin-off. In connection with that spin-off, DHC entered into a services agreement with Liberty Media pursuant to which Liberty Media agreed to make available to DHC the services of certain personnel, including Mr. Fitzgerald, an officer of Liberty Media who had overseen the management of Ascent


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Media on behalf of Liberty Media prior to the spin-off. Mr. Fitzgerald is compensated by Liberty Media and has not been directly compensated by DHC or Ascent Media. Rather, pursuant to that services agreement, DHC has paid Liberty Media DHC’s allocable portion of Mr. Fitzgerald’s salary and benefits. DHC has not paid any portion of any bonus or incentive compensation paid by Liberty Media to Mr. Fitzgerald. We anticipate that after such time, the services agreement will also relate to services performed by Mr. Orr (who is also an officer of Liberty Media) and we will discuss with Liberty Media the reimbursement amounts relating to the services of Mr. Fitzgerald and Mr. Orr.
 
When DHC entered into the services agreement with Liberty Media, DHC agreed to a scheduled estimate of the annual allocation of employee costs and expenses for the Liberty Media employees, including Mr. Fitzgerald, performing services under that agreement. That estimate, which was based on the percentage of such employees’ respective work hours anticipated to be spent on the business of DHC and Ascent Media, applied under the agreement for the remainder of the 2005 calendar year. As provided by the agreement, DHC and Liberty Media reevaluated the appropriateness of the allocation schedule on a semi-annual basis and made appropriate adjustments, based on discussions with the officers and employees involved, including Mr. Fitzgerald, and an analysis of the business demands expected to be made on such persons for the relevant period by the businesses of DHC and Ascent Media, as applicable. Such proposed allocations were also discussed with and subject to approval by the compensation committee of DHC’s board of directors.
 
Pursuant to the services agreement between Liberty Media and DHC, DHC reimbursed Liberty Media for 50% of Mr. Fitzgerald’s salary for the years ended December 31, 2007 and December 31, 2006. Such reimbursements resulted in aggregate payments to Liberty Media of $332,500 for each of the 2007 and 2006 calendar years. In addition, the services agreement provides for DHC to reimburse Liberty for employee benefits. Such amounts aggregated 15% of the allocated salary amount for each of the 2007 and 2006 calendar years.
 
Concurrently with the effectiveness of the spin-off of our company by DHC, we will assume all rights and obligations of DHC under its services agreement with Liberty Media.
 
Decisionmakers
 
Ascent Media is currently an indirect wholly-owned subsidiary of DHC. Because Ascent Media is a private company, Ascent Media does not have an independent compensation committee. In addition, because none of Ascent Media’s executive officers are executive officers of DHC, the compensation committee of DHC does not make compensation decisions for Ascent Media management. Following the completion of the spin-off, decisions regarding executive compensation will be made by a compensation committee comprised of independent directors of our company.
 
The objectives and principles of Ascent Media’s executive compensation program have been established by Mr. Fitzgerald, as Chairman of Ascent Media, and Robert R. Bennett, as President of DHC. In such capacities, Mr. Fitzgerald and Mr. Bennett constitute the compensation committee of Ascent Media. Decisions regarding the executive compensation packages paid to the named executive officers (other than Mr. Fitzgerald and Mr. Orr) are generally made by Mr. Fitzgerald and Mr. Bennett.
 
Objectives
 
The compensation program for the named executive officers (other than Mr. Fitzgerald and Mr. Orr) is designed to meet the following objectives that align with and support Ascent Media’s strategic business goals:
 
  •  attracting and retaining executive managers with the industry knowledge, skills, experience and talent to help Ascent Media attain its strategic objectives and build long-term company value;
 
  •  emphasizing variable performance-based compensation components, which following the spin-off will include equity-based compensation, by linking individual compensation with corporate operating metrics as well as individual professional achievements; and
 
  •  aligning the interests of management with the interests of Ascent Media’s stockholders (or, prior to the spin-off, its sole owner, DHC). Prior to the spin-off, this has been done by using awards of phantom appreciation


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  rights under a long-term incentive plan, in which the value of such phantom appreciation rights is based on the achievement of certain financial metrics as defined in the plan. Following the spin-off, we will be able to use both phantom appreciation rights and true equity-based awards in executive compensation as determined from time to time by the compensation committee of our board of directors.
 
Principles
 
The following principles are used to guide the design of Ascent Media’s executive compensation program and to ensure that the program is consistent with the objectives described above:
 
  •  Competitive Compensation.  Ascent Media believes that its executive compensation program must provide compensation to the named executive officers that, based on general business and industry knowledge and experience, is competitive with the compensation paid to similarly situated employees of companies in Ascent Media’s industry and companies with which Ascent Media competes for talent. These companies include the major motion picture studios, numerous independent creative services providers, and companies in various industries that operate or manage data and communications networks.
 
  •  “Pay for Performance” Philosophy.  Ascent Media believes its compensation program should align the interests of the named executive officers with the interests of the company and its stockholders by strengthening the link between pay and company and individual performance. Variable compensation — including awards under the Ascent Media Group, LLC 2006 Long-Term Incentive Plan, as amended and restated as of August 15, 2008 (which we refer to as the “LTIP”), and annual awards under our Management Incentive Plan, as amended and restated in January 2007 (which we refer to as the “MIP”) — represents a significant portion of the total compensation mix for the named executive officers during 2007.
 
Process of Decisionmaking
 
As Chairman of Ascent Media, Mr. Fitzgerald has been primarily responsible for negotiating the fixed elements (such as base salary) and performance-based elements (such as the terms of awards under the MIP and LTIP) of the compensation to be paid to each of the other named executive officers (other than Mr. Orr). In proposing compensation terms for such other named executive officers, Mr. Fitzgerald considered the value of the overall role and contribution of such named executive officer, including the impact that person has had on the achievement of strategic priorities and operating goals for Ascent Media. In that regard, and throughout the compensation process, Mr. Fitzgerald consulted with Mr. Bennett as President of DHC. Mr. Fitzgerald and Mr. Bennett relied on their knowledge of compensation practices and of the industries in which Ascent Media operates and their long experience as senior executives with major media and telecommunications companies.
 
Ultimately, the compensation packages of each of such named executive officers represent the results of extensive negotiations between Ascent Media and such officers, as finally approved by Mr. Fitzgerald and Mr. Bennett.
 
Elements of Compensation
 
A summary of each element of the compensation program for the named executive officers (other than Mr. Fitzgerald and Mr. Orr) is set forth below. Ascent Media believes that each element complements the others and that together they serve to achieve Ascent Media’s compensation objectives.
 
Base Salary
 
Ascent Media provides competitive base salaries to attract and retain high-performing executive talent. Ascent Media believes that a competitive base salary is an important component of compensation as it provides a degree of financial stability for executives. Base salaries also form the basis for calculating other compensation opportunities for the named executive officers other than Mr. Fitzgerald and Mr. Orr, including, for example, the metrics for the target award of each such named executive officer under the MIP and the amount of life insurance provided by Ascent Media.


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The base salary level of each named executive officer is generally determined based on the responsibilities assumed by such officer; his or her experience, overall effectiveness and demonstrated leadership ability; the performance expectations set for such officer; and competitive market factors.
 
Employment Agreements
 
Base salaries of the named executive officers other than Mr. Fitzgerald and Mr. Orr were established under the employment agreements entered into between Ascent Media and each such officer. Mr. Fitzgerald’s and Mr. Orr’s base salaries are determined by Liberty Media. Mr. Fitzgerald and Mr. Orr do not have employment agreements with Liberty Media or Ascent Media.
 
Ascent Media entered into a five-year renewable employment agreement dated as of February 11, 2008, with Mr. Royo in connection with his appointment as president and chief executive officer of Ascent Media in February 2008. Under the terms of that contract, Mr. Royo is entitled to a base salary of $600,000 per year, subject to annual review for increase in the sole discretion of the Company, beginning in 2009.
 
Ascent Media entered into five-year renewable employment agreements dated as of September 1, 2006 with each of Messrs. Niles and Platisa in connection with their appointments as members of an executive committee, which acted as Ascent Media’s chief executive officer from August 2006 through February 2008. Under the terms of such contracts, the base salaries provided for therein are subject to annual review for increase in the sole discretion of the Company, beginning in 2008.
 
In addition to base salary, each of the named executive officers other than Mr. Fitzgerald and Mr. Orr is eligible to participate in the MIP, the LTIP and any life, health, accident, disability or hospitalization insurance plans, pension plans and retirement plans that Ascent Media makes available to its senior executive employees. Each of the employment agreements with the named executive officers described above also provides for payments in the event of a termination of employment, as consideration for the named executive officer’s continued compliance with certain nondisclosure and nonsolicitation obligations set forth in the employment agreement and, during the term of such employment agreement and a 21-day to 45-day period thereafter, an obligation not to compete. See “— Management Incentive Plan (MIP)”, “— Long-Term Incentive Plan (LTIP)” and “— Termination Payments”, below.
 
Management Incentive Plan (MIP)
 
The named executive officers (other than Mr. Fitzgerald and Mr. Orr) participate in Ascent Media’s Management Incentive Plan or “MIP”, which provides for annual cash incentive awards based on company and individual performance. Employees of Ascent Media and its controlled affiliates with divisional titles of managing director and higher and corporate staff with titles of director and higher are eligible to receive awards under the MIP, as determined by a management incentive plan compensation committee. Prior to the spin-off, the members of such committee were designated by DHC. Following the spin-off, the members of such committee will be designated by our board of directors.
 
The MIP is a performance-based compensation program designed to focus the named executive officers (other than Mr. Fitzgerald and Mr. Orr) and other participants on achieving annual operating performance goals for both the business as a whole and any applicable division or facility for which such participant is responsible, as well as individual professional goals.
 
For each plan year, the committee will assign each participant a target award equal to a percentage of the participant’s base salary (which we refer to as a “Target Award”).
 
Each participant’s target award is allocated 20% to individual performance, based on achievement of individual objectives established by the committee for such plan year (which we refer to as “Key Performance Indicators”). Examples of broad categories of individual objectives include customer care, management and staffing, and customer growth and service expansion. At the end of each plan year, the committee evaluates each participant’s individual performance and determines the portion of the individual component of the target award (from 0% to 100%, which percentage we refer to as the “Individual Achievement Percentage”) the participant is eligible to receive for such plan year. However, no award payments will be made in any year in which Ascent Media


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does not achieve at least 90% of “Hedged” EBITDA for the Ascent Media business as a whole for such plan year. We refer to that overall threshold for payments under the MIP as the “Benchmark”.
 
As defined in the MIP, an “Unhedged” financial result for a given plan year means such financial result as budgeted for Ascent Media as a whole, or for the relevant division or facility, as determined by the committee in its sole discretion in connection with the annual budgeting process prior to the beginning of such plan year; a “Hedged” financial result means the Unhedged result less a percentage discount to reflect the committee’s assessment of business risks relating to such Unhedged result, as determined by the committee in its sole discretion during such budgeting process. “EBITDA” means earnings before interest, taxes, depreciation and amortization. For the 2007 plan year, the EBITDA hedge percentage was 5%, with corresponding differences between “Hedged” and “Unhedged” targets for revenue and free cash flow (defined for purposes of the MIP as EBITDA less capital expenditures).
 
The remaining 80% of each participant’s target award (the “Corporate Performance Component”) under the MIP is subject to the achievement of certain economic performance metrics. In the case of corporate staff, including Messrs. Niles, Platisa and Royo, the Corporate Performance Component of their awards is based on Ascent Media achieving “Hedged” levels of (1) revenue (such component’s weight, 20%), (2) EBITDA (such component’s weight, 40%) and (3) free cash flow (such component’s weight, 40%). We refer to each of the three levels as an “Economic Performance Goal”. Pursuant to the MIP, these Economic Performance Goals are compared to Ascent Media’s adjusted operating results, and the resulting percentage (an “Economic Performance Goal Achievement Percentage”) is then used to determine the portion of the component weight of each Economic Performance Goal (the “Percentage of Component Weight”) that will be used to determine the percentage of the Corporate Performance Component (the “Corporate Performance Component Percentage”) earned by each participant, as follows:
 
     
Economic Performance Goal
  Percentage of
Achievement Percentage
 
Component Weight
 
> 100%   > 100% and up to 150%
100%   100%
99.5% to 95%   95% to 50%
< 95%   0%
 
Adjustments to actual operating results under the MIP are intended to reflect unbudgeted factors that are believed to have affected actual operating results, such that reliance on actual operating results to calculate Economic Performance Goal Achievement Percentages would cause such percentages not to be indicative of Ascent Media’s operational performance in the relevant period. Any such adjustments must be approved by the management incentive plan compensation committee, which has discretion to approve such adjustments under the plan. Such adjustments may be positive or negative. For 2007, the management incentive plan committee approved adjustments which, in the aggregate on a net basis, decreased revenue by $7.2 million (1%), and increased EBITDA by $6.5 million (10%). Notwithstanding the adjustments to EBITDA, the committee held adjusted free cash flow flat for purposes of the MIP. For 2007, such adjustments reflected numerous factors that the management incentive plan committee deemed appropriate in light of the purposes of the plan, including, among other factors, the impact of the Writers Guild strike and certain foreign exchange effects.
 
Awards are payable, to the extent earned, no later than 21/2 months following the end of the applicable plan year. Participants must be employed by Ascent Media through the payment date to be eligible to receive awards. Awards and other plan terms are subject to adjustment under certain circumstances as determined by the committee in accordance with the MIP.
 
