UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Ascent Media Corporation

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ASCENT MEDIA CORPORATION
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5622

 

April 27, 2009

 

Dear Stockholder:

 

The 2009 annual meeting of stockholders of Ascent Media Corporation will be held at 9:00 a.m., local time, at the Fairmont Miramar Hotel, 101 Wilshire Boulevard, Santa Monica, California 90401, Tel. No. (800) 257-7544, on June 12, 2009. At the annual meeting, you will be asked to consider and vote on the following:

 

 

This document describes the annual meeting, the enumerated proposals and related matters. Our board of directors has approved each of the enumerated proposals and recommends that you vote FOR each of them.

 

Your vote is important, regardless of the number of shares you own. Whether or not you plan to attend the annual meeting, please read the enclosed proxy statement and then vote via the Internet or telephone as promptly as possible. Alternatively, request a paper proxy card to complete, sign and return by mail. This will save us additional expense in soliciting proxies and will ensure that your shares are represented at the meeting. It will not, however, prevent you from later revoking your proxy or changing your vote at the meeting.

 

Thank you for your continued support and interest in our company.

 

Very truly yours,

 

William R. Fitzgerald
Chairman and Chief Executive Officer

 

ASCENT MEDIA CORPORATION
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5622

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 12, 2009

 

 

 

NOTICE IS HEREBY GIVEN of the annual meeting of stockholders of Ascent Media Corporation to be held at 9:00 a.m., local time, at the Fairmont Miramar Hotel, 101 Wilshire Boulevard, Santa Monica, California 90401, Tel. No. (800) 257-7544, on June 12, 2009, to consider and vote on the following:

 

1. A proposal to elect Michael J. Pohl to serve as the Class I member of our board of directors until the 2012 annual meeting of stockholders (the director election proposal);

 

2. A proposal to approve the material terms of the performance objectives under the Ascent Media Corporation 2008 Incentive Plan (the incentive plan proposal);

 

3. A proposal to ratify the selection of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2009 (the auditors ratification proposal); and

 

4. Any other business as may properly come before the annual meeting.

 

We describe the proposals in more detail in the accompanying proxy statement. We encourage you to read the proxy statement in its entirety before voting.

 

Holders of record of our Series A common stock and Series B common stock outstanding as of 5:00 p.m., New York City time, on April 14, 2009, the record date for the annual meeting, will be entitled to notice of the annual meeting and to vote at the annual meeting or any adjournment thereof. Holders of Series A common stock and Series B common stock will vote together as a single class on each proposal. A list of stockholders entitled to vote at the annual meeting will be available at our offices for review by our stockholders, for any purpose germane to the annual meeting, for at least 10 days prior to the annual meeting.

 

The following stockholder approvals are required with respect to the matters described above:

 

 

Our board of directors has carefully considered and approved each of the enumerated proposals and recommends that you vote FOR each of them.

 

YOUR VOTE IS IMPORTANT.  We urge you to vote as soon as possible by telephone, Internet or mail.

 

By order of the board of directors,

 

William E. Niles
Executive Vice President,
General Counsel and Secretary

 

Englewood, Colorado

April 27, 2009

 

WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE VOTE VIA THE INTERNET OR TELEPHONE AS PROMPTLY AS POSSIBLE. ALTERNATIVELY, REQUEST A PAPER PROXY CARD TO COMPLETE, SIGN AND RETURN BY MAIL.

 

TABLE OF CONTENTS

 

ASCENT MEDIA CORPORATION
a Delaware corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
(720) 875-5622

 

PROXY STATEMENT

 

We are furnishing this proxy statement in connection with the board of directors’ solicitation of proxies for use at our 2009 Annual Meeting of Stockholders to be held at 9:00 a.m., local time, at the Fairmont Miramar Hotel Santa Monica, 101 Wilshire Boulevard, Santa Monica, California 90401, Tel. No. (800) 257-7544, on June 12, 2009, or at any adjournment or postponement of the annual meeting. At the annual meeting, we will ask you to consider and approve the proposals described in the accompanying Notice of Annual Meeting of Stockholders. The proposals are described in more detail in this proxy statement. We are soliciting proxies from holders of our Series A common stock, par value $0.01 per share, and Series B common stock, par value $0.01 per share.

 

The Securities and Exchange Commission has adopted a “Notice and Access” rule that allows companies to deliver a Notice of Internet Availability of Proxy Materials (which we refer to as the Notice) to stockholders in lieu of a paper copy of the proxy statement and related materials and the annual report to stockholders (collectively, the proxy materials). Pursuant to this rule, it is anticipated that the Notice is first being mailed to our stockholders on or about May 1, 2009. The proxy materials, including the form of proxy, relating to the 2009 annual meeting of stockholders are first being made available to stockholders on or about April 27, 2009.

 

The Notice will instruct you as to how you may access and review the information in the proxy materials and how you may submit your proxy by mail, or may vote by telephone or over the Internet. Alternatively, you may order a paper copy of the proxy materials at no charge by following the instructions provided in the Notice. You will not receive a printed copy of the proxy materials, unless specifically requested.

 

In order to carry on the business of the annual meeting, a quorum of stockholders must be present. This means that at least a majority of the aggregate voting power represented by the outstanding shares of our common stock as of the record date must be represented at the annual meeting, either in person or by proxy. For purposes of determining a quorum, your shares will be included as represented at the meeting even if you indicate on your proxy that you abstain from voting. If a broker, who is a record holder of shares, indicates on a form of proxy that the broker does not have discretionary authority to vote those shares on one or more of the proposals, or if those shares are voted in circumstances in which proxy authority is defective or has been withheld, those shares (which we refer to as broker non-votes) nevertheless will be treated as present for purposes of determining the presence of a quorum.

 

Holders of our Series A common stock and Series B common stock, as recorded in our stock register as of 5:00 p.m., New York City time, on April 14, 2009 (which is the record date for the annual meeting), may vote at the annual meeting or at any adjournment or postponement thereof.

 

At the annual meeting, holders of Series A common stock will have one vote per share for each share of Series A common stock that our records show they owned on the record date, and holders of Series B common stock

will have ten votes per share for each share of Series B common stock that our records show they owned on the record date. Holders of all series of our common stock will vote together as a single class.

 

Our board of directors has approved the director election proposal, the incentive plan proposal and the auditors ratification proposal and recommends that you vote FOR each of such proposals.

 

Approval of the director election proposal requires the affirmative votes of a plurality of the shares of our common stock that are voted in person or by proxy at the annual meeting. This means that Mr. Pohl will be elected if he receives more affirmative votes than any other person.

 

Approval of the incentive plan proposal and the auditors ratification proposal each requires the affirmative vote of a majority of the voting power of the shares of our common stock that are present, in person or by proxy, and entitled to vote at the annual meeting.