The following table sets forth, for each of Messrs. Niles, Platisa and Royo, such named executive officer’s salary, Target Award, Individual Achievement Percentage, Corporate Performance Component Percentage, total award percentage (which amount represents the applicable named executive officer’s Target Award times the sum of (i) 0.2 times such named executive officer’s Individual Achievement Percentage and (ii) 0.8 times such named


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executive officer’s Corporate Performance Component Percentage) and total amount payable pursuant to the MIP, in each case, for the year ending December 31, 2007.
 
                                                 
                Individual
    Economic
             
                Achievement
    Achievement
    Total Award
       
Name
  Salary     Target Award     Percentage     Percentage     Percentage     MIP Award  
 
William Niles
  $ 440,000       50%       85%       60.2%       32.6%     $ 143,320  
George Platisa
  $ 475,000       50%       70%       60.2%       31.1%     $ 147,595  
Jose Royo
  $ 337,731       35%       85%       60.2%       22.8%     $ 77,006  
 
For 2007, Mr. Niles’ Individual Achievement Percentage was based on the committee’s determination of Mr. Niles’ achievement of the following Key Performance Indicators:
 
  •  Providing leadership and driving key operating committee initiatives, including developing a well articulated and understood strategic vision, developing a “re-engineered” sales process and organization, developing an employee communication strategy, driving the continued evolution of breaking operating silos and ensuring that the entire company is executing a unified strategy, and supporting and driving the evaluation and implementation of new operating systems, to improve operational efficiency and provide better operating metrics; and
 
  •  Identifying, developing, negotiating and consummating strategic relationships, partnerships, acquisitions and dispositions.
 
For 2007, Mr. Platisa’s Individual Achievement Percentage was based on the committee’s determination of Mr. Platisa’s achievement of the following Key Performance Indicators:
 
  •  Providing leadership and driving key operating committee initiatives, including developing a well articulated and understood strategic vision, developing a “re-engineered” sales process and organization, developing an employee communication strategy, driving the continued evolution of breaking operating silos and ensuring that Ascent Media is executing a unified strategy, and supporting and driving the evaluation and implementation of new operating systems designed to improve operational efficiency and provide improved operating metrics; and
 
  •  Providing finance and accounting support to Ascent Media’s operations committee and maintaining a strong financial internal control environment.
 
For 2007, Mr. Royo’s Individual Achievement Percentage was based on the committee’s determination of Mr. Royo’s achievement of the following Key Performance Indicators:
 
  •  Providing leadership and driving key operating committee initiatives, including developing a well articulated and understood strategic vision, developing a “re-engineered” sales process and organization, developing an employee communication strategy, driving the continued evolution of breaking operating silos and ensuring that the entire company is executing a unified strategy, and supporting and driving the evaluation and implementation of new operating systems designed to improve operational efficiency and provide better operating metrics;
 
  •  Implementing an overall technology strategy for Ascent Media;
 
  •  Overseeing and managing all strategic planning, design, launch and operations of the Digital Services Group;
 
  •  Overseeing and managing Ascent Media’s support, network operations and business systems;
 
  •  Working to develop a company-wide technology strategy, to establish strong communication among different departments and divisions and to create leverage across Ascent Media’s various technology initiatives and capital expenditure investments;
 
  •  Actively engaging in the capital expenditure approval process and ensuring alignment with overall company strategy for any capital expenditure approvals; and
 
  •  Leading planning and development of Ascent Media’s emerging digital services.


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The following table sets forth, for 2007, the calculation of the Corporate Performance Component Percentage for each of Messrs. Niles, Platisa and Royo (in each case, 60.2%), the elements of which calculation are described above.
 
                                                 
            Economic
          Corporate
    2007 Economic
  2007 Adjusted
  Performance Goal
  Percentage of
      Performance
    Performance
  Economic
  Achievement
  Component
  Component
  Component
    Goal(1)   Performance(1)   Percentage   Weight   Weight   Percentage
 
Revenue   $ 688,488     $ 675,001       98 %     80 %     20 %     16 %
EBITDA
  $ 82,225     $ 74,003       90 %     0 %     40 %     0 %
Free Cash Flow
  $ 21,740     $ 23,842       108 %     110.5 %     40 %     44.2 %
Total
                                            60.2 %
 
 
(1) Includes Ascent Sound.
 
Long-Term Incentive Plan (LTIP)
 
The named executive officers (other than Mr. Fitzgerald and Mr. Orr) and certain other key employees of Ascent Media participate in Ascent Media’s Long-Term Incentive Plan, or “LTIP”, which provides for the grant of awards which we refer to as “phantom appreciation rights” or “PARs”. Subject to vesting in accordance with the LTIP, each PAR measures the increase, if any, in the “Value” of a phantom unit under the LTIP from the grant date to the date of exercise, in each case as defined in accordance with the LTIP. The LTIP is administered by a committee, which has authority to determine eligibility under the LTIP, to grant PARs to eligible personnel thereunder, to interpret the LTIP for all purposes, including the authority to make the calculations required by the LTIP in accordance with the terms thereof, and to make any adjustments provided for under the LTIP. Prior to the spin-off, the members of such committee were designated by DHC. Following the spin-off, the members of such committee will be designated by our board of directors.
 
Pursuant to the LTIP, the Value of a phantom unit under the LTIP as of any valuation date is equal to the sum of (i) 6% of cumulative free cash flow (as defined in the LTIP) over a period of up to six years, divided by 500,000 (which we refer to as the “Free Cash Flow Component”) plus (ii) the calculated value of Ascent Media, based on a formula set forth in the LTIP, divided by 10,000,000 (which we refer to as the “Company Value Component”). A maximum of 500,000 PARs may be granted under the LTIP. PARs that are exercised and paid, and PARs that are forfeited or canceled or otherwise not paid, are available for re-grant under the Plan. As of June 1, 2008, an aggregate of 488,500 PARs have been granted and are outstanding under the LTIP.
 
Under the LTIP, cumulative free cash flow is defined as the aggregate free cash flow, as of any valuation date, for all calendar years beginning on or after January 1, 2006 and ending on or before the applicable valuation date (or, in the case of AccentHealth, for the period beginning on January 1, 2006 and ending on the date of any sale to a third party of all or substantially all of the assets or equity of AccentHealth). Under the LTIP, free cash flow is defined as, for any calendar year:
 
  •  the aggregate EBITDA of Ascent Media and AccentHealth;
 
  •  less the sum of the capital expenditures of Ascent Media and AccentHealth for such year;
 
  •  plus the aggregate cash amount actually expended by Ascent Media and AccentHealth for such year for prepayment of taxes other than federal or state income taxes;
 
  •  plus the portion of any debt service payments allocable to interest on any outstanding debt of Ascent Media and AccentHealth for such year.
 
The LTIP defines the value of Ascent Media for the purpose of calculating the Company Value Component as the sum of:
 
  •  7.5 times the aggregate EBITDA of Ascent Media and AccentHealth for the calendar year last ended (or, in the case of AccentHealth, following any sale to a third party of all or substantially all of the assets or equity of AccentHealth, an amount equal to the net consideration (as defined in the LTIP) received in such sale),


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  excluding for this purpose EBITDA under certain long-term networks services contracts (which we refer to as the “Value EBITDA Component”); plus
 
  •  the present value of the free cash flow projected to be generated over the life of such long-term networks services contracts, using a 10% discount rate (which we refer to as the “Value FCF Component”); minus
 
  •  the sum of any indebtedness of Ascent Media, the liquidation value of any preferred equity interests, and the aggregate amount of Ascent Media’s obligations under the then outstanding vested PARs, and any amounts that are or may become payable under certain deferred compensation arrangements entered into by Ascent Media or subsidiaries of Ascent Media (which we refer to as the “Value Additional Adjustments Component”);
 
calculated in each case as provided under the LTIP. Such value is calculated on a periodic basis pursuant to the terms of the LTIP.
 
The initial Value of a phantom unit under the LTIP, which is the baseline for all PARs granted on or before December 31, 2007, is $50.50. The amount, if any, by which the Value of a phantom unit on the exercise date of a PAR exceeds the grant date Value of a phantom unit is referred to under the LTIP as the “PAR Value” of such PAR. As of December 31, 2007, the PAR Values of all PARs granted prior to such date were not positive. As of such date, the PAR Value of each PAR was −$0.59, based on a Value of $49.91. Such Value was calculated based on a Free Cash Flow Component of $35,266,800 and a Company Value Component of $463,802,500 (calculated on the basis of a Value EBITDA Component of $390,067,500, a Value FCF Component of $73,735,000 and a Value Additional Adjustments Component of $0). See “Risk Factors” and “Cautionary Statements Concerning Forward Looking Statements” for factors that may negatively impact the Value of a phantom unit under the LTIP, and thus negatively impact PAR Value.
 
Awards under the LTIP are subject to vesting. Unless otherwise determined by the committee in connection with any grant, and set forth in the applicable grant agreement, each award under the LTIP will vest in 12 equal quarterly installments over the 36-month period following the Grant Date, so long as the grantee remains continuously employed by the Company on a full-time basis. A grantee who dies or becomes disabled while employed will be 100% vested in his or her PARs as of the date of death or disability.
 
Upon the termination of employment of a grantee, for any reason other than a termination for Cause as defined in the LTIP, such grantee will be deemed to exercise all of his or her vested PARs on the grantee’s termination date, based on the PAR Value as of the valuation date last preceding or on the date of termination, and all unvested PARs will be terminated. All PARs, whether vested or unvested, will automatically terminate unexercised upon any termination of employment of the grantee for Cause. All vested PARs then outstanding will be automatically exercised upon a change of control (as defined in the LTIP) or, if no change of control has then occurred, on March 31, 2012, which is referred to under the LTIP as the “Payment Date”. Pursuant to the LTIP, PARs may not be exercised in any other manner except as described above.
 
Following the exercise of vested PARs, if the PAR Value of such vested PARs is greater than zero, the grantee shall be entitled to receive consideration in the amount of such PAR Value, including interest (in the event of an exercise upon a change of control) from the date of exercise to the date of payment at the rate of three month LIBOR as published in the Wall Street Journal. Such consideration shall be payable at the earlier of the Payment Date and six months after the grantee’s separation from service (as defined in the LTIP). Such consideration shall be payable in cash or, at the discretion of the committee, in shares of any publicly-traded class or series of common stock of Ascent Media (if Ascent Media is at such time a corporation) or of any corporate affiliate of Ascent Media designated by the committee.
 
The foregoing description of the LTIP is qualified in its entirety by reference to the LTIP included as Exhibit 10.3 to the Registration Statement on Form 10 of which this Information Statement forms a part.


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Relocation Assistance and Related Tax Gross-Up
 
Consistent with Ascent Media’s objective to attract and retain a high-performing executive management team, Ascent Media may recruit candidates from throughout the U.S. to fill executive level openings and will reimburse the newly hired executive for relocation costs.
 
Summary Compensation Table
 
We have not yet paid any compensation to any of our executive officers. The following table sets forth information regarding the compensation paid during the years ended December 31, 2007 and 2006 (i) to Mr. Fitzgerald by Liberty Media, to the extent allocated to services provided by Mr. Fitzgerald to DHC and its subsidiaries, including Ascent Media and AccentHealth, under the services agreement with Liberty Media and (ii) to our other named executive officers, by Ascent Media. Prior to the date hereof, Mr. Orr has not performed, and has not received compensation with respect to, any services for Ascent Media. The compensation set forth below does not necessarily reflect the compensation to be paid by our company to our named executive officers in the future.
 
                                                                 
                                  Non-Equity
             
                      Stock
    Option
    Incentive Plan
    All Other
       
Name
  Year     Salary     Bonus     Awards     Awards     Compensation(1)     Compensation     Total  
 
William Fitzgerald(2)
    2007     $ 332,500                             $ 49,875(3 )   $ 382,375  
      2006     $ 332,500                             $ 49,875(3 )   $ 382,375  
William Niles
    2007     $ 440,000                       $ 143,320 (4)   $ 11,988(5 )   $ 595,308  
      2006     $ 421,731     $ 103,750                       $ 11,368(6 )   $ 536,849  
John Orr
    2007                                            
      2006                                            
George Platisa
    2007     $ 475,000                       $ 147,595 (4)   $ 13,845(7 )   $ 636,440  
      2006     $ 472,081     $ 117,875                       $ 12,850(8 )   $ 602,806  
Jose Royo
    2007     $ 337,731 (9)                     $ 77,006 (4)   $ 3,333(10 )   $ 418,070  
      2006     $ 265,000     $ 39,750                       $ 2,274(10 )   $ 307,024  
 
 
(1) Amounts granted pursuant to the LTIP represent Non-Equity Incentive Plan Compensation. Because the Value of each PAR granted to our named executive officers does not exceed the initial Value of such PARs, as of December 31, 2007, the PAR Value of each such PAR, as of December 31, 2007, is 0. Accordingly, no amounts are recorded in the Summary Compensation Table with respect to any PARs granted to our named executive officers prior to such date.
 
(2) Amounts set forth represent amounts paid by DHC to Liberty Media pursuant to the services agreement as portions of Mr. Fitzgerald’s salary and benefits allocable to Mr. Fitzgerald’s work for and on behalf of Ascent Media.
 
(3) Calculated as 15% of Mr. Fitzgerald’s allocated salary for health and other benefits.
 
(4) Represents amounts payable to such named executive officer pursuant to the MIP.
 
(5) Includes (i) a matching contribution of $7,500 made by Ascent Media to Mr. Niles’ 401(k) account and (ii) $4,488 in term life insurance premiums paid by Ascent Media.
 
(6) Includes (i) a matching contribution of $7,750 made by Ascent Media to Mr. Niles’ 401(k) account and (ii) $3,618 in term life insurance premiums paid by Ascent Media.
 
(7) Represents (i) a matching contribution of $9,000 made by Ascent Media to Mr. Platisa’s 401(k) account and (ii) $4,845 in term life insurance premiums paid by Ascent Media.
 
(8) Represents (i) a matching contribution of $8,800 made by Ascent Media to Mr. Platisa’s 401(k) account and (ii) $4,050 in term life insurance premiums paid by Ascent Media.
 
(9) Includes $10,231 paid to retroactively increase Mr. Royo’s salary for the year ended December 31, 2006.
 
(10) Represents term life insurance premiums paid by Ascent Media.


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Grants of Plan-Based Awards
 
The following table contains information regarding plan-based incentive awards granted during the year ended December 31, 2007.
 
                                                 
    Estimated Future Payouts Under
 
    Non-Equity Incentive Plan Awards  
          Committee
                         
          Approval
                      Number of
 
Name
  Grant Date(1)     Date(1)     Threshold(2)     Target(3)     Maximum(2)     PARs(4)  
 
William Fitzgerald
                                   
William Niles
    1/9/07       12/29/06           $ 0             60,000  
John Orr
                                   
George Platisa
    1/2/07       12/29/06           $ 0             60,000  
Jose Royo
    1/2/07       12/29/06           $ 0             35,000 (5)
 
 
(1) By written consent dated December 29, 2006, the committee appointed by DHC to administer the LTIP approved the grants of the PARs reflected in the Grants of Plan-Based Awards table, which approval was subject to the delivery by the applicable grantee of an executed PAR Grant Agreement. The Grant Date reflects the execution and delivery date of such PAR Grant Agreement. Additionally, while each of the applicable grantees were granted their respective PARs in the first quarter of 2007, each such grantee was credited with vested PARs as if the PARs had begun to vest on August 3, 2006. The PARs vest quarterly over a three year period.
 
(2) The PAR Value, representing the value of a single PAR, is equal to the positive amount (if any) of (a) the sum of (i) 6% of cumulative free cash flow (as defined in the LTIP) over a period of up to six years, divided by 500,000 plus (ii) the calculated value of Ascent Media, based on a formula set forth in the LTIP, divided by 10,000,000 over (b) a baseline value determined at the time of the applicable grant. The Par Value is calculated on a periodic basis pursuant to the terms of the LTIP. Accordingly, the Par Value cannot have a minimum or maximum value. See “Compensation Discussion and Analysis — Long-Term Incentive Plan.”
 
(3) Because the Value of each PAR granted to our named executive officers does not exceed the initial Value of such PARs the PAR Value was zero as of December 31, 2007. Accordingly, no amounts are recorded in the Grants of Plan-Based Awards Table with respect to any PARs granted to our named executive officers prior to such date.
 
(4) As of March 31, 2008, our named executive officers have been granted an aggregate of 190,000 PARs, or 38% of the aggregate number of PARs available for grant under the LTIP.
 
(5) In addition to such PARs granted to Mr. Royo during the fiscal year ended December 31, 2007, on February 11, 2008, Mr. Royo was granted an additional 35,000 PARs, each with an initial Value of $49.91.


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Outstanding Equity Awards at Fiscal Year-End
 
We did not grant any stock options or stock appreciation rights to our named executive officers during the year ended December 31, 2007. The following table contains information regarding unexercised options to acquire shares of DHC common stock, which were outstanding as of December 31, 2007 and held by any of our named executive officers.
 
                                 
    Option awards  
    Number of
    Number of
             
    Securities
    Securities
             
    Underlying
    Underlying
             
    Unexercised
    Unexercised
    Option
    Option
 
    Options-
    Options-
    Exercise
    Expiration
 
Name
  Exercisable     Unexercisable     Price ($)     Date  
 
William Fitzgerald
                               
Series A
          3,500     $ 13.00       7/31/13  
            7,000     $ 11.84       8/6/14  
William Niles
                       
John Orr
          1,200     $ 13.00       7/31/13  
            3,000     $ 11.84       8/6/14  
George Platisa
                       
Jose Royo
                       
 
Option Exercises and Stock Vested Table
 
None of our named executive officers held options to purchase our common stock during the year ended December 31, 2007. The following table sets forth information regarding the exercise of DHC stock options held by any of our named executive officers during the year ended December 31, 2007.
 
                 
    Option Awards  
    Number of
       
    Shares
    Value
 
    Acquired on
    Realized on
 
Name
  Exercise     Exercise ($)  
 
William Fitzgerald
               
Series A
    92,162       1,041,255  
      55,410       751,372  
William Niles
           
John Orr
    23,300       288,427  
George Platisa
           
Jose Royo
           
 
Potential Payments Upon Termination or Change-in-Control
 
DHC Options
 
Neither Mr. Fitzgerald nor Mr. Orr is a party to any employment agreement with Liberty Media, DHC or our company pursuant to which such named executive officer would be entitled to receive any severance payments. Pursuant to the Discovery Holding Company Transitional Stock Adjustment Plan, adopted by the DHC board of directors in connection with the 2005 spin-off of DHC from Liberty Media, options to purchase shares of DHC common stock granted to Mr. Fitzgerald and Mr. Orr pursuant thereto will vest in full, and any restrictions thereon will lapse, in the event of Mr. Fitzgerald’s or Mr. Orr’s death or disability, or upon a change of control of DHC. The amounts provided with respect to such options in the “Benefits Payable Upon Termination” table are based on the spread between the exercise price of the applicable award and the closing market price on December 31, 2007 for DHC Series A common stock ($25.14).


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Employment Agreements
 
Each of the employment agreements between Ascent Media and each of Messrs. Royo, Niles and Platisa provide for certain severance payments in the event of the termination of the employment of the applicable named executive officer, with adjustments to be made to such severance payments if such named executive officer’s employment is terminated concurrently with or following a change of control of Ascent Media.
 
Under each of the employment agreements of Messrs. Royo, Niles and Platisa, a change of control of Ascent Media will be deemed to have occurred if any person or group (other than one or more of DHC, a parent entity of Ascent Media, Mr. Malone and certain affiliates of each, each of which we refer to as an “Ascent Media Permitted Holder”):
 
(i) acquires, directly or indirectly, all or substantially all of the assets of Ascent Media; or
 
(ii) becomes the beneficial owner of more than 50% of the aggregate voting power of Ascent Media’s outstanding voting securities, and such person or group beneficially owns a greater percentage of such aggregate voting power than owned in the aggregate by the Ascent Media Permitted Holders, subject to certain exceptions.
 
Under each such employment agreement, a direct or indirect spin-off of Ascent Media from DHC will not constitute a change in control of Ascent Media.
 
Termination for Cause
 
If Ascent Media terminates such a named executive officer’s employment for “Cause,” Ascent Media will have no further liability or obligations under the applicable employment agreement to such named executive officer other than accrued but unpaid base salary, vacation days and expenses. “Cause” is defined in each employment agreement to include: breaches of material obligations under the applicable employment agreement; continued failure to perform the applicable named executive officer’s duties; material violations of company policies or applicable laws and regulations; fraud, dishonesty or misrepresentation; gross negligence in the performance of duties; conviction of felony or crime of moral turpitude; and other misconduct that is materially injurious to the financial condition or business reputation of Ascent Media.
 
Termination Without Cause
 
If Ascent Media terminates the employment of Mr. Royo, Mr. Niles or Mr. Platisa, Ascent Media becomes obligated to pay the applicable named executive officer:
 
(i) accrued but unpaid base salary and vacation time;
 
(ii) a severance payment equal to:
 
  •  if termination occurs prior to a change of control, as defined in the employment agreement, the named executive officer’s base salary times 2.0; or
 
  •  if termination occurs concurrently with or following such a change of control, the product of 2.5 times the sum of (A) the named executive officer’s base salary and (B) an amount equal to the named executive officer’s average bonus award under the MIP for the preceding two years (or, if greater, 60% of the named executive officer’s target award under the MIP for the year of termination), in each case calculated as a percentage of base salary and applied to the named executive officer’s then current base salary;
 
(iii) in lieu of any award payable under the MIP with respect to the applicable year of termination:
 
  •  if termination occurs prior to a change of control, as defined in the employment agreement, and (i) on a date that is on or prior to June 30 of the calendar year in which the termination occurs, an amount equal to the named executive officer’s average bonus award under the MIP for the preceding two years, or (ii) on a date that is after June 30 of such calendar year, the greater of the amount determined in item (i) above or an amount equal to the named executive officer’s actual


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  bonus award under the MIP for the applicable year, in each case prorated to the date of termination; or
 
  •  if termination occurs concurrently with or following such change of control, an amount equal to the named executive officer’s average bonus award under the MIP for the preceding two years (or, if greater, 60% of the named executive officer’s target award under the MIP for the year of termination), in each case calculated as a percentage of base salary and applied to the named executive officer’s then current base salary, prorated to the date of termination; and
 
(iv) incurred but unpaid expenses.
 
Termination with Good Reason
 
Subject to certain notice provisions and Ascent Media’s rights with respect to a negotiation period, each named executive officer (other than Mr. Fitzgerald and Mr. Orr) may terminate his employment for “Good Reason” and receive the same payments as if such named executive officer’s employment was terminated without Cause. “Good Reason” is defined in each employment agreement to include a reduction in base salary, a breach by Ascent Media of any material term of the applicable employment agreement, the relocation of the applicable named executive officer’s principal place of employment by more than 35 miles and the failure of the parties to negotiate a new, mutually acceptable employment agreement following a change of control.
 
Death or Disability
 
In the event any of Messrs. Royo, Niles or Platisa dies or becomes disabled during such named executive officer’s term of employment, Ascent Media becomes obligated to pay such named executive officer (or his legal representative, as applicable):
 
  (i)    any accrued but unpaid base salary and vacation time;
 
  (ii)   incurred but unpaid expenses; and
 
  (iii)  a lump sum amount equal to such named executive officer’s monthly base salary in effect on the date of termination for the lesser of six months or the remainder of the term of the applicable employment agreement.
 
Non-Renewal
 
Each of the employment agreements of Messrs. Royo, Niles and Platisa provides that, absent a prior change of control, if a new employment agreement is not executed to continue the applicable named executive officer’s employment beyond the term of the employment agreement, such named executive officer will be deemed terminated without Cause (except that if such named executive officer does not accept an offered employment agreement on terms at least as favorable as the employment agreement then in effect, such named executive officer shall be entitled to 1.0 times base salary, rather than 2.0 times base salary, as a severance payment).
 
LTIP
 
For a description of the LTIP and the PARs granted thereunder, see “Compensation Discussion and Analysis — 2006 Long-Term Incentive Plan”. In the event of a change of control of Ascent Media with respect to each PAR granted to a grantee that remains an employee of Ascent Media or one of its subsidiaries on the date of such change of control:
 
  •  the grantee will become 100% vested in such grantee’s PARs as of the date of such change of control; and
 
  •  the grantee will be deemed to have exercised such grantee’s PARs as of the date of such change of control, with the applicable PAR Value to be determined by the LTIP committee in good faith based on the fair market value of the net proceeds received in connection with the change of control.
 
Under the LTIP, a “change in control” will be deemed to have occurred if there occurs a change in ownership of Ascent Media or a change in ownership in a substantial portion of Ascent Media’s assets. A change in ownership is


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deemed to have occurred if any one person, or more than one person acting as a group, acquires more than 50% of the total fair market value or more than 50% of the total voting power of the stock of Ascent Media. However, if any person or group already owns more than 50% of the total fair market value or more than 50% of the total voting power of Ascent Media stock at the time of such acquisition, the acquisition of additional stock by the same person or group is not considered to cause a change in ownership. A change in the ownership of a substantial portion of Ascent Media’s assets is deemed to have occurred if any person or group acquires 40% or more of the total gross fair market value of Ascent Media’s assets. In either case, there is no change in control when there is a transfer to a person that is controlled by the shareholders of Ascent Media immediately after the transfer. Under the LTIP, a direct or indirect spin-off of Ascent Media from DHC will not constitute a change in control of Ascent Media.
 
Benefits Payable Upon Termination
 
The following table (i) sets forth benefits that would have been payable to each named executive officer if the employment of such named executive officer had been terminated on December 31, 2007, (ii) assumes that all salary, bonus and expense reimbursement amounts due on or before December 31, 2007 had been paid in full as of such date and (iii) does not include any amounts payable pursuant to the LTIP as the PAR Value of all PARs granted prior to December 31, 2007 was zero on such date. The number of PARs held by our named executive officers that had vested as of December 31, 2007 were (i) 0 vested PARs held by Mr. Fitzgerald, (ii) 25,000 vested PARs held by Mr. Niles, (iii) 0 vested PARs held by Mr. Orr, (iv) 25,000 vested PARs held by Mr. Platisa and (v) 14,585 vested PARs held by Mr. Royo. The number of PARs held by our named executive officers that would have vested as of December 31, 2007 assuming a change of control had occurred prior to such date would have been (i) 0 vested PARs held by Mr. Fitzgerald, (ii) 60,000 vested PARs held by Mr. Niles, (iii) 0 vested PARs held by Mr. Orr, (iv) 60,000 vested PARs held by Mr. Platisa and (v) 35,000 vested PARs held by Mr. Royo.
 