 

On the record date, 13,528,806 shares of our Series A common stock and 659,679 shares of our Series B common stock were outstanding.

 

As of the record date, there were approximately 1,322 and 72 record holders of Series A common stock and Series B common stock, respectively.

 

Holders of record of our common stock as of the record date may vote in person at the annual meeting. Alternatively, they may give a proxy by completing, signing, dating and returning the proxy card, or may vote by telephone or over the Internet. Unless subsequently revoked, shares of our common stock represented by a proxy submitted as described below and received at or before the annual meeting will be voted in accordance with the instructions on the proxy.

 

YOUR VOTE IS IMPORTANT.  It is recommended that you vote by proxy even if you plan to attend the annual meeting. You may change your vote at the annual meeting. Specific voting instructions are set forth in this proxy statement and on both the Notice and proxy card.

 

If a proxy is properly executed and submitted by a record holder without indicating any voting instructions, the shares of our common stock represented by the proxy will be voted FOR the approval of each of the proposals.

 

If you submit a proxy card on which you indicate that you abstain from voting, it will have no effect on the director election proposal and will have the same effect as a vote AGAINST the auditors ratification proposal and the incentive plan proposal.

 

If you hold your shares in the name of a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee when voting your shares of our common stock or when granting or revoking a proxy.

 

Shares represented by broker non-votes will be deemed shares not entitled to vote and will not be included for purposes of determining the aggregate voting power and number of shares present and entitled to vote on the proposals. Broker non-votes will have no effect on any of the proposals.

 

Before your proxy is voted, you may change your vote by telephone or over the Internet (if you originally voted by telephone or over the Internet), by voting in person at the annual meeting or by delivering a signed proxy revocation or a new signed proxy with a later date to Ascent Media Corporation, c/o Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021. Any signed proxy revocation or new signed proxy must be received before the start of the annual meeting.

 

Your attendance at the annual meeting will not, by itself, revoke your proxy.

 

If your shares are held in an account by a broker, bank or other nominee, you should contact your nominee to change your vote.

 

The proxy for the annual meeting is being solicited on behalf of our board of directors. In addition to this mailing, our employees may solicit proxies personally or by telephone. We pay the cost of soliciting these proxies. We also reimburse brokers and other nominees for their expenses in sending these materials to you and getting your voting instructions.

 

The board of directors is not currently aware of any business to be acted on at the annual meeting other than that which we have described in this proxy statement. If, however, other matters are properly brought to a vote at the annual meeting, the persons you choose as proxies will have discretion to vote or to act on these matters according to their best judgment, unless you indicate otherwise on your proxy.

 

One matter that could come to a vote at the annual meeting is a proposal to adjourn or postpone the meeting. The persons you choose as proxies will have discretion to vote on any adjournment or postponement of the annual meeting, other than an adjournment or postponement for the purpose of soliciting additional proxies.

 

The following table sets forth information, to the extent known by us or ascertainable from public filings, concerning shares of our common stock beneficially owned by each person or entity (excluding any of our directors and executive officers) known by us to own more than five percent of the outstanding shares of any series of our common stock.

 

The security ownership information is given as of the record date, and, in the case of percentage ownership information, is based upon 13,528,806 shares of our Series A common stock and 659,679 shares of our Series B common stock, in each case, outstanding on that date. Such outstanding share amounts do not include shares of our common stock that may be issued upon the exercise of stock options, including stock options disclosed in the table below.

 

 

 

 

 

The following table sets forth information with respect to the ownership by each of our directors and each of our executive officers and by all of our directors and executive officers as a group of shares of Series A common stock and Series B common stock. The security ownership information is given as of the record date, and, in the case of percentage ownership information, is based upon 13,528,806 shares of Series A common stock and 659,679 shares of Series B common stock, in each case, outstanding on that date. Such outstanding share amounts do not include shares of our common stock that may be issued upon the exercise of stock options, including stock options disclosed in the table below.

 

Shares of restricted stock that have been granted pursuant to our equity incentive plans are included in the outstanding share numbers provided throughout this proxy statement. Shares of common stock issuable upon exercise or conversion of options, warrants and convertible securities that were exercisable or convertible on or within 60 days after the record date, are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. For purposes of the following presentation, any beneficial ownership of shares of our Series B common stock, though convertible on a one-for-one basis into shares of our Series A common stock, is reported as beneficial ownership of our Series B common stock only, and not as beneficial ownership of our Series A common stock. So far as is known to us, the persons indicated below have sole voting power with respect to the shares indicated as owned by them, except as otherwise stated in the notes to the table.

 

 

 

 

 

 

 

 

 

We know of no arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of our company.

 

The following proposals will be presented at the annual meeting by our board of directors.

 

Our board of directors currently consists of five directors, divided among three classes. Our Class I director, whose term will expire at the annual meeting, is Michael J. Pohl. This director is nominated for re-election to our board to continue to serve as a Class I director, and we have been informed that Mr. Pohl is willing to continue to serve as a director of our company. The term of the Class I director who is elected at the annual meeting will expire at the annual meeting of our stockholders in the year 2012. Our Class II directors, whose term will expire at the annual meeting of our stockholders in the year 2010, are Philip J. Holthouse and Brian C. Mulligan. Our Class III directors, whose term will expire at the annual meeting of our stockholders in the year 2011, are William R. Fitzgerald and Jose A. Royo.

 

If any nominee should decline re-election or should become unable to serve as a director of our company for any reason before re-election, votes will be cast for a substitute nominee, if any, designated by the board of directors, or, if none is so designated prior to the election, votes will be cast according to the judgment of the person or persons voting the proxy.

 

The following lists the nominee for re-election as a director and the four directors of our company whose term of office will continue after the annual meeting, including the age of each person, the positions with our company or principal occupation of each person, certain other directorships held and the year each person became a director of our company. The number of shares of our common stock beneficially owned by each director, as of the record date, is set forth in this proxy statement under the caption “Security Ownership of Certain Beneficial Owners and Management — Security Ownership of Management.”

 

Michael J. Pohl: Age: 57. A director of our company since September 2008. Mr. Pohl serves as an advisor to companies in the technology, media and telecommunications industries. From December 2008 through April 2009, Mr. Pohl served as a consultant to ARRIS Group, Inc., a communications technology company specializing in the design and engineering of broadband networks, where he served as the interim Vice President and General Manager of the On Demand Systems Division from December 2007 through December 2008. Mr. Pohl was President of Global Strategies at C-COR Incorporated from January 2005 to December 2007, when C-COR Incorporated was acquired by ARRIS Group, Inc. Mr. Pohl served as the President and Chief Executive Officer of nCUBE Corporation from 1999 to 2005.

 

Philip J. Holthouse: Age: 50. A director of our company since September 2008. 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 served on the board of Napster, Inc. from January 2004 to October 2008.