                                                 
                Termination
    Termination
             
                Without Cause or
    Without Cause or
             
    Voluntary
    Termination
    for Good Reason
    for Good Reason
             
Name
  Termination     for Cause     (Change in Control)     (No Change in Control)     Death     Disability  
 
William Fitzgerald
              $ 135,590           $ 135,590     $ 135,590  
William Niles
                                               
Severance
              $ 1,430,000     $ 880,000     $ 220,000     $ 220,000  
Bonus/MIP
              $ 132,000     $ 143,320              
Total
              $ 1,562,000     $ 1,023,320     $ 220,000     $ 220,000  
John Orr
              $ 54,468           $ 54,468     $ 54,468  
George Platisa
                                               
Severance
              $ 1,543,750     $ 950,000     $ 237,500     $ 237,500  
Bonus/MIP
              $ 142,500     $ 147,595              
Total
              $ 1,686,250     $ 1,097,595     $ 237,500     $ 237,500  
Jose Royo
                                               
Severance
              $ 653,886     $ 653,500              
Bonus/MIP
              $ 70,924     $ 77,006              
Total
              $ 724,810     $ 730,506              
 
Compensation of Directors
 
We were formed in connection with the spin-off and did not provide any compensation to our directors prior to the spin-off. It is expected that our directors who are also employees of our company will receive no additional compensation for their services as directors. Each of our non-employee directors will receive compensation for services as a director and, if applicable, for services as a member of any board committee, as will be determined by our board of directors.


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Equity Compensation Plan Information
 
Ascent Media Corporation 2008 Incentive Plan
 
The following is a description of the material provisions of the Ascent Media Corporation 2008 Incentive Plan (the “incentive plan”). The summary which follows is not intended to be complete, and we refer you to the copy of the incentive plan filed as an exhibit to the Form 10 registration statement of which this information statement is a part.
 
The incentive plan will be administered by the compensation committee of our board of directors. The incentive plan is designed to provide additional remuneration to certain of our employees and independent contractors for services rendered and to encourage their investment in our capital stock, thereby increasing their proprietary interest in our business. The incentive plan is also intended to (1) attract persons of exceptional ability to become our officers and employees, and (2) induce independent contractors to provide services to us. Employees (including officers and directors) of, and independent contractors providing services to, our company or any of our subsidiaries, will be eligible to participate and may be granted awards under the incentive plan. Awards may be made to any such employee or independent contractor who holds or has held awards under the incentive plan or under any other plan of our company or any of our affiliates. The number of individuals who will receive awards under the incentive plan will vary from year to year and will depend on various factors, such as the number of promotions and our hiring needs during the year, and thus we cannot predict the number of future award recipients.
 
Because equity-based incentive compensation, following the spin-off, is expected to represent a material component of our executive compensation plan, the spin-off is expected to provide real and significant benefits in regard to our executive compensation objectives. The spin-off will further enhance our ability to attract, retain and provide incentives to qualified personnel, by enabling us to grant equity incentive awards based on our publicly traded equity, which will directly reflect the performance of the businesses of Ascent Media. The spin-off will further enable us to more effectively tailor employee benefit plans and retention programs, when compared with current alternatives, to provide improved incentives to the employees and future hires of our company that will better and more directly align the incentives for our management with their performance.
 
Under the incentive plan, the compensation committee may grant non-qualified stock options, stock appreciation rights (SARs), restricted shares, stock units, cash awards, performance awards or any combination of the foregoing (collectively, “awards”). The maximum number of shares of our common stock with respect to which awards may be granted under the incentive plan is 2,000,000, subject to anti-dilution and other adjustment provisions of the incentive plan. With limited exceptions, no person will be granted in any calendar year awards under the incentive plan covering more than 500,000 shares of our common stock. In addition, no person may receive payment for cash awards during any calendar year in excess of $2,000,000.
 
Shares of our common stock issuable pursuant to awards made under the incentive plan will be made available from either authorized but unissued shares of our common stock or shares of our common stock that we have issued but reacquired, including shares purchased in the open market. Shares of our common stock that are subject to (i) any award that expires, terminates or is annulled for any reason without having been exercised, (ii) any award of any SARs that is exercised for cash, and (iii) any award of restricted shares or stock units that shall be forfeited prior to becoming vested, will once again be available for issuance under the incentive plan.
 
Subject to the provisions of the incentive plan, the compensation committee will be authorized to establish, amend and rescind such rules and regulations as it deems necessary or advisable for the proper administration of the incentive plan and to take such other action in connection with or in relation to the incentive plan as it deems necessary or advisable.
 
Options.  Non-qualified stock options awarded under the incentive plan will entitle the holder to purchase a specified number of shares of a series of our common stock at a specified exercise price subject to the terms and conditions of the applicable option grant. The exercise price of an option awarded under the incentive plan may not be less than the fair market value of the shares of the applicable series of our common stock as of the day the option is granted. The compensation committee will determine, in connection with each option awarded to a holder: (1) the series and number of shares of our common stock subject to the option, (2) the per share exercise price, (3) whether the exercise price is payable in cash, by check, by promissory note, in whole shares of any series of our common


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stock, by the withholding of shares of our common stock issuable upon exercise of the option, by cashless exercise, or any combination of the foregoing, (4) other terms and conditions of exercise, (5) restrictions on transfer of the option and (6) other provisions not inconsistent with the incentive plan. Options granted under the incentive plan will generally be non-transferable except as permitted by will or the laws of descent and distribution or pursuant to a qualified domestic relations order.
 
Stock Appreciation Rights.  A SAR awarded under the incentive plan entitles the recipient to receive a payment in stock or cash equal to the excess of the fair market value (on the day the SAR is exercised) of a share of the applicable series of our common stock with respect to which the SAR was granted over the base price specified in the grant. A SAR may be granted to an option holder with respect to all or a portion of the shares of our common stock subject to a related stock option (a “tandem SAR”) or granted separately to an eligible employee or independent contractor (a “free-standing SAR”). Tandem SARs are exercisable only at the time and to the extent that the related stock option is exercisable. Upon the exercise or termination of the related stock option, the related tandem SAR will automatically be cancelled to the extent of the number of shares of our common stock with respect to which the related stock option was so exercised or terminated. The base price of a tandem SAR is equal to the exercise price of the related stock option. Free-standing SARs are exercisable at the time and upon the terms and conditions provided in the relevant agreement. The base price of a free-standing SAR may not be less than the fair market value of a share of the applicable series of our common stock as of the day the SAR is granted. SARs granted under the incentive plan will generally be non-transferable, except as permitted by will or the laws of descent and distribution or pursuant to a qualified domestic relations order.
 
Restricted Shares.  Restricted shares are shares of our common stock, or the right to receive shares of our common stock, that become vested and may be transferred upon completion of the restriction period. The compensation committee will determine, and each individual award agreement will provide: (1) whether the restricted shares are issued to the award recipient at the beginning or end of the restriction period, (2) the price, if any, to be paid by the recipient for the restricted shares, (3) if shares are to be issued at the end of the restriction period, whether dividend equivalents will be paid during the restriction period, (4) whether dividends or distributions paid with respect to shares issued at the beginning of the restriction period will be withheld by us and retained during the restriction period, (5) whether the holder of the restricted shares may be paid a cash amount any time after the shares become vested, (6) the vesting date or vesting dates (or basis of determining the same) for the award and (7) other terms and conditions of the award. Upon the applicable vesting date, all or the applicable portion of restricted shares will vest, any retained distributions or unpaid dividend equivalents with respect to the restricted shares will vest to the extent that the restricted shares related thereto have vested, and any cash amount to be received by the holder with respect to the restricted shares will become payable, all in accordance with the terms of the individual award agreement. The compensation committee may permit a holder to elect to defer delivery of any restricted shares that become vested and any related cash payments or dividend equivalents, provided that such deferral elections are made in accordance with Section 409A of the Code.
 
Stock Units.  The compensation committee will be authorized to award units based upon the fair market value of shares of any series of our common stock under the incentive plan. The compensation committee has the power to determine the terms, conditions, restrictions, vesting requirements and payment rules for awards of stock units, including whether the holder may elect to defer payment of vested stock units in accordance with Section 409A of the Code.
 
Cash Awards.  The compensation committee will also be authorized to provide for the grant of cash awards under the incentive plan. A cash award is a bonus paid in cash that may be based upon the attainment of one or more performance goals that have been established by the compensation committee, if any. The terms, conditions and limitations applicable to any cash awards will be determined by the compensation committee.
 
Performance Awards.  At the discretion of the compensation committee, any of the above-described awards, including cash awards, may be designated as a performance award. Performance awards are contingent upon performance measures applicable to a particular period, as established by the compensation committee and set forth


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in individual agreements, based upon any one or more of certain business criteria specified in the incentive plan, including, but not limited to:
 
  •  increased revenue;
 
  •  net income measures (including income after capital costs and income before or after taxes);
 
  •  stock price measures (including growth measures and total stockholder return);
 
  •  price per share of our common stock;
 
  •  earnings per share (actual or targeted growth); or
 
  •  earnings before interest, taxes, depreciation and amortization (EBITDA).
 
Performance measures may apply to the award recipient, to one or more business units, divisions or subsidiaries of our company or the applicable sector of our company, or to our company as a whole. Goals may also be based on performance relative to a peer group of companies. If the compensation committee intends for the performance award to be granted and administered in a manner that preserves the deductibility of the compensation resulting from such award in accordance with Section 162(m) of the Code, among other requirements set forth in Section 162(m) of the Code and the Treasury Regulations promulgated thereunder, the applicable performance goals must be established in writing (1) no later than 90 days after the commencement of the period of service to which the performance goals relate and (2) prior to the completion of 25% of such period of service. The compensation committee will have no discretion to modify or waive such performance goals to increase the amount of compensation payable that would otherwise be due upon attainment of the goal, unless the applicable award is not intended to qualify as qualified performance-based compensation under Section 162(m) of the Code and the relevant agreement provides for such discretion. Section 162(m) of the Code generally disallows deductions for compensation in excess of $1 million for some executive officers unless the awards meet the requirements for being performance-based.
 
Awards Generally.  Awards under the incentive plan may be granted either individually, in tandem or in combination with each other. Where applicable, the securities underlying, or relating to, awards granted under the incentive plan may be shares of our Series A, Series B or Series C common stock, as provided in the relevant grant. Under certain conditions, including the occurrence of certain approved transactions, a board change or a control purchase (all as defined in the incentive plan), options and SARs will become immediately exercisable, the restrictions on restricted shares will lapse and stock units will become fully vested, unless individual agreements state otherwise. At the time an award is granted, the compensation committee will determine, and the relevant agreement will provide for, any vesting or early termination, upon a holder’s termination of employment with our company, of any unvested options, SARs, stock units or restricted shares and the period during which any vested options, SARs and stock units must be exercised. Unless otherwise provided in the relevant agreement, (1) no option or SAR may be exercised after its scheduled expiration date, (2) if the holder’s service terminates by reason of death or disability (as defined in the incentive plan), his or her options or SARs shall remain exercisable for a period of at least one year following such termination (but not later than the scheduled expiration date) and (3) any termination of the holder’s service for “cause” (as defined in the incentive plan) will result in the immediate termination of all options, SARs and stock units and the forfeiture of all rights to any restricted shares retained distributions, unpaid dividend equivalents and related cash amounts held by such terminated holder. If a holder’s service terminates due to death or disability, options and SARs will become immediately exercisable, the restrictions on restricted shares will lapse and stock units will become fully vested, unless individual agreements state otherwise.
 
Adjustments.  The number and kind of shares of our common stock which may be awarded or otherwise made subject to awards under the incentive plan, the number and kind of shares of our common stock covered by outstanding awards and the purchase or exercise price and any relevant appreciation base with respect to any of the foregoing are subject to appropriate adjustment in the discretion of the compensation committee, as the compensation committee deems equitable, in the event (1) we subdivide the outstanding shares of any series of our common stock into a greater number of shares of such series of common stock, (2) we combine the outstanding shares of any series of our common stock into a smaller number of shares of such series of common stock or (3) there is a stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off,


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combination, exchange of shares, warrants or rights offering to purchase any series of our common stock, or any other similar corporate event (including mergers or consolidations other than approved transactions (as defined in the incentive plan)).
 
Amendment and Termination.  The incentive plan will terminate on the tenth anniversary of its effective date, unless earlier terminated by the compensation committee. The compensation committee may suspend, discontinue, modify or amend the incentive plan at any time prior to its termination. However, before an amendment may be made that would adversely affect a participant who has already been granted an award, the participant’s consent must be obtained, unless the change is necessary to comply with Section 409A of the Code.
 
Plan Benefits.  Due to the nature of the incentive plan and the discretionary authority afforded the compensation committee in connection with the administration thereof, we cannot determine or predict the value, number or type of awards to be granted pursuant to the incentive plan.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
Security Ownership of Certain Beneficial Owners
 
Prior to the spin-off, all of the outstanding shares of our common stock will be owned by DHC. The following table sets forth, to the extent known by us or ascertainable from public filings, the anticipated beneficial ownership of our common stock immediately following the distribution by each person or entity (other than certain of our directors and executive officers, whose ownership information follows) known by us to own more than five percent of the outstanding shares of DHC common stock.
 