 

Brian C. Mulligan: Age: 49. A director of our company since September 2008. Mr. Mulligan is the chairman of Brooknol Advisors, LLC, an advisory and investment firm specializing in media and entertainment. 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 served on the board of Napster, Inc. from March 2003 to October 2008 and was a director of Ascent Media Group, Inc., a predecessor of Ascent Media Group, LLC, our principal operating subsidiary (which we refer to as AMG), from December 2002 to September 2003.

 

William R. Fitzgerald: Age: 51. A director of our company since September 2008. Mr. Fitzgerald is Chairman of the Board and Chief Executive Officer of our company. Mr. Fitzgerald has served as Chairman of AMG since July 2000. Mr. Fitzgerald also serves as a Senior Vice President of Liberty Media Corporation, a position he has held since July 2000. Mr. Fitzgerald also serves on the board of Expedia, Inc.

 

Jose A. Royo: Age: 43. A director of our company since September 2008. Mr. Royo has served as President and Chief Executive Officer of AMG since February 2008, and since the spin-off of our company from DHC in September 2008, has also served as President and Chief Operating Officer of our company. From July 2001 until his appointment as CEO, Mr. Royo served in various positions at AMG, including Vice President of the New Products Division, Senior Vice President of the Digital Services Group, and Chief Technology Officer.

 

Approval of the director election proposal requires the affirmative votes of a plurality of the shares of our common stock that are voted in person or by proxy at the annual meeting. This means that Mr. Pohl will be elected if he receives more affirmative votes than any other person.

 

Our board of directors recommends a vote FOR the election of the nominee to our board of directors.

 

On September 17, 2008, Discovery Holding Company (which we refer to as DHC) completed the spin-off of our company to DHC’s shareholders and we became an independent, publicly traded company. In the spin-off, each holder of DHC common stock received 0.05 of a share of our Series A common stock for each share of DHC Series A common stock held and 0.05 of a share of our Series B common stock for each share of DHC Series B common stock held. Prior to, and in connection with, the spin-off, our board of directors at such time approved and adopted the Ascent Media Corporation 2008 Incentive Plan (which we refer to as the incentive plan) and submitted the incentive plan for the approval of DHC, as our then sole-stockholder. On September 15, 2008, DHC approved the incentive plan. In order for certain awards under the incentive plan to be eligible for favorable tax treatment under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), the material terms of the performance objectives under the incentive plan must be approved by our shareholders.

 

The following is a summary of the material provisions of the incentive plan and is qualified in its entirety by the complete text of the incentive plan, which is attached to this proxy statement as Annex A.

 

The incentive plan is 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 receive awards under the incentive plan varies from year to year and depends on various factors, such as the number of promotions and our hiring needs during the year. We cannot predict the number of future award recipients. For information with respect to shares of our common stock authorized for issuance under the incentive plan, see “Executive Compensation — Securities Authorized for Issuance under Equity Compensation Plans.”

 

Under the incentive plan, the compensation committee may grant non-qualified stock options, stock appreciation rights (which we refer to as SARs), restricted shares, stock units, cash awards, performance awards or any combination of the foregoing (which we refer to, collectively, as 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 $1,000,000.

 

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 is 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 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 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 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 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 in connection with such award (subject to prior vesting), (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 is 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 is also authorized to provide for the grant of cash awards under the incentive plan. A cash award is a bonus paid in cash that shall be based upon the attainment of one or more performance goals that have been established by the compensation committee. 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 may be designated as a performance award. Cash awards will be designated as performance awards. Performance awards are contingent upon performance measures applicable to a particular period, as established by the compensation committee and set forth in individual agreements, based upon any one or more of the following business criteria specified in the incentive plan:

 

 

Performance measures may apply to the award recipient, to one or more business units, divisions or subsidiaries 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 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 following any such termination 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, 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.

 

New Plan Benefits.  Except as otherwise described below, due to the nature of the incentive plan and the discretionary authority afforded the incentive plan 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 after the date hereof.

 

Consequences to Participants.  The following is a summary of the U.S. federal income tax consequences that generally will arise with respect to awards granted under the incentive plan and with respect to the sale of any shares of our common stock acquired under the incentive plan.

Non-Qualified Stock Options; SARs.  Holders will not realize taxable income upon the grant of a non-qualified stock option or a SAR. Upon the exercise of a non-qualified stock option or a SAR, the holder will recognize ordinary income (subject to withholding, if applicable) in an amount equal to the excess of (1) the fair market value on the date of exercise of the shares received over (2) the exercise price or base price (if any) he or she paid for the shares. The holder will generally have a tax basis in any shares of our common stock received pursuant to the exercise of a SAR, or pursuant to the cash exercise of a non-qualified stock option, that equals the fair market value of such shares on the date of exercise. The disposition of the shares of our common stock acquired upon exercise of a non-qualified stock option will ordinarily result in capital gain or loss. We are entitled to a deduction in an amount equal to the income recognized by the holder upon the exercise of a non-qualified stock option or SAR.

 

Under current rulings, if a holder transfers previously held ordinary shares in satisfaction of part or all of the exercise price of a non-qualified stock option, the holder will recognize income with respect to the shares received, but no additional gain will be recognized as a result of the transfer of such previously held shares in satisfaction of the non-qualified stock option exercise price. Moreover, that number of shares received upon exercise that equals the number of previously held shares surrendered in satisfaction of the non-qualified stock option will have a tax basis that equals, and a holding period that includes, the tax basis and holding period of the previously held shares surrendered in satisfaction of the non-qualified stock option exercise price. Any additional shares received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the holder, plus, the amount of ordinary income recognized by the holder with respect to the shares received.

 

Cash Awards; Stock Units; Restricted Shares.  A holder will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time such cash is otherwise made available for the holder to draw upon it, and we will have a corresponding deduction for federal income tax purposes. A holder will not have taxable income upon the grant of a stock unit but rather will generally recognize ordinary compensation income at the time the holder receives cash in satisfaction of such stock unit or shares of common stock in satisfaction of such stock unit in an amount equal to the fair market value of the shares received, at which time we will have a corresponding deduction for federal income tax purposes.

 

Generally, a holder will not recognize taxable income upon the grant of restricted shares, and we will not be entitled to any federal income tax deduction upon the grant of such award. The value of the restricted shares will generally be taxable to the holder as compensation income in the year or years in which the restrictions on the shares of common stock lapse. Such value will equal the fair market value of the shares on the date or dates the restrictions terminate. A holder, however, may elect pursuant to Section 83(b) of the Code to treat the fair market value of the shares subject to the restricted share award on the date of such grant as compensation income in the year of the grant of the restricted share award. The holder must make such an election pursuant to Section 83(b) of the Code within 30 days after the date of grant. If such an election is made and the holder later forfeits the restricted shares to us, the holder will not be allowed to deduct, at a later date, the amount such holder had earlier included as compensation income. In any case, we will receive a deduction for federal income tax purposes corresponding in amount to the amount of compensation included in the holder’s income in the year in which that amount is so included.