The percentage ownership information is based upon 268,059,637 shares of DHC Series A common stock and 13,198,236 shares of DHC Series B common stock outstanding as of June 30, 2008 and assumes a distribution ratio of one share of our common stock for every twenty shares of DHC common stock.
 
                                 
    Title of
    Amount and Nature of
    Percent of
    Voting
 
Name and Address of Beneficial Owner
  Class     Beneficial Ownership     Class     Power  
 
Harris Associates L.P.
    Series A       1,346,853 (1)     10.0 %     6.7 %
Two North LaSalle Street
Suite 500 Chicago, IL 60602
                               
T. Rowe Price Associates, Inc.
    Series A       774,564 (2)     5.8 %     3.9 %
100 E. Pratt Street
Baltimore, MD 21202
                               
John C. Malone
    Series A       112,801 (3)(4)     *       31.0 %
      Series B       609,349 (3)     92.3 %        
Robert R. Bennett
    Series A       16,372 (5)(6)(7)     *       4.1 %
      Series B       83,401 (6)(7)     11.27 %        
 
 
Less than one percent.
(1) Such projected amount is based upon Amendment No. 3 to the Schedule 13G dated February 12, 2008, filed by Harris Associates L.P., an investment adviser, and its general partner, Harris Associates Inc., with respect to DHC’s Series A common stock. Harris Associates would be deemed to be the beneficial owner of 1,346,852 shares of our Series A common stock, as a result of acting as investment adviser. Harris Associates would have shared voting power over 1,236,566 shares of our Series A common stock.
(2) Such projected amount is based upon Amendment No. 1 to the Schedule 13G dated February 14, 2008, filed by T. Rowe Price Associates, Inc., an investment adviser, with respect to DHC’s Series A common stock. T. Rowe Price would be deemed to be the beneficial owner of 774,563 shares of our Series A common stock. T. Rowe Price would have sole voting power over 774,563 shares of our Series A common stock.
(3) Such projected amount will include 26,834 shares of our Series A common stock and 17,047 shares of our Series B common stock held by Mr. Malone’s wife, Mrs. Leslie Malone, as to which shares Mr. Malone has disclaimed beneficial ownership.


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(4) Such projected amount will include 16 and 55,318 shares of our Series A common stock held by two trusts with respect to which Mr. Malone is the sole trustee and, with his wife, retains a unitrust interest in the trust.
(5) Such projected amount will include 113 shares of our Series A common stock held by the Liberty Media 401(k) Savings Plan.
(6) Such projected amount includes beneficial ownership of shares that may be acquired upon exercise of stock options exercisable within 60 days after May 31, 2008. See “The Spin-Off — Effect of the Spin-Off on Outstanding DHC Options.”
(7) Such projected amount will include 5,491 shares of our Series A common stock and 2 shares of our Series B common stock owned by Hilltop Investments, Inc., which is jointly owned by Mr. Bennett and his wife, Mrs. Deborah Bennett.
 
Security Ownership of Management
 
Prior to the spin-off, all of the outstanding shares of our common stock will be owned by DHC. The following table sets forth the anticipated beneficial ownership of shares of our Series A and Series B common stock immediately following the distribution by each of our directors and named executive officers, and by all of our directors and executive officers as a group.
 
The percentage ownership information is based upon 268,059,637 shares of DHC Series A common stock and 13,198,236 shares of DHC Series B common stock outstanding as of June 30, 2008 and assumes a distribution ratio of one share of our common stock for every twenty shares of DHC common stock.
 
                                 
    Title of
  Amount and Nature of
  Percent of
  Voting
Name of Beneficial Owner
  Class   Beneficial Ownership   Class   Power
        (In thousands)        
 
William Fitzgerald
    Series A       1 (1)     *       *  
      Series B                      
                                 
Philip Holthouse
    Series A       ** (2)            
      Series B                    
                                 
Brian Mulligan
    Series A                    
      Series B                      
                                 
William Niles
    Series A                    
      Series B                      
                                 
John Orr
    Series A       ** (3)     *       *  
      Series B                        
                                 
George Platisa
    Series A                    
      Series B                      
                                 
Michael Pohl
    Series A                    
      Series B                      
                                 
Jose Royo
    Series A                    
      Series B                      
                                 
All directors and officers as a group
    Series A       1       *       *  
      Series B                      
 
 
 * Less than one percent
 
** Less than 100 shares
 
(1) Such projected amount reflects beneficial ownership of shares of our Series A common stock held by the Liberty Media 401(k) Savings Plan, had the spin-off been consummated on June 30, 2008.
 
(2) Such projected amount includes 20 shares owned by Mr. Holthouse and his wife, had the spin-off been consummated on June 30, 2008.


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(3) Such projected amount includes beneficial ownership of 10 shares held by a joint account in favor of Mr. Orr and his wife and 67 shares of our Series A common stock held by the Liberty Media 401(k) Savings Plan, had the spin-off been consummated on June 30, 2008.
 
Change of Control
 
Other than as contemplated by the spin-off, we know of no arrangements, including any pledge by any person of its securities, the operation of which may at a subsequent date result in a change in control of our company. For more information about the spin-off, please see “The Spin-Off.”
 
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
We expect that our board of directors will adopt a formal written policy for the review, approval or ratification of any transactions or arrangements involving related parties. All of our directors, executive officers and employees will be subject to the policy and will be asked to promptly report any such related party transaction. No related party transaction will be effected without the approval of the independent committee of the board designated by the board to address such actual or potential conflicts. Directors will be asked to recuse themselves from any discussion or decision by the board or a board committee that involves or affects their personal, business or professional interests.
 
CERTAIN INTER-COMPANY AGREEMENTS
 
Agreements with DHC
 
Following the spin-off, our company and DHC will operate independently, and neither will have any ownership interest in the other. In order to govern certain of the ongoing relationships between our company and DHC (and certain subsidiaries thereof) after the spin-off and to provide mechanisms for an orderly transition, we and DHC (and certain subsidiaries thereof) are entering into certain agreements, the terms of which are summarized below.
 
In addition to the agreements described below, we anticipate entering into, from time to time, agreements and arrangements with Discovery and certain of its related entities, in connection with, and in the ordinary course of, our business. For the years ended December 31, 2007, 2006 and 2005, we recorded revenue of $41,216,000, $33,741,000 and $34,187,000, respectively, earned from Discovery for providing services such as satellite uplink, systems integration, origination and post-production.
 
Reorganization Agreement
 
On June 4, 2008, we entered into a reorganization agreement with DHC and Ascent Media to provide for, among other things, the principal corporate transactions required to effect the spin-off, certain conditions to the spin-off and provisions governing the relationship between our company and DHC with respect to and resulting from the spin-off.
 
The reorganization agreement provides that, on or prior to the record date for the spin-off:
 
  •  DHC will transfer to us, or cause its subsidiaries to transfer to us, all of the outstanding ownership interests in Ascent Media and AccentHealth, as well as all or substantially all of DHC’s excess cash and investment securities;
 
  •  Ascent Media will transfer to DHC, or a subsidiary of DHC, all of the outstanding ownership interests in Ascent Sound; and
 
  •  We and Ascent Media will assume all or substantially all known monetary obligations of DHC (other than any liabilities relating to Ascent Sound) outstanding at or before the effectiveness of the Discovery Transaction, including all obligations of DHC under the services agreement with Liberty Media and all out-of-pocket costs (including the fees and expenses of attorneys and accountants) incurred by DHC and its


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  subsidiaries through the effectiveness of the Discovery Transaction in connection with the spin-off and related matters.
 
The reorganization agreement also provides for mutual indemnification obligations, which are designed to make our company financially responsible for substantially all liabilities that may exist relating to the business of Ascent Media and AccentHealth, whether incurred prior to or after the spin-off, as well as those obligations of DHC assumed by us pursuant to the reorganization agreement, and to make DHC financially responsible for any liabilities relating to the business of Ascent Sound, whether incurred prior to or after the spin-off, as well as any obligations of DHC other than those assumed by us pursuant to the reorganization agreement. For the avoidance of doubt, the liabilities of DHC to be assumed by us pursuant to the reorganization agreement shall not include any liability of or related to Discovery or any of its subsidiaries.
 
In addition, the reorganization agreement provides for each of our company and DHC to preserve the confidentiality of all confidential or proprietary information of the other party for five years following the spin-off, subject to customary exceptions, including disclosures required by law, court order or government regulation.
 
The reorganization agreement may be terminated, and the spin-off may be abandoned, at any time prior to the date of the spin-off, by and in the sole discretion of the DHC board of directors, without the approval of DHC’s shareholders or anyone else. In such event, DHC will have no liability to any person under the reorganization agreement or any obligation to effect the spin-off.
 
This summary is qualified by reference to the full text of the reorganization agreement, a copy of which has been filed as an exhibit to the Form 10 registration statement of which this information statement is a part.
 
Tax Sharing Agreement
 
On or before the date of the spin-off, we will enter into a tax sharing agreement with DHC that governs DHC’s and our respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters. References in this summary description of the tax sharing agreement to the terms “tax” or “taxes” mean taxes as well as any interest, penalties, additions to tax or additional amounts in respect of such taxes.
 
The results of our operations and those of our eligible subsidiaries are currently reflected in DHC’s consolidated return for U.S. federal income tax purposes and certain consolidated, combined, and unitary returns for state, local, and foreign tax purposes. However, for periods (or portions thereof) beginning after the spin-off, we will not join with DHC in the filing of any federal, state, local or foreign consolidated, combined or unitary tax returns.
 
Under the tax sharing agreement, except as described below, DHC will be responsible for (i) all U.S. federal, state, local and foreign income taxes attributable to DHC or any of its subsidiaries for any tax period that begins after the date of the spin-off (and for any tax period that begins on or before and ends after the date of the spin-off, for the portion of that period after the date of the spin-off), other than such taxes arising as a result of the spin-off and related internal restructuring of DHC, (ii) all taxes arising as a result of the spin-off to the extent such taxes arise as a result of any breach on or after the date of the spin-off of any representation, warranty, covenant or other obligation of DHC or of a subsidiary or shareholder of DHC made in connection with the issuance of the tax opinion relating to, among other things, the qualification of the spin-off as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes or in the tax sharing agreement, and (iii) all taxes arising as a result of such internal restructuring of DHC to the extent such taxes arise as a result of any action undertaken after the date of the spin-off by DHC or a subsidiary or shareholder of DHC. We will be responsible for all taxes attributable to us or one of our subsidiaries, whether accruing before, on or after the spin-off (other than any such taxes for which DHC is responsible under the tax sharing agreement), as well as (i) all taxes attributable to DHC or any of its subsidiaries (other than Discovery) for any tax period that ends on or before the date of the spin-off (and for any tax period that begins on or before and ends after the date of the spin-off, for the portion of that period on or before the date of the spin-off), other than such taxes arising as a result of the spin-off and related internal restructuring of DHC and (ii) all taxes arising as a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the tax sharing agreement.


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DHC will have no obligation to compensate us for any tax losses or other attributes created on or before the date of the spin-off, except that DHC will be required to reimburse us for any tax benefit attributable to the utilization, in any period after the date of the spin-off, of any tax losses or other attributes existing on or before the date of the spin-off, to the extent that we have previously indemnified DHC for any taxes or other amounts for which we are responsible under the tax sharing agreement. In addition, we may offset any such tax benefit attributable to the utilization by DHC of such losses or other attributes against any such obligation for taxes or other amounts pursuant to the tax sharing agreement for which we would otherwise have to indemnify DHC.
 
We will be responsible for preparing and filing all tax returns that include us or one of our subsidiaries other than any consolidated, combined or unitary income tax return that includes us or one of our subsidiaries, on the one hand, and DHC or one of its subsidiaries (other than us or any of our subsidiaries), on the other hand, and we will have the authority to respond to and conduct all tax proceedings, including tax audits, involving any taxes or any deemed adjustment to taxes reported on such tax returns. DHC will be responsible for preparing and filing all consolidated, combined or unitary income tax returns that include us or one of our subsidiaries, on the one hand, and DHC or one of its subsidiaries (other than us or any of our subsidiaries), on the other hand, and DHC will have the authority to respond to and conduct all tax proceedings, including tax audits, relating to taxes or any deemed adjustment to taxes reported on such tax returns. We will be entitled to participate in any tax proceeding involving any taxes or deemed adjustment to taxes for which we may be liable under the tax sharing agreement. The tax sharing agreement further provides for cooperation between DHC and our company with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the agreement.
 
Finally, in the tax sharing agreement, we have agreed to comply with all covenants and agreements made in connection with the issuance of the tax opinion to be delivered to DHC by Skadden, Arps, Slate, Meagher & Flom LLP relating to, among other things, the qualification of the spin-off as a transaction described under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off.”
 
This summary is qualified by reference to the full text of the tax sharing agreement, a form of which will be filed as an exhibit to the Form 10 registration statement of which this information statement is a part.
 
Services Agreement
 
On or before the date of the spin-off, Ascent Media will enter into a services agreement with Ascent Sound, which, following consummation of the transactions contemplated by the reorganization agreement, will be a subsidiary of DHC and not a subsidiary of our company. Pursuant to the services agreement Ascent Media will provide and/or make available to Ascent Sound, for the one-year period beginning on the date of the spin-off, certain specified services and benefits, including:
 
  •  accounting and finance services, including general ledger, cash management, purchasing, collections and payables;
 
  •  human resources services;
 
  •  information technology services;
 
  •  payroll services; and
 
  •  real estate management services.
 