 

A holder who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time the holder recognizes income under the rules described above with respect to the cash or the shares of our common stock received pursuant to awards. Dividends that are received by a holder prior to the time that the restricted shares are taxed to the holder under the rules described in the preceding paragraph are taxed as additional compensation, not as dividend income. The tax basis of a holder in the shares of our common stock received will equal the amount recognized by the holder as compensation income under the rules described in the preceding paragraph, and the holder’s holding period in such shares will commence on the date income is so recognized.

 

Certain Tax Code Limitations on Deductibility.  In order for us to deduct the amounts described above, such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses. Our ability to obtain a deduction for future payments under the incentive plan could also be limited by Section 280G of the Code, which provides that certain excess parachute payments made in connection with a change of control of an employer are not deductible. Our ability to obtain a deduction for amounts paid under the incentive plan could also be affected by Section 162(m) of the Code, which limits the deductibility,

for U.S. federal income tax purposes, of compensation paid to certain employees to $1 million during any taxable year. In order for certain awards under the incentive plan to be eligible for favorable tax treatment under Section 162(m) of the Code, we are submitting the material terms of the performance objectives under the incentive plan for the approval of our stockholders at the annual meeting. If the material terms of the performance objectives under the incentive plan are not approved at the annual meeting, awards under the incentive plan will not be eligible for favorable tax treatment under Section 162(m) of the Code.

 

Approval of the incentive plan proposal requires the affirmative vote of a majority of the voting power of the shares of our common stock that are present, in person or by proxy, and entitled to vote at the annual meeting.

 

Our board of directors recommends a vote FOR the incentive plan proposal.

 

We are asking our stockholders to ratify the selection of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2009.

 

Even if the selection of KPMG LLP is ratified, the audit committee of our board in its discretion may direct the appointment of a different independent accounting firm at any time during the year if our audit committee determines that such a change would be in the best interests of our company and our stockholders. In the event our stockholders fail to ratify the selection of KPMG LLP, our audit committee will consider it as a direction to select other auditors for the year ending December 31, 2009.

 

A representative of KPMG LLP is expected to be present at the annual meeting, will have the opportunity to make a statement if he or she so desires and is expected to be available to respond to appropriate questions.

 

The following table presents fees for professional audit services rendered by KPMG LLP for the audit of our consolidated financial statements for 2008, and fees billed for other services rendered by KPMG LLP following the spin-off of our company from DHC in September 2008:

 

 

 

 

Our audit committee has considered whether the provision of services by KPMG LLP to our company other than auditing is compatible with KPMG LLP maintaining its independence and believes that the provision of such other services is compatible with KPMG LLP maintaining its independence.

 

Services provided by our independent auditor following the spin-off of our company were approved by our audit committee.

 

Approval of the auditors ratification proposal requires the affirmative vote of a majority of the voting power of the shares of our common stock that are present, in person or by proxy, and entitled to vote at the annual meeting.

 

Our board of directors recommends a vote FOR the auditors ratification proposal.

 

 

The following lists the executive officers of our company (other than William R. Fitzgerald, our Chairman of the Board and Chief Executive Officer, and Jose A. Royo, our President and Chief Operating Officer, who also serve as directors of our company and who are listed under “Proposals of Our Board — Proposal 1 — The Director Election Proposal”), their ages and a description of their business experience, including positions held with our company. In the table below, and throughout this proxy statement, we refer to Ascent Media Group, LLC, our wholly-owned subsidiary, as AMG.

 

 

Our executive officers will serve in such capacities until the next annual meeting of our board of directors, or until their respective successors have been duly elected or appointed, or until their earlier death, resignation or removal from office. There is no family relationship between any of our executive officers or directors, by blood, marriage or adoption.

 

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 ability or integrity.

 

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (SEC). Officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16 forms they file.

 

Based solely on a review of the copies of the Forms 3, 4 and 5 and amendments to those forms furnished to us during our most recent fiscal year, or written representations that no Forms 5 were required, we believe that, during the year ended December 31, 2008, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten-percent beneficial owners were met, except that the Form 4 of Mr. Orr, dated October 20, 2008, was required to be filed on or before the preceding business day.

 

We have adopted a code of ethics that applies to all of our employees, directors and officers, which constitutes our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act. Our code of ethics is available on our website at www.ascentmediacorporation.com/Business-Conduct-Compliance-Programs.aspx.

 

It is our policy that a majority of the members of our board of directors be independent of our management. For a director to be deemed independent, our board of directors must affirmatively determine that the director has no disqualifying direct or indirect material relationship with our company. To assist our board of directors in determining which of our directors qualify as independent for purposes of The Nasdaq Stock Market rules as well as applicable rules and regulations adopted by the SEC, the nominating and corporate governance committee of our board follows the Corporate Governance Rules of The Nasdaq Stock Market on the criteria for director independence. Under these criteria, a director will be deemed independent if such director:

 

 

In addition, under these criteria, a director will not be deemed independent if such director:

 

 

Our board of directors has determined that each of Philip J. Holthouse, Brian C. Mulligan and Michael J. Pohl qualifies as an independent director of our company.

 

Executive Committee

 

Our board of directors has established an executive committee, whose current members are 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.

 

Compensation Committee

 

Our board of directors has also established a compensation committee, whose chairman is Michael J. Pohl and whose other members are Philip J. Holthouse and Brian C. Mulligan. The compensation committee reviews and makes recommendations to our board regarding all forms of compensation provided to our executive officers and directors. In addition, the compensation committee reviews and makes recommendations on bonus and stock compensation arrangements for all of our employees and has sole responsibility for the administration of our incentive plan.

 

The compensation committee reviews and approves corporate goals and objectives relevant to the compensation of our chief executive officer and our other executive officers. The compensation committee also reviews and approves the compensation of our chief executive officer and certain other officers of our company. For a description of our processes and policies for consideration and determination of executive and director compensation, including the role of our Chief Executive Officer and outside consultants in determining or recommending amounts and/or forms of compensation, see “Executive Compensation — Compensation Discussion and Analysis.”

 

Our board of directors has adopted a written charter for the compensation committee, which is available on our website at www.ascentmediacorporation.com/Compensation-Committee-Charter.aspx.

 

The compensation committee has reviewed and discussed with the company’s management the “Compensation Discussion and Analysis” included under “Executive Compensation” below. Based on such review and discussions, the compensation committee recommended to the company’s board of directors that the “Compensation Discussion and Analysis” be included in this proxy statement.

 

Submitted by the Members of the Compensation Committee

 

Philip J. Holthouse

Brian C. Mulligan

Michael J. Pohl

 

Compensation Committee Interlocks and Insider Participation

 

No member of the compensation committee is or has been an officer or employee of our company, or has engaged in any related party transaction in which our company was a participant.

 

Nominating and Corporate Governance Committee

 

Our board of directors has established a nominating and corporate governance committee, whose chairman is Brian C. Mulligan and whose other members are Philip J. Holthouse and Michael J. Pohl. See “— Director Independence” above.

 

The nominating and corporate governance committee:

 

 

The nominating and corporate governance committee will consider candidates for director recommended by any stockholder provided that such nominations are properly submitted. Eligible stockholders wishing to recommend a candidate for nomination as a director should send the recommendation in writing to the Nominating and Corporate Governance Committee, Ascent Media Corporation, 12300 Liberty Boulevard, Englewood, Colorado 80112. Stockholder recommendations must be made in accordance with our bylaws, as discussed under “Stockholder Proposals” below, and must contain the following information:

 

 

In connection with its evaluation, the nominating and corporate governance committee may request additional information from the proposing stockholder and the candidate. The nominating and corporate governance committee has sole discretion to decide which individuals to recommend for nomination as directors.

 

To be nominated to serve as a director, a nominee need not meet any specific, minimum criteria; however, the nominating and corporate governance committee believes that nominees for director should possess the highest personal and professional ethics, integrity, values and judgment and should be committed to the long-term interests of our stockholders. When evaluating a potential director nominee, including one recommended by a stockholder, the nominating and corporate governance committee will take into account a number of factors, including, but not limited to, the following:

 

 

When seeking candidates for director, the nominating and corporate governance committee may solicit suggestions from incumbent directors, management, stockholders and others. After conducting an initial evaluation of a prospective nominee, the nominating and corporate governance committee will interview that candidate if it believes the candidate might be suitable to be a director. The nominating and corporate governance committee may also ask the candidate to meet with management. If the nominating and corporate governance committee believes a

candidate would be a valuable addition to the board of directors, it may recommend to the full board that candidate’s nomination and election.

 

Prior to nominating an incumbent director for re-election at an annual meeting of stockholders, the nominating and corporate governance committee will consider the director’s past attendance at, and participation in, meetings of the board of directors and its committees and the director’s formal and informal contributions to the various activities conducted by the board and the board committees of which such individual is a member.

 

The members of the Nominating and Corporate Governance Committee (with Mr. Pohl abstaining and recusing himself from this discussion) have determined that Mr. Pohl continues to be qualified to serve as a director of the company and have recommended to the board of directors that he be nominated for re-election to serve as the Class I director for a three-year term. Mr. Pohl’s nomination has been approved by the entire board of directors.

 

Our board of directors has adopted a written charter for the nominating and corporate governance committee and corporate governance guidelines, which are available on our website at www.ascentmediacorporation.com/Nominating-Corporate-Governance-Committee-Charter.aspx and www.ascentmediacorporation.com/Corporate-Governance-Guidelines.aspx, respectively.

 

Audit Committee

 

Our board of directors has established an audit committee, whose chairman is Philip J. Holthouse and whose other members are Brian C. Mulligan and Michael J. Pohl. See “— Director Independence” above.

 

Our board of directors has determined that each of Mr. Holthouse and Mr. Mulligan is an “audit committee financial expert” under applicable SEC rules and regulations. The audit committee reviews and monitors the corporate financial reporting and the internal and external audits of our company. The committee’s functions include, among other things:

 

 

Our board of directors has adopted a written charter for the audit committee, which is available on our website at www.ascentmediacorporation.com/Audit-Committee-Charter.aspx.

 

Each member of the audit committee is an independent director as determined by the company’s board of directors, based on the listing standards of The Nasdaq Stock Market. Each member of the audit committee also satisfies the SEC’s independence requirements for members of audit committees. Each of Mr. Holthouse and Mr. Mulligan is an “audit committee financial expert” under applicable SEC rules and regulations.

 

The audit committee reviews the company’s financial reporting process on behalf of its board of directors. Management has primary responsibility for establishing and maintaining adequate internal controls, for preparing financial statements and for the public reporting process. The company’s independent auditor, KPMG LLP, is responsible for expressing opinions on the conformity of the company’s audited consolidated financial statements with U.S. generally accepted accounting principles.

The audit committee has reviewed and discussed with management and KPMG the company’s most recent audited consolidated financial statements. The audit committee has also discussed with KPMG the matters required to be discussed by the Statement on Auditing Standards No. 61, Communications With Audit Committees, as amended and as adopted by the Public Accounting Oversight Board, plus the additional matters required to be discussed by the Statement on Auditing Standards No. 114, The Auditor’s Communication with Those Charged with Governance, as modified or supplemented, including that firm’s judgment about the quality of the company’s accounting principles, as applied in its financial reporting.

 

KPMG has provided the audit committee with the written disclosures and the letter required by the Public Company Accounting Oversight Board Ethics and Independence Rule 3526, as modified or supplemented, and the audit committee has discussed with KPMG that firm’s independence from the company and its subsidiaries.

 

Based on the reviews, discussions and other considerations referred to above, the audit committee recommended to the board of directors of the company that the audited financial statements be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2008, which was filed on March 31, 2009 with the SEC.

 

Submitted by the Members of the Audit Committee

 

Philip J. Holthouse
Brian C. Mulligan
Michael J. Pohl

 

Other

 

Our board of directors, by resolution, may from time to time establish other committees of our board of directors, consisting of one or more of our directors. Any committee so established will have the powers delegated to it by resolution of our board of directors, subject to applicable law.

 

In 2008, after the date of our spin-off from DHC, there were four meetings of our full board of directors, one meeting of our compensation committee and one meeting of our audit committee.

 

All of our directors are encouraged to attend each annual meeting of our stockholders.

 

Our stockholders may send communications to our board of directors or to individual directors by mail addressed to the Board of Directors or to an individual director c/o Ascent Media Corporation, 12300 Liberty Boulevard, Englewood, Colorado 80112. All such communications from stockholders will be forwarded to our directors on a timely basis.

 

In 2008, after the date of our spin-off from DHC, the independent directors of our company met at one executive session without management participation. Any interested party who has a concern regarding any matter which it wishes to have addressed by our independent directors, as a group, at an upcoming executive session may send its concern in writing addressed to Independent Directors of Ascent Media Corporation, c/o Ascent Media Corporation, 12300 Liberty Boulevard, Englewood, Colorado 80112. The current independent directors of our company are Philip J. Holthouse, Brian C. Mulligan and Michael J. Pohl.

 

This Compensation Discussion and Analysis explains our compensation program for:

 

 

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 proxy statement as our named executive officers.