In consideration for such services, Ascent Sound will pay Ascent Media a fee of $1 million. Ascent Sound will also reimburse Ascent Media for any out-of-pocket expenses we incur in providing such services.
 
In addition, during the term of the services agreement, Ascent Media will make cash advances to Ascent Sound from time to time, in an aggregate principal amount not to exceed $1.5 million, as reasonably required to meet Ascent Sound’s current payroll and to pay third-party vendors in the ordinary course of its business. Such advances will be due and payable in full on the first anniversary of the spin-off and will bear interest at the prime rate as published from time to time by The Wall Street Journal, calculated on an average daily balance basis.


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The personnel performing services for Ascent Sound under the services agreement will be employees and/or independent contractors of Ascent Media and will remain under Ascent Media’s direction and control. Ascent Media and Ascent Sound will each agree not to solicit employees of the other for the two year period following the spin-off.
 
The services agreement will also contain customary mutual indemnification provisions.
 
Any extension or renewal of the services agreement beyond the first year following the spin-off will be subject to the mutual agreement of our company and Ascent Sound, including without limitation mutual agreement as to the compensation and other terms and conditions thereunder.
 
DESCRIPTION OF OUR CAPITAL STOCK
 
The following information reflects our certificate of incorporation and bylaws as these documents will be in effect at the time of the spin-off.
 
Authorized Capital Stock
 
Our authorized capital stock consists of one hundred million (100,000,000) shares, of which ninety five million (95,000,000) shares are designated common stock, par value $0.01 per share, and five million (5,000,000) shares are designated preferred stock, par value $0.01 per share. Our common stock is divided into three series. We have authorized forty five million (45,000,000) shares of Series A common stock, five million (5,000,000) shares of Series B common stock, and forty five million (45,000,000) shares of Series C common stock.
 
Immediately following the spin-off, we expect to have approximately 13,402,982 shares of our Series A common stock and approximately 659,912 shares of our Series B common stock outstanding, based upon the number of shares of DHC Series A common stock and Series B common stock outstanding on June 30, 2008. No shares of our Series C common stock or preferred stock will be outstanding immediately following the spin-off.
 
Our Common Stock
 
The holders of our Series A common stock, Series B common stock and Series C common stock have equal rights, powers and privileges, except as otherwise described below.
 
Voting Rights
 
The holders of our Series A common stock will be entitled to one vote for each share held, and the holders of our Series B common stock will be entitled to ten votes for each share held, on all matters voted on by our shareholders, including elections of directors. The holders of our Series C common stock will not be entitled to any voting powers, except as required by Delaware law. When the vote or consent of holders of our Series C common stock is required by Delaware law, the holders of our Series C common stock will be entitled to 1/100th of a vote for each share held. Our charter does not provide for cumulative voting in the election of directors.
 
The separate consent of the holders of at least 75% of our outstanding Series B common stock, voting together as a separate class, is required to approve certain distributions of our common stock and certain related amendments to our certificate of incorporation. For a description of the circumstances in which such separate consent would be required, see “— Distributions.”
 
Dividends; Liquidation
 
Subject to any preferential rights of any outstanding series of our preferred stock created by our board from time to time, the holders of our common stock will be entitled to such dividends as may be declared from time to time by our board from funds available therefor. Except as otherwise described under “— Distributions,” whenever a dividend is paid to the holders of one of our series of common stock, we will also pay to the holders of the other series of our common stock an equal per share dividend. For a more complete discussion of our dividend policy, please see “— Dividend Policy.”


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Conversion
 
Each share of our Series B common stock is convertible, at the option of the holder, into one share of our Series A common stock. Our Series A common stock and Series C common stock are not convertible.
 
Distributions
 
Subject to the exception provided below, distributions made in shares of our Series A common stock, our Series B common stock, our Series C common stock or any other security with respect to our Series A common stock, our Series B common stock or our Series C common stock may be declared and paid only as follows:
 
  •  a share distribution (1) consisting of shares of our Series A common stock (or securities convertible therefor) to holders of our Series A common stock, Series B common stock and Series C common stock, on an equal per share basis; or (2) consisting of shares of our Series B common stock (or securities convertible therefor) to holders of our Series A common stock, Series B common stock and Series C common stock, on an equal per share basis; or (3) consisting of shares of our Series C common stock (or securities convertible therefor) to holders of our Series A common stock, Series B common stock and Series C common stock, on an equal per share basis; or (4) consisting of shares of our Series A common stock (or securities convertible therefor) to holders of our Series A common stock and, on an equal per share basis, shares of our Series B common stock (or securities convertible therefor) to holders of our Series B common stock and, on an equal per share basis, shares of our Series C common stock (or securities convertible thereof) to holders of our Series C common stock; and
 
  •  a share distribution consisting of any class or series of securities of our company or any other person, other than our Series A common stock, Series B common stock or Series C common stock (or securities convertible therefor) on the basis of a distribution of (1) identical securities, on an equal per share basis, to holders of our Series A common stock, Series B common stock and Series C common stock; or (2) separate classes or series of securities, on an equal per share basis, to holders of our Series A common stock, Series B common stock and Series C common stock; or (3) a separate class or series of securities to the holders of one or more series of our common stock and, on an equal per share basis, a different class or series of securities to the holders of all other series of our common stock, provided that, in the case of (2) or (3) above, the securities so distributed do not differ in any respect other than their relative voting rights and related differences in designation, conversion and share distribution provisions, with the holders of shares of Series B common stock receiving securities of the class or series having the highest relative voting rights and the holders of shares of each other series of our common stock receiving securities of the class or series having lesser relative voting rights, and provided further that, if different classes or series of securities are being distributed to holders of our Series A common stock and Series C common stock, then such securities shall be distributed either as determined by our board of directors or such that the relative voting rights of the securities of the class or series of securities to be received by the holders of our Series A common stock and Series C common stock corresponds, to the extent practicable, to the relative voting rights of each such series of our common stock, and provided further that, in each case, the distribution is otherwise made on a equal per share basis.
 
In addition, no share distribution of voting stock may be declared or paid if the securities (or securities convertible therefor) to be received by the holders of our Series B common stock consist of securities (or securities convertible therefor) having a per share voting power of less than ten times the per share voting power of the securities (or securities convertible therefor) received in such distribution by holders of our Series A and Series C common stock, unless such share distribution has been consented to by at least 75% of the outstanding shares of Series B common stock, voting as a separate class (who may for this purpose act by written consent).
 
We may not reclassify, subdivide or combine any series of our common stock without reclassifying, subdividing or combining the other series of our common stock, on an equal per share basis.
 
Any amendment of our certificate of incorporation which has the effect of reclassifying or recapitalizing our common stock in a manner which results in the holders of our Series B common stock receiving or holding securities having per share voting power of less than ten times the per share voting power of any other class or series


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of common stock having general voting rights will, in addition to any other approval requirements necessary to amend our certificate of incorporation, also require the consent of the holders of at least 75% of the shares of Series B common stock outstanding (who may for this purpose act by written consent).
 
In addition, any amendment to our certificate of incorporation which amends or changes the foregoing distribution provisions or reclassification provisions will also require the consent of the holders of 75% of the shares of Series B common stock outstanding (who may act for this purpose by written consent).
 
The foregoing distribution provisions, together with the consent right of the Series B holders described above, were structured to ensure that all holders of our common stock are treated proportionately in a distribution, while protecting the relative voting rights associated with each series of our common stock. The distribution provisions permit holders of each series to receive a distribution of shares of the respective series held because such a distribution would not affect any single series’ relative voting rights. The distribution provisions also permit any of Series A, Series B and Series C shares to be distributed to all holders of our common stock, subject to the Series B consent right described above. The purpose of this consent right is to provide our company with flexibility in structuring a share distribution while still protecting the relative voting power of the holders of our Series B common stock. The voting power of our Series B holders would be diluted by a distribution of Series B shares to holders of a lower voting or non-voting series of our stock. Similarly, were our Series B holders to receive a distribution of securities with the same per share voting rights as holders of our lower voting or non-voting series of stock, our Series B holders would also be subject to dilution. The Series B consent right provides our Series B holders with the opportunity to block any such dilutive event. The foregoing distribution provisions, together with the Series B consent right, also replicate, to the extent practicable, these protections with respect to distributions of other securities (including those not issued by our company).
 
Liquidation and Dissolution
 
In the event of our liquidation, dissolution and winding up, after payment or provision for payment of our debts and liabilities and subject to the prior payment in full of any preferential amounts to which our preferred stock holders may be entitled, the holders of our Series A common stock, Series B common stock and Series C common stock will share equally, on a share for share basis, in our assets remaining for distribution to the holders of our common stock.
 
Our Preferred Stock
 
Our certificate of incorporation authorizes our board of directors to establish one or more series of our preferred stock and to determine, with respect to any series of our preferred stock, the terms and rights of the series, including:
 
  •  the designation of the series;
 
  •  the number of authorized shares of the series, which number our board may thereafter increase or decrease but not below the number of such shares then outstanding;
 
  •  the dividend rate or amounts, if any, payable on the shares and, in the case of cumulative dividends, the date or dates from which dividends on all shares of the series shall be cumulative;
 
  •  the rights of the series in the event of our voluntary or involuntary liquidation, dissolution or winding up;
 
  •  the rights, if any, of holders of the series to convert into or exchange for other classes or series of stock or indebtedness and the terms and conditions of any such conversion or exchange, including provision for adjustments within the discretion of our board;
 
  •  the voting rights, if any, of the holders of the series;
 
  •  the terms and conditions, if any, for us to purchase or redeem the shares; and
 
  •  any other relative rights, preferences and limitations of the series.


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We believe that the ability of our board of directors to issue one or more series of our preferred stock will provide us with flexibility in structuring possible future financings and acquisitions, and in meeting other corporate needs that might arise. The authorized shares of our preferred stock, as well as shares of our common stock, will be available for issuance without further action by our shareholders, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be listed or traded. If the approval of our shareholders is not required for the issuance of shares of our preferred stock or our common stock our board may determine not to seek shareholder approval.
 
Three series of preferred stock have been authorized in connection with our Shareholder Rights Plan described below. In addition, although our board of directors has no intention at the present time of doing so, it could in the future issue an additional series of our preferred stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt. Our board of directors will make any determination to issue such shares based upon its judgment as to the best interests of our company and our shareholders. Our board of directors, in so acting, could issue our preferred stock having terms that could discourage an acquisition attempt through which an acquirer may be able to change the composition of our board of directors, including a tender offer or other transaction that some, or a majority, of our shareholders might believe to be in their best interests or in which shareholders might receive a premium for their stock over the then-current market price of the stock.
 
Shareholder Rights Plan
 
Our board of directors has approved the adoption of a shareholder rights plan that will include the terms and provisions described below. As contemplated by the shareholder rights plan, the distribution of our common stock to DHC stockholders of record on the record date for the spin-off will include:
 
  •  one preferred share purchase right (which we refer to as a “Series A right”) for each outstanding share of our Series A common stock, which Series A right will entitle the registered holder to purchase from us one one — thousandth of a share of our Series A Junior Participating Preferred Stock, par value $0.01 per share (which we refer to as the “Series A junior preferred stock”), at a purchase price of $100.00 per one one-thousandth of a share, subject to adjustment; and
 
  •  one preferred share purchase right (which we refer to as a “Series B right”) for each outstanding share of our Series B common stock, which Series B right will entitle the registered holder to purchase from us one one — thousandth of a share of Series B Junior Participating Preferred Stock, par value $0.01 per share (which we refer to as the “Series B junior preferred stock”), at a purchase price of $100.00 per one one-thousandth of a share, subject to adjustment.
 
In the event that we issue shares of our Series C common stock, such shares will include one preferred share purchase right (which we refer to as a Series C right and, collectively with the Series A rights and Series B rights, the “rights”) for each share of Series C common stock issued, which Series C right will entitle the registered holder to purchase from us one one-thousandth of a share of Series C Junior Participating Preferred Stock, at a purchase price of $100.00 per one one-thousandth of a share, subject to adjustment.
 
The description and terms of the rights will be set forth in a Rights Agreement, between us and Computershare Trust Company, N.A., as Rights Agent, a form of which has been filed as an exhibit to the Form 10 of which this information statement is a part. The following description of the rights is qualified in its entirety by reference to the Rights Agreement.
 
Separation and Distribution of Rights; Exercisability.  The Series A rights will be attached to all certificates (or, in the case of uncertificated shares, all book-entry notations) representing shares of our Series A common stock distributed in the spin-off or issued thereafter, the Series B rights will be attached to all Series B certificates (or, in the case of uncertificated shares, all book-entry notations) representing shares of our Series B common stock distributed in the spin-off or issued thereafter and the Series C rights will be attached to all Series C certificates (or, in the case of uncertificated shares, all book-entry notations) representing shares of Series C Stock, if and when such


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shares are issued, and no separate rights certificates will be distributed with respect to any of the rights at such time. The rights will separate from our common stock on the rights distribution date, which will occur upon the earlier of:
 
  •  10 days following a public announcement that a person or group of affiliated or associated persons has become an “acquiring person”; and
 
  •  10 business days (or such later date as may be determined by action of our board of directors prior to such time as any person or group of affiliated persons becomes an “acquiring person”) following the commencement by any person of, or the announcement by any person of an intention to make, a tender offer or exchange offer the consummation of which would result in any person or group of affiliated persons becoming an “acquiring person.”
 