 

Compensation Practices

 

Currently, each of our named executive officers is a party to an employment agreement with us or AMG and receives a salary, bonus opportunity, and long-term incentive compensation directly from us and/or AMG. However, during portions of 2008, both Mr. Fitzgerald and Mr. Orr received compensation for their services to us through a services agreement between our company and Liberty Media Corporation (which we refer to as Liberty Media).

 

Services Agreement

 

From July 2003 to July 2005, AMG was a wholly owned subsidiary of Liberty Media. In July 2005, Liberty Media contributed the equity of AMG to DHC and distributed 100% of the outstanding shares of DHC to the stockholders of Liberty Media in a spin-off. In connection with the spin-off of DHC, Liberty Media and DHC entered into the services agreement, pursuant to which Liberty Media agreed to make available to DHC the services of certain personnel and DHC agreed to reimburse Liberty Media for an allocable portion of the salary and benefits of such personnel. Pursuant to the services agreement, DHC and Liberty Media reevaluated the allocation of such salaries and benefits on a semi-annual basis and made appropriate adjustments based on discussions with the officers and employees involved and an analysis of the business demands made and expected to be made on such persons for the relevant period by the businesses of DHC and AMG. Such allocations were also discussed with and subject to approval by the compensation committee of DHC’s board of directors.

 

In September 2008, DHC contributed the equity of AMG to our company, and distributed 100% of our common stock to the stockholders of DHC in a spin-off. Concurrently with the spin-off of our company from DHC, we assumed all rights and obligations of DHC under the services agreement with Liberty Media.

 

William R. Fitzgerald.  Mr. Fitzgerald has been Chairman of AMG, our principal operating subsidiary, since July 2000. At the time of the spin-off of our company from DHC, Mr. Fitzgerald was appointed chairman and chief executive officer of our company. From the date of the spin-off until November 11, 2008, we compensated Mr. Fitzgerald indirectly through the services agreement with Liberty Media. On November 11, 2008, the compensation committee of our board of directors approved a compensation package (which we refer to as the Fitzgerald Compensation Package) payable to Mr. Fitzgerald in his capacity as our chief executive officer. From November 11, 2008, through February 8, 2009, we compensated Mr. Fitzgerald pursuant to his compensation package.

 

John A. Orr.  Prior to the spin-off of our company from DHC, Mr. Orr was an employee of Liberty Media and did not provide services to AMG. At the time of the spin-off, Mr. Orr became a senior vice president of our company. From the date of the spin-off until October 15, 2008, Mr. Orr was compensated for his services to us through the services agreement. On October 15, 2008, the compensation committee approved a compensation package (which we refer to as the Orr Compensation Package) payable to Mr. Orr as a senior vice president of our

company. From October 15, 2008, through April 12, 2009, we compensated Mr. Orr pursuant to his compensation package.

 

Employment Agreements

 

William E. Niles.  On September 1, 2006, in connection with Mr. Niles’ appointment to AMG’s executive committee, AMG entered into a five-year renewable employment agreement with Mr. Niles. Mr. Niles is compensated for his services as an executive officer of our company through his employment agreement with AMG.

 

George C. Platisa.  On September 1, 2006, in connection with Mr. Platisa’s appointment to AMG’s executive committee, AMG entered into a five-year renewable employment agreement with Mr. Platisa. Mr. Platisa is compensated for his services as an executive officer of our company through his employment agreement with AMG.

 

Jose A. Royo.  On February 11, 2008, in connection with Mr. Royo’s appointment as President and Chief Executive Officer of AMG, AMG entered into a five-year renewable employment agreement with Mr. Royo. Mr. Royo is compensated for his services as an executive officer of our company through his employment agreement with AMG.

 

William R. Fitzgerald.  On February 9, 2009, we entered into an employment agreement (which we refer to as the Fitzgerald Employment Agreement) with Mr. Fitzgerald, setting the terms and conditions, including compensation terms, of Mr. Fitzgerald’s employment as our Chairman and Chief Executive Officer. The compensation levels provided for in the Fitzgerald Employment Agreement are substantially the same as the compensation levels under the Fitzgerald Compensation Package.

 

John A. Orr.  On April 13, 2009, we entered into an employment agreement (which we refer to as the Orr Employment Agreement) with Mr. Orr, setting the terms and conditions, including compensation terms, of Mr. Orr’s employment as our Senior Vice President — Corporate Development. The compensation levels provided for in the Orr Employment Agreement are substantially the same as the compensation levels under the Orr Compensation Package, except for certain severance compensations See “— Potential Payments Upon Termination or Change-in-Control” below.

 

For descriptions of the compensation arrangements and elements contemplated by our named executive officers’ employment agreements, see “Executive Compensation — Compensation Discussion and Analysis — Elements of 2008 Executive Compensation”, “Executive Compensation — Compensation Discussion and Analysis — Changes to Compensation Programs for 2009”, “Proposals of Our Board — Proposal 2 — The Incentive Plan Proposal” and “Executive Compensation — Potential Payments Upon Termination or Change-in-Control.”

 

Decision-making Process

 

The compensation committee of our board of directors reviews and makes recommendations to our board regarding compensation of our executive officers. The compensation packages of Messrs. Fitzgerald and Orr represent terms agreed upon by the compensation committee and each such named executive officer. The compensation packages of Messrs. Niles, Platisa and Royo were established pursuant to contracts negotiated and entered into prior to the spin-off.

 

Prior to the effective time of the spin-off, AMG was an indirect wholly-owned subsidiary of DHC. Because AMG was a private company, AMG did not have an independent compensation committee. The objectives and principles of AMG’s executive compensation program were established by Mr. Fitzgerald, as Chairman of AMG, and Robert R. Bennett, as President of DHC. In such capacities, Mr. Fitzgerald and Mr. Bennett constituted the compensation committee of AMG. Decisions regarding the executive compensation packages paid to Messrs. Niles, Platisa and Royo were generally made by Mr. Fitzgerald and Mr. Bennett.

 

In determining appropriate compensation packages for our named executive officers, (i) the compensation committee, in the cases of Messrs. Fitzgerald and Orr and (ii) Messrs. Fitzgerald and Bennett, in the cases of Messrs. Niles, Platisa and Royo, considered:

 

 

 

During 2008, we engaged Mercer as an independent compensation consultant to advise the compensation committee on management compensation matters generally and to make recommendations regarding appropriate compensation practices and programs for our executive officers and directors. In connection with such recommendations, Mercer reviewed our existing policies and programs (including our long-term incentive policies), and compiled compensation data to establish a reference peer group for comparative purposes. See, “— Benchmarking” below. Mercer had previously provided services to AMG in 2007 with respect to a project designed to increase the operational efficiency of AMG’s human resources department.

 

Objectives

 

The compensation program for our named executive officers was designed to meet the following objectives that align with and support our strategic business goals:

 

 

Principles

 

The following principles are used to guide the design of our executive compensation program and to ensure that the program is consistent with the objectives described above:

 

 

Benchmarking

 

We believe that our executive compensation program should provide compensation to our named executive officers that is both reasonable in relation to, and competitive with, the compensation paid to similarly situated employees of companies in our industry and companies with which we compete for talent. In that connection, our compensation committee considers compensation data relating to other companies as a factor in evaluating existing and proposed compensation arrangements for our named executive officers.

 

In the third quarter of 2008, the compensation committee engaged Mercer to recommend a peer group of companies that compete with Ascent Media for executive talent. Based on such recommendations and discussions among the committee and between the committee and Mercer, as well as input from management, the compensation committee selected a peer group of 14 publicly traded U.S. companies, similar in size to our company, and with similar business characteristics. The peer companies selected operate in various markets within the technology,

media, communications and entertainment industries, and include client-based, business-to-business service providers and operators of global data networks.

 

2008 Compensation Peer Group

 

 

Mercer collected compensation data for the chief executive officer, chief operating officer (or second highest paid executive), chief financial officer, general counsel and fifth highest paid executive officer, for each of the companies in the peer group. Such compensation data included the levels of base salary, target bonus, total cash compensation, long-term incentives and total direct compensation. Based on such comparative data, as well as the general business and industry knowledge and experience of the compensation committee members, the compensation committee believes that the current compensation levels of our named executive officers are both reasonable and competitive. The compensation committee did not establish any specific benchmarking targets in connection with its comparative review.

 

Elements of 2008 Executive Compensation

 

For 2008, the principal components of compensation for our named executive officers were:

 

 

A summary of each element of the compensation program for our named executive officers is set forth below. We believe that each element complements the others and that together they serve to achieve our compensation objectives.

 

Base Salary

 

We provide competitive base salaries to attract and retain high-performing executive talent. We believe 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, including, for example, (i) in the case of Mr. Fitzgerald, the metrics for calculating the annual bonus payable to Mr. Fitzgerald, (ii) in the case of Mr. Orr, the metrics for calculating the annual bonus payable to Mr. Orr and the amount of life insurance provided by our company and (iii) in the case of Messrs. Niles, Platisa and Royo, the metrics for the target award of each such named executive officer under AMG’s Management Incentive Plan described below and the amount of life insurance provided by AMG.

 

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. Base salaries of the named executive officers represent negotiated amounts and were established under the employment packages and employment agreements, as applicable, entered into with each such officer.

 

Each of the Fitzgerald Compensation Package and the Orr Compensation Package sets forth the initial percentage of the applicable named executive officer’s base salary allocable to our company under the services

agreement, and contemplates that such portion of base salary allocable to our company under the services agreement is subject to review annually for increase in the sole discretion of the compensation committee.

 

The employment agreement of each of Messrs. Niles, Platisa and Royo sets forth the applicable named executive officer’s base salary for the first term year of such employment agreement. Each such employment agreement provides that, beginning as of the first anniversary of such agreement’s commencement date, such base salary shall be reviewed on an annual basis during the term of such agreement, for increase in the sole discretion of the compensation committee.

 

Bonus

 

Each of Messrs. Fitzgerald and Orr received a bonus with respect to services to our company for the period beginning on the date of the spin-off through December 31, 2008, which bonuses were calculated as a percentage of such named executive officer’s base salary, based on the compensation committee’s determination of each of Messrs. Fitzgerald and Orr’s contribution to our company.

 

Non-Equity Incentive Compensation

 

MIP.  Pursuant to the terms of their employment agreements, each of Messrs. Niles, Platisa and Royo participates in AMG’s Management Incentive Plan, as amended and restated in January 2007 (which we refer to as the MIP), which provides for annual cash incentive awards based on company and individual performance. Prior to the spin-off, the MIP was administered by a management incentive plan compensation committee designated by DHC. Since the spin-off, the MIP has been administered by the compensation committee with respect to awards granted to any of our named executive officers, and by our board and its designees with respect to other eligible employees. We refer to the applicable committee administering the MIP as the administering committee. Employees of AMG and its controlled affiliates with divisional titles of managing director and higher and corporate staff of AMG with titles of director and higher are eligible to receive awards under the MIP, as determined by the administering committee.

 

The MIP is a performance-based compensation program designed to focus 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 through 2008, the administering committee assigned 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 administering 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 administering committee evaluates each participant’s individual performance and determines the portion of the individual component of the target award (from 0% to 100%) the participant is eligible to receive for such plan year. We refer to such percentage as the Individual Achievement Percentage.

 

The remaining 80% of each participant’s target award (which we refer to as the Corporate Performance Component) under the MIP is subject to the achievement, as determined by the administering committee, of certain adjusted economic performance metrics by AMG and/or the relevant division or other operating unit of AMG. In the case of corporate staff, including Messrs. Niles, Platisa and Royo, the Corporate Performance Component of their awards is based on AMG achieving certain levels of Adjusted Revenue, Adjusted EBITDA and Adjusted Free Cash Flow, in each case as determined by the administering committee for purposes of the plan. We refer to each of the

three levels as an Economic Performance Goal. The Economic Performance Goals are weighted as follows to determine the Corporate Performance Component:

 

 

In establishing Economic Performance Goals under the MIP, the administering committee takes into account various factors, including AMG’s operating budget for the relevant period for financial planning purposes, the business risks relating to such operating budget, and the compensatory purposes of the MIP. The administering committee may modify Economic Performance Goals from time to time to reflect changes in AMG’s business, as well as industry and economic conditions. Any modification to Economic Performance Goals must be approved by the administering committee, which has discretion to approve such modifications under the plan. Such modifications may be positive or negative. During 2008, the administering committee approved modifications to the Economic Performance Goals for such year to reflect, among other things: (i) the effects of the Writers Guild strike on the market for AMG’s services relating to entertainment television programming, (ii) certain costs incurred by AMG in connection with the spin-off of our company, and (iii) certain discontinued and/or divested operations of AMG. The Economic Performance Goals in the table below reflect the cumulative effects of such modifications, all of which were approved by the administering committee.

 

To calculate the amount of any awards payable under the MIP, at the end of the plan year, the final Economic Performance Goals are compared to AMG’s adjusted operating results, and the resulting percentage (which we refer to as an Economic Performance Goal Achievement Percentage) is then used to determine the portion of the component weight of each Economic Performance Goal (which we refer to as the Percentage of Component Weight) that will be used to determine the percentage of the Corporate Performance Component (which we refer to as the Corporate Performance Component Percentage) earned by each participant, as follows:

 

 

Adjustments to actual operating results under the MIP are intended to reflect factors not taken into account in establishing or revising the Economic Performance Goals 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 AMG’s operational performance in the relevant period. Any such adjustments must be approved by the administering committee, which has discretion to approve such adjustments under the plan. Such adjustments may be positive or negative. For 2008, the administering committee approved adjustments which, in the aggregate on a net basis, decreased Adjusted Revenue by $3.0 million (0.4%), decreased Adjusted EBITDA by $1.6 million (2.7%) and increased Adjusted Free Cash Flow by $923,000 (5.7%). Such adjustments reflected numerous factors that the administering committee deemed appropriate in light of the purposes of the plan, including, among other factors, capital expenditures paid in 2008 relating to revenue anticipated to be generated in 2009 and certain foreign currency exchange effects.

 

No award payments will be made under the MIP for any year in which AMG is not deemed to have achieved at least 90% of Adjusted EBITDA for purposes of the MIP for such plan year, after giving effect to any adjustments authorized by the administering committee as contemplated above. We refer to that overall threshold for payments under the MIP as the Benchmark. In the year ended December 31, 2008, the administering committee determined that AMG achieved the Benchmark for purposes of the MIP.

The following table sets forth, for 2008, the calculation of the Corporate Performance Component Percentage for each of Messrs. Niles, Platisa and Royo (in each case, 72.7%), the elements of which calculation are described above.

 

 

 

 

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 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 executive officer’s Corporate Performance Component Percentage) and total amount payable pursuant to the MIP, in each case, for the year ending December 31, 2008.

 

 

For 2008, Mr. Niles’ Individual Achievement Percentage was based on the administering committee’s determination of Mr. Niles’ achievement of the following Key Performance Indicators:

 

 

For 2008, Mr. Platisa’s Individual Achievement Percentage was based on the administering committee’s determination of Mr. Platisa’s achievement of the following Key Performance Indicators:

 

 

For 2008, Mr. Royo’s Individual Achievement Percentage was based on the administering committee’s determination of Mr. Royo’s achievement of the following Key Performance Indicators:

 

 

 

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 AMG 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 administering committee in accordance with the MIP.

 

In March 2009, AMG determined not to implement the MIP for the 2009 plan year. We expect that any cash bonus paid to our executive officers for their 2009 performance will be determined in the discretion of the compensation committee. We currently anticipate that AMG will reinstate the MIP for the 2010 plan year.

 

LTIP.  Each of Messrs. Niles, Platisa and Royo participates in AMG’s 2006 Long-Term Incentive Plan, as amended and restated as of September 9, 2008 (which we refer to as the LTIP), which provides for the grant by AMG of awards which we refer to as phantom appreciation rights or PARs to key employees of AMG. Subject to vesting in accordance with the LTIP, each PAR measures the increase, if any, in the Value (as defined below) 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 (including, as discussed below, certain adjustments to PAR Values), subject, in certain cases, to the approval of our compensation committee. Prior to the spin-off, the members of such committee were designated by DHC. The current members of the LTIP committee are Mr. Fitzgerald and Mr. Pohl.

 

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 AMG, 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 March 31, 2009, an aggregate of 378,500 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. Under the LTIP, free cash flow is defined as, for any calendar year:

 

 

The LTIP defines the value of AMG for the purpose of calculating the Company Value Component as the sum of:

 

 

calculated in each case as provided under the LTIP. Such value is calculated on a periodic basis pursuant to the terms of the LTIP.

 

On September 4, 2008, we consummated the sale of 100% of the outstanding ownership interests in Ascent Media CANS, LLC (dba AccentHealth) (which we refer to as AccentHealth), a Delaware limited liability company and prior to such sale a wholly-owned subsidiary of our company, to AccentHealth Holdings LLC, an unaffiliated third party, for approximately $120 million in cash. Prior to the sale of AccentHealth, the value and free cash flow of AccentHealth were included in determining the Value of a phantom unit under the LTIP. Effective September 9, 2008, the LTIP was amended to reflect the sale of AccentHealth. As a result of this amendment (which we refer to as the LTIP Amendment), AMG will distribute to grantees who held PARs at the date of sale certain amounts (which we refer to as AH Distributions) relating to AccentHealth and representing the increase in Value of a phantom unit under the LTIP attributable to the increase in the value of AccentHealth and the cumulative cash flow of AccentHealth from adoption of the LTIP through the date of the sale. The AH Distributions commenced in February 2009 and will be made, with respect to Messrs. Niles, Platisa and Royo, as follows:

 

 

Following the date of the LTIP Amendment, the Value of phantom units under the LTIP no longer includes the value and free cash flow of AccentHealth, and the grant date Value of outstanding PARs was adjusted to reflect the exclusion, as described below.

 

As of December 31, 2008, (i) Messrs. Niles, Platisa and Royo had received grants, made as of August 3, 2006, of 60,000 PARs, 60,000 PARs and 35,000 PARs, respectively (which we refer to as the August 2006 Grants) and (ii) Mr. Royo had received an additional grant, made as of February 11, 2008, of 35,000 PARs (which we refer to as the February 2008 Grant), in each case subject to vesting as described below. The initial Value of the PARs granted pursuant to the August 2006 Grants was $50.50 as of the date of such grants, and was adjusted downward to $45.25 pursuant to the LTIP Amendment. The initial Value of the PARs granted pursuant to the February 2008 Grant was $49.91 as of the date of such grant, and was adjusted downward to $40.72 pursuant to the LTIP Amendment.

 

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. Subject to the foregoing description of the AH Distributions, as of December 31, 2008, all PARs granted prior to such date had a PAR Value of zero (if exercised on such date) because the Value of each such PAR was less than the grant date Value of such PAR.

 

Awards under the LTIP (including the right to receive AH Distributions) 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). Any such consideration and all AH Distributions 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 AMG (if AMG is at such time a publicly-traded corporation) or of any corporate affiliate of AMG designated by the committee.

 

Equity Incentive Compensation

 

Consistent with our compensation philosophy, we seek to align the interests of our named executive officers with those of stockholders by awarding equity-based incentive compensation, ensuring that our executives have a continuing stake in the long-term success of our company and our subsidiaries.

 

In the year ended December 31, 2008, we made the following equity incentive awards, in each case under the Incentive Plan:

 

 

The options vest quarterly over the five-year period beginning on the date of the spin-off and have a term of ten years from the date of the spin-off, subject to certain specified early termination events. The restricted stock grants vest quarterly over a four-year period from the date of the spin-off.

 

Perquisites and Personal Benefits

 

In the year ended December 31, 2008, the limited perquisites and personal benefits provided to our named executive officers consisted of:

 

 

Relocation Assistance and Related Tax Gross-Up

 

Consistent with our objective to attract and retain a high-performing executive management team, we may recruit candidates from throughout the U.S. to fill executive level openings and will reimburse the newly hired executive for relocation costs. To the extent such reimbursement is taxable to the recipient, we may also provide a cash payment to the recipient