Except in certain situations, a person or group of affiliated or associated persons becomes an “acquiring person” upon acquiring beneficial ownership of our outstanding common stock representing in the aggregate ten percent or more of the shares of our common stock then outstanding. For purposes of the shareholder rights plan, “group” generally means any group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934.
 
The rights agreement provides that, until the rights distribution date (or earlier expiration of the rights), the rights will be evidenced by and transferred with (and only with) the stock certificates or book-entry notation representing the Series A common stock, Series B common stock or Series C common stock to which they are attached. Until the rights distribution date (or earlier expiration of the rights), common stock certificates will contain a notation incorporating the rights agreement by reference. Until the rights distribution date (or earlier expiration of the rights), the transfer of any shares of Series A common stock, Series B common stock or Series C common stock outstanding will also constitute the transfer of the rights associated with the shares of common stock represented by such certificate or book-entry notation. As soon as practicable following any occurrence of a rights distribution date, separate certificates evidencing the rights related to the applicable series of common stock (which we refer to as right certificates) will be mailed to holders of record of our common stock as of the close of business on the rights distribution date and such separate right certificates alone will evidence the rights.
 
The rights are not exercisable unless and until a rights distribution date occurs. The rights will expire ten years after the date of the spin-off, unless such date is advanced or extended or unless the rights are earlier redeemed or exchanged by us, in each case as described below.
 
Anti-dilution Adjustments.  The applicable purchase price payable, the number of shares of the applicable series of junior preferred stock or other securities or property issuable upon the exercise of the rights, and the number of applicable rights outstanding are subject to adjustment from time to time to prevent dilution:
 
  •  in the event of a stock dividend on, or a subdivision, combination or reclassification of, the applicable series of junior preferred stock;
 
  •  if any person acquires, or obtains the right to subscribe for or purchase the applicable junior preferred stock at a price, or securities convertible into the applicable junior preferred stock with a conversion price, less than the then current market price of the applicable junior preferred stock; or
 
  •  upon the distribution to holders of the applicable series of junior preferred stock of evidences of indebtedness, cash (excluding regular quarterly cash dividends), assets (other than dividends payable in junior preferred stock) or subscription rights or warrants.
 
The number of outstanding rights are also subject to adjustment in the event of a stock dividend on, or a subdivision, combination or reclassification of the applicable series of common stock, in each case until a rights distribution date occurs.
 
Dividend and Liquidation Rights of the Junior Preferred Stock.  No shares of any series of junior preferred stock purchasable upon exercise of the rights will be redeemable. Each share of the applicable series of junior preferred stock will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (1) $10 per share and (2) an amount equal to 1,000 times the dividend (other than dividends payable in the related series of common stock) declared per share of our Series A common stock, Series B common stock or Series C common stock, as the case may be. In the event of our liquidation, dissolution or winding up, the holders of


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each series of junior preferred stock will be entitled in priority to the holders of common stock to a minimum preferential payment equal to the greater of (1) $10 per share (plus any accrued but unpaid dividends and distributions) and (2) an amount equal to 1,000 times the payment made per share of our Series A common stock, Series B common stock or Series C common stock, as the case may be. Each share of the applicable series of junior preferred stock will have 1,000 times the number of votes as each share of the corresponding common stock on all matters which the corresponding common stock is entitled, voting together with the applicable series of common stock. Upon any merger, consolidation or other transaction in which shares of our Series A common stock or Series B common stock or Series C common stock are converted or exchanged, each share of the corresponding series of junior preferred stock will be entitled to receive 1,000 times the amount received per share of our Series A common stock, Series B common stock or Series C common stock, as the case may be. These rights are protected by customary anti-dilution provisions.
 
Because of the nature of the dividend, liquidation and voting rights of each series of junior preferred stock, the value of the fractional share of Series A junior preferred stock purchasable upon exercise of each Series A right and the value of the fractional share of Series B junior preferred stock purchasable upon exercise of each Series B right, should approximate the value of one share of our Series A common stock and Series B common stock, respectively.
 
Flip-in and Flip-Over Events.  In the event that any person or group of affiliated or associated persons becomes an acquiring person, each holder of a Series A right (other than rights beneficially owned by the acquiring person, which will become void) will have the right to receive upon exercise of a Series A right shares of Series A common stock, each holder of a Series B right (other than rights beneficially owned by the acquiring person, which will become void) will have the right to receive upon exercise of a Series B right shares of Series B common stock, and if shares of Series C common stock are issued, each holder of a Series C right (other than rights beneficially owned by the acquiring person, which will become void) will have the right to receive upon exercise of a Series C right shares of Series C common stock, in each case, having a market value equal to two times the exercise price of the Series A right, Series B right or Series C right, as the case may be. The events described in this paragraph are referred to as “flip-in events.”
 
In the event that, after a person or group has become an acquiring person, we are acquired in a merger or other business combination transaction or 50% or more of our consolidated assets or earning power are sold, proper provisions will be made so that each holder of a Series A right, Series B right or a Series C right (other than rights beneficially owned by an acquiring person, which will have become void) will have the right to receive upon exercise of Series A rights, Series B rights or Series C rights shares of common stock of the person with whom we have engaged in the foregoing transaction (or its parent) that at the time of such transaction have a market value of two times the exercise price of the Series A right, the Series B right or the Series C right, as the case may be. The events described in this paragraph, are referred to as “flip-over” events.
 
Exchange of the Rights.  At any time after any person or group becomes an acquiring person and prior to the earlier of the occurrence of a flip-over event or the acquisition by the person or group of shares of our common stock representing, in the aggregate, 50% or more of our outstanding voting power, our board of directors may, without payment of the purchase price by the holder, cause the exchange of the rights (other than the rights beneficially owned by the acquiring person, which will become void), in whole or in part, for shares of the corresponding series of common stock (or in some circumstances junior preferred stock) at an exchange ratio of one share of the corresponding series of common stock (or junior preferred stock of equivalent value) for each right, subject to adjustment.
 
Redemption of Rights.  At any time prior to the time a person or group becomes an acquiring person, our board of directors may redeem the rights in whole, but not in part, at a price of $.01 per right, subject to adjustment, payable, at our option, in cash, shares of common stock or other consideration deemed appropriate by our board of directors. The redemption of the rights may be made effective at the time, on the basis and with the conditions as our board of directors in its sole discretion may establish. Immediately upon any redemption of the rights, the right to exercise the rights will terminate and the only right of the holders of rights will be to receive the redemption price.
 
Amendment of Rights.  For so long as the rights are redeemable, we may, except with respect to the redemption price, amend the rights agreement in any manner without approval of the holders of our common stock.


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After the rights are no longer redeemable, we may, except with respect to the redemption price, amend the rights agreement in any manner that does not adversely affect the interests of holders of the rights.
 
No Rights as Stockholder.  Until a right is exercised or exchanged, the holder of the rights, as such, will not have any rights as a stockholder of our company, including, without limitation, any right to vote or to receive dividends.
 
Tax Considerations.  See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off — Material Tax Considerations of the Distribution of the Rights.”
 
Dividend Policy
 
We presently intend to retain future earnings, if any, to finance the expansion of our business. Therefore, we do not expect to pay any cash dividends in the foreseeable future. All decisions regarding the payment of dividends by our company will be made by our board of directors, from time to time, in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, plans for expansion and possible loan covenants which may restrict or prohibit our payment of dividends.
 
Anti-Takeover Effects of Provisions of our Certificate of Incorporation and Bylaws
 
Board of Directors
 
Our certificate of incorporation and bylaws provide that, subject to any rights of the holders of any series of our preferred stock to elect additional directors, the number of our directors shall not be less than three or more than nine, with the exact number to be fixed from time to time by a resolution adopted by the affirmative vote of 75% of the members of our board then in office. Initially, the board will consist of five members. The members of our board are divided into three classes. Each class consists, as nearly as possible, of a number of directors equal to one-third of the then authorized number of board members. The term of office of our Class I directors expires at the annual meeting of our shareholders in 2009. The term of office of our Class II directors expires at the annual meeting of our shareholders in 2010. The term of office of our Class III director expires at the annual meeting of our shareholders in 2011. At each annual meeting of our shareholders, the successors of that class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of our shareholders held in the third year following the year of their election. The directors of each class will hold office until their respective successors are elected and qualified.
 
Our certificate of incorporation provides that, subject to the rights of the holders of any series of our preferred stock, as to directors elected by such holders, directors may be removed from office only for cause upon the affirmative vote of the holders of at least a majority of the total voting power of our outstanding capital stock entitled to vote at an election of directors (including the holders of any preferred stock entitled to elect any directors), voting together as a single class.
 
Our certificate of incorporation provides that, subject to the rights of the holders of any series of our preferred stock, vacancies on our board resulting from death, resignation, removal, disqualification or other cause, and newly created directorships resulting from any increase in the number of directors on our board, shall be filled only by the affirmative vote of a majority of the remaining directors then in office (even though less than a quorum) or by the sole remaining director. Any director so elected shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred or to which the new directorship is assigned, and until that director’s successor shall have been elected and qualified or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting our board shall shorten the term of any incumbent director, except as may be provided in any certificate of designation with respect to a series of our preferred stock with respect to any additional director elected by the holders of that series of our preferred stock.
 
These provisions would preclude a third party from removing incumbent directors and simultaneously gaining control of our board by filling the vacancies created by removal with its own nominees. Under the classified board provisions described above, it would take at least two elections of directors for any individual or group to gain control of our board. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of us.


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No Shareholder Action by Written Consent; Special Meetings
 
Our certificate of incorporation provides that, except as provided in the terms of any series of preferred stock and in other limited circumstances in which the separate consent of the holders of the Series B common stock is required, stockholder action may only be taken at an annual meeting or special meeting of shareholders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of the holders of any series of our preferred stock, special meetings of our shareholders for any purpose or purposes may be called only by our Secretary at the request of at least 75% of the members of our board then in office. No business other than that stated in the notice of special meeting shall be transacted at any special meeting.
 
Advance Notice Procedures
 
Our bylaws establish an advance notice procedure for shareholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of our shareholders.
 
Shareholders must notify our corporate secretary in writing prior to the meeting at which the matters are to be acted upon or directors are to be elected. The notice must contain the information specified in our bylaws. To be timely, the notice must be received at our corporate headquarters not less than 60 days nor more than 90 days prior to the first anniversary of the date of the prior year’s annual meeting of shareholders (or, in the case of our first annual meeting, the preceding year’s annual meeting for DHC). If the annual meeting is advanced by more than 30 days, or delayed by more than 60 days, from the anniversary of the preceding year’s annual meeting, notice by the shareholder to be timely must be received not earlier than the 100th day prior to the annual meeting and not later than the later of the 70th day prior to the annual meeting and the 10th day following the day on which we notify shareholders of the date of the annual meeting, either by mail or other public disclosure. In the case of a special meeting of shareholders called to elect directors, the shareholder notice must be received not earlier than 90 days prior to the special meeting and not later than the later of the 60th day prior to the special meeting and the 10th day following the day on which we notify shareholders of the date of the special meeting, either by mail or other public disclosure.
 
The public announcement of an adjournment or postponement of a meeting of our shareholders does not commence a new time period (or extend any time period) for the giving of any such shareholder notice. However, if the number of directors to be elected to our board at an annual meeting is increased, and we do not make a public announcement naming all of the nominees for director or specifying the size of the increased board at least 100 days prior to the anniversary date of the immediately preceding annual meeting (or, in the case of our first meeting, the preceding year’s annual meeting for DHC), a shareholder’s notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to our Secretary at our offices not later than the close of business on the 10th day following the day on which we first make the relevant public announcement.
 
Amendments
 
Our certificate of incorporation provides that, subject to the rights of the holders of any series of our preferred stock and subject to obtaining the consent of the holders of 75% or more of the outstanding shares of Series B common stock (who may act by written consent in such circumstances) in the case of certain amendments described above under “Our Common Stock — Distributions,” the affirmative vote of the holders of at least 80% of the voting power of our outstanding capital stock, voting together as a single class, is required to adopt, amend or repeal any provision of our certificate of incorporation or the addition or insertion of other provisions in the certificate, provided that the foregoing 80% voting power requirement shall not apply to any adoption, amendment, repeal, addition or insertion (1) as to which Delaware law does not require the consent of our shareholders or (2) which has been approved by at least 75% of the members of our board then in office. Our certificate of incorporation further provides that the affirmative vote of the holders of at least 80% of the voting power of our outstanding capital stock, voting together as a single class, is required to adopt, amend or repeal any provision of our bylaws, provided that the foregoing voting requirement shall not apply to any adoption, amendment or repeal approved by the affirmative vote of not less than 75% of the members of our board then in office.


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Supermajority Voting Provisions
 
In addition to the supermajority voting provisions discussed under “— Amendments” above, our certificate of incorporation provides that, subject to the rights of the holders of any series of our preferred stock, the affirmative vote of the holders of at least 80% of the voting power of our outstanding capital stock generally entitled to vote upon all matters submitted to our shareholders, voting together as a single class, is required for:
 
  •  our merger or consolidation with or into any other corporation or a business combination involving our company, provided that the foregoing voting provision shall not apply to any such merger or consolidation (1) as to which the laws of the State of Delaware, as then in effect, do not require the consent of our shareholders, or (2) that at least 75% of the members of our board of directors then in office have approved;
 
  •  the sale, lease or exchange of all, or substantially all, of our assets, provided that the foregoing voting provisions shall not apply to any such sale, lease or exchange that at least 75% of the members of our board of directors then in office have approved; or
 
  •  our dissolution, provided that the foregoing voting provision shall not apply to such dissolution if at least 75% of the members of our board of directors then in office have approved such dissolution.
 
Corporate Opportunities
 
Our certificate of incorporation provides that if one of our directors or officers acquires knowledge of a potential transaction or matter that may be a business opportunity for our company, such director or officer will to the fullest extent permitted by law have no liability to us related to such person’s failure to refer or communicate such opportunity to us, unless:
 
  •  such opportunity was expressly offered to such person solely in his or her capacity as a director or officer of our company or as a director or officer of any of our subsidiaries, and
 
  •  such opportunity relates to a line of business in which our company or any of our subsidiaries is then directly engaged.
 
Any person becoming a stockholder in our company will be deemed to have notice of and have consented to the provisions of our certificate of incorporation related to corporate opportunities that are described above.
 
Section 203 of the Delaware General Corporation Law
 
Section 203 of the Delaware General Corporation Law prohibits certain transactions between a Delaware corporation and an “interested stockholder.” An “interested stockholder” for this purpose is a stockholder who is directly or indirectly a beneficial owner of 15% or more of the outstanding voting power of a Delaware corporation. This provision prohibits certain business combinations between an interested stockholder and a corporation for a period of three years after the date on which the stockholder became an interested stockholder, unless: (1) the transaction which resulted in the stockholder becoming an interested stockholder is approved by the corporation’s board of directors before the stockholder became an interested stockholder, (2) the interested stockholder acquired at least 85% of the voting power of the corporation in the transaction in which the stockholder became an interested stockholder, or (3) the business combination is approved by a majority of the board of directors and the affirmative vote of the holders of two-thirds of the outstanding voting power not owned by the interested stockholder at or subsequent to the time that the stockholder became an interested stockholder. These restrictions do not apply if, among other things, the corporation’s certificate of incorporation contains a provision expressly electing not to be governed by Section 203. In our certificate of incorporation, we have elected not to be governed by Section 203.
 
Transfer Agent and Registrar
 
Computershare Trust Company, N.A. will be the transfer agent and registrar for our common stock:
 
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Telephone: (877) 453-1510


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INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation, such as a derivative action), if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of any actions by or in the right of the corporation, except that indemnification only extends to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such actions, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, agreement, a vote of shareholders or disinterested directors or otherwise.
 
Our certificate of incorporation provides that we will indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of us or, while a director or officer of us, is or was serving at our request as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and losses suffered and expenses (including attorneys’ fees) incurred by such person in connection therewith. Our certificate of incorporation also provides that we will pay the expenses incurred by a director or officer in defending any such proceeding in advance of its final disposition, subject to such person providing us with certain undertakings. Notwithstanding the foregoing, our certificate of incorporation provides that we shall be required to indemnify or make advances to a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by our board of directors. Such rights are not exclusive of any other right that any person may have or thereafter acquire under any statute, provision of our certificate of incorporate, bylaws, agreement, vote of shareholders or disinterested directors or otherwise. No amendment, modification or repeal of such provision will in any way adversely affect any right or protection thereunder of any person in respect of any act or omission occurring prior to the time of such amendment, modification or repeal. We intend to enter into indemnification agreements with each of our directors and officers. A form of indemnification agreement approved by our board of directors is included as an exhibit to the Form 10 registration statement of which this information statement is a part.
 
The Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
 
  •  any breach of the director’s duty of loyalty to the corporation or its shareholders;
 
  •  acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
  •  payments of unlawful dividends or unlawful stock repurchases or redemptions; or
 
  •  any transaction from which the director derived an improper personal benefit.
 
Our certificate of incorporation provides that, to the fullest extent permitted by applicable law, none of our directors will be personally liable to us or our shareholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this provision will be prospective only and will not adversely affect any limitation, right or protection of a director of our company existing at the time of such repeal or modification.


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INDEPENDENT AUDITORS
 
The audit committee of DHC’s board of directors has selected KPMG LLP as our independent auditors for the year ended December 31, 2008.
 
WHERE YOU CAN FIND MORE INFORMATION
 
We have filed a registration statement on Form 10 with the SEC with respect to the shares of our common stock being distributed as contemplated by this information statement. This information statement is a part of, and does not contain all of the information set forth in, the registration statement and the exhibits and schedules to the registration statement. For further information with respect to our company and our common stock, please refer to the registration statement, including its exhibits and schedules. Statements made in this information statement relating to any contract or other document are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may review a copy of the registration statement, including its exhibits and schedules, at the SEC’s public reference room, located at 100 F Street, N.E., Washington, D.C. 20549, as well as on the Internet website maintained by the SEC at www.sec.gov. Information contained on any website referenced in this information statement is not incorporated by reference in this information statement.
 
As a result of the distribution, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934 and, in accordance with the Exchange Act, we will file periodic reports, proxy statements and other information with the SEC.
 
You may request a copy of any of our filings with the SEC at no cost, by writing or telephoning the office of:
 
Investor Relations
ASCENT MEDIA CORPORATION
12300 Liberty Blvd.
Englewood, Colorado 80112
Telephone: (720) 875-5622
 
We intend to furnish holders of our common stock with annual reports containing consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles and audited and reported on, with an opinion expressed, by an independent public accounting firm.
 
For additional information regarding DHC and its subsidiaries, you may review copies of DHC’s periodic reports, proxy statements and other information publicly filed by DHC at the SEC’s public reference room or on the SEC’s website, and you may contact DHC at the contact information set forth therein.
 
You may request a copy of any of DHC’s filings with the SEC at no cost, by writing or telephoning the office of:
 
Investor Relations
DISCOVERY HOLDING COMPANY
12300 Liberty Blvd.
Englewood, CO 80112
Telephone: (877) 772-1518
 
For more information regarding Ascent Media, see Ascent Media’s website at www.ascentmedia.com.
 
You should rely only on the information contained in this information statement or to which we have referred you. We have not authorized any person to provide you with different information or to make any representation not contained in this information statement.


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INDEX TO FINANCIAL STATEMENTS
 
         
    Page
 
Ascent Media Corporation
       
    F-2  
    F-3  
    F-4  
    F-5  
    F-6  
    F-7  
    F-8  
Ascent Media Group
       
    F-9  
    F-10  
    F-11  
    F-12  
    F-13  
    F-20  
    F-21  
    F-22  
    F-23  
    F-24  
    F-25  


F-1


Table of Contents

ASCENT MEDIA CORPORATION
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
 
Ascent Media Corporation (“AMC”) has entered into a Purchase Agreement with an unaffiliated third party (“Buyer”), dated as of August 8, 2008, pursuant to which AMC has agreed to sell to the Buyer 100% of the ownership interests in Ascent Media CANS, LLC (dba AccentHealth) (“AccentHealth”) for approximately $120 million in cash. AMC originally acquired AccentHealth in January 2006 (the “AccentHealth Acquisition Date”). The sale of AccentHealth is currently expected to close on or before September 15, 2008, subject to customary closing conditions.
 
Upon closing, if completed, AMC will account for AccentHealth as discontinued operations. Accordingly, the assets, liabilities, revenue, costs and expenses, and cash flows of AccentHealth will be excluded from the respective captions in AMC’s financial statements. AMC expects to recognize a pre-tax gain on the sale transaction of approximately $65 to $70 million. Such gain would be included with AccentHealth’s revenue and expenses in earnings from discontinued operations, net of income taxes, in AMC’s statement of operations.
 
Although AccentHealth does not qualify for discontinued operations treatment as of June 30, 2008, the following unaudited condensed pro forma combined financial statements have been prepared to reflect AccentHealth as discontinued operations since the AccentHealth Acquisition Date. The AMC historical financial information included in the following unaudited condensed pro forma combined financial statements is derived from the historical financial statements of AMC included elsewhere herein.


F-2


Table of Contents

Ascent Media Corporation
 
Unaudited Condensed Pro Forma Combined Balance Sheet
June 30, 2008
 
                                 
          Less:              
    AMC
    AccentHealth
          AMC
 
    historical     historical     Adjustments     adjusted  
          amounts in thousands        
 
Assets
                               
Cash
  $ 224,866       11,607             213,259  
Deferred income tax assets, net
    11,153       159             10,994  
Other current assets
    181,982       7,863             174,119  
Property and equipment, net
    251,954       8,241             243,713  
Goodwill
    127,293       32,224             95,069  
Long-term deferred income tax assets, net
    31,855       (1,535 )           33,390  
Other assets
    15,732       7,042             8,690  
Assets of discontinued operations
                65,601       65,601  
                                 
Total assets
  $ 844,835       65,601       65,601       844,835  
                                 
Liabilities and Equity
                               
Current liabilities
  $ 142,372       2,301             140,071  
Other liabilities
    20,912                   20,912  
Liabilities of discontinued operations
                2,301       2,301  
                                 
                                 
Total liabilities
    163,284       2,301       2,301       163,284  
Parent’s investment
    681,551       63,300       63,300       681,551  
                                 
                                 
Total liabilities and parent’s investment
  $ 844,835       65,601       65,601       844,835  
                                 


F-3


Table of Contents

Ascent Media Corporation
 
Unaudited Condensed Pro Forma Combined Balance Sheet
December 31, 2007
 
                                 
          Less:              
    AMC
    AccentHealth
          AMC
 
    historical     historical     Adjustments     adjusted  
          amounts in thousands        
 
Assets
                               
Cash
  $ 201,633       8,403             193,230  
Deferred income tax assets, net
    11,150       172             10,978  
Other current assets
    150,693       8,807             141,886  
Property and equipment, net
    265,123       5,483             259,640  
Goodwill
    127,293       32,224             95,069  
Long-term deferred income tax assets, net
    32,928       (1,208 )           34,136  
Other assets
    42,166       7,622             34,544  
Assets of discontinued operations
                61,503       61,503  
                                 
Total assets
  $ 830,986       61,503       61,503       830,986  
                                 
Liabilities and Equity
                               
Current liabilities
  $ 122,508       2,260             120,248  
Other liabilities
    21,582                   21,582  
Liabilities of discontinued operations
                2,260       2,260  
                                 
Total liabilities
    144,090       2,260       2,260       144,090  
Parent’s investment
    686,896       59,243       59,243       686,896  
                                 
Total liabilities and parent’s investment
  $ 830,986       61,503       61,503       830,986  
                                 


F-4


Table of Contents

Ascent Media Corporation
 
Unaudited Condensed Pro Forma Combined Statement of Operations
Six Months Ended June 30, 2008
 
                         
          Less:        
    AMC
    AccentHealth
    AMC
 
    historical     historical     adjusted  
    amounts in thousands,
 
    except per share amounts  
 
Revenue
  $ 348,151       14,556       333,595  
Cost of sales
    (249,276 )     (4,624 )     (244,652 )
Selling, general and administrative expenses
    (67,587 )     (3,504 )     (64,083 )
Depreciation and amortization
    (32,193 )     (1,346 )     (30,847 )
                         
Operating income (loss)
    (905 )     5,082       (5,987 )
Other income, net
    2,308       116       2,192  
                         
Earnings (loss) from continuing operations before income taxes
    1,403       5,198       (3,795 )
Income tax expense
    (7,461 )     (2,102 )     (5,359 )
                         
Earnings (loss) from continuing operations
    (6,058 )     3,096       (9,154 )
                         
Pro forma loss from continuing operations per common share - Series A and Series B
  $ (.43 )             (.65 )
                         
Pro forma weighted average outstanding common shares - Series A and Series B
    14,063               14,063  
                         


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Table of Contents

Ascent Media Corporation
 
Unaudited Condensed Pro Forma Combined Statement of Operations
Six Months Ended June 30, 2007
 
                         
          Less:        
    AMC
    AccentHealth
    AMC
 
    historical     historical     adjusted  
          amounts in thousands        
 
Revenue
  $ 307,315       10,721       296,594  
Cost of sales
    (213,686 )     (3,512 )     (210,174 )
Selling, general and administrative expenses
    (65,540 )     (2,443 )     (63,097 )
Depreciation and amortization
    (32,065 )     (1,096 )     (30,969 )
                         
Operating income (loss)
    (3,976 )     3,670       (7,646 )
Other income, net
    4,593       78       4,515  
                         
Earnings (loss) from continuing operations before income taxes
    617       3,748       (3,131 )
Income tax expense
    (6,602 )     (1,514 )     (5,088 )
                         
Earnings (loss) from continuing operations
  $ (5,985 )     2,234       (8,219 )
                         


F-6


Table of Contents

Ascent Media Corporation
 
Unaudited Condensed Pro Forma Combined Statement of Operations
Year Ended December 31, 2007
 
                         
          Less:        
    AMC
    AccentHealth
    AMC
 
    historical     historical     adjusted  
    amounts in thousands,
 
    except per share amounts  
 
Revenue
  $ 631,425       26,365       605,060  
Cost of sales
    (431,367 )     (7,940 )     (423,427 )
Selling, general and administrative expenses
    (129,403 )     (6,367 )     (123,036 )
Depreciation and amortization
    (65,544 )     (2,333 )     (63,211 )
Impairment of goodwill
    (165,347 )           (165,347 )
                         
Operating income (loss)
    (160,236 )     9,725       (169,961 )
Other income, net
    9,472       177       9,295  
                         
Earnings (loss) from continuing operations before income taxes
    (150,764 )     9,902       (160,666 )
Income tax benefit (expense)
    18,433       (4,003 )     22,436  
                         
Earnings (loss) from continuing operations
  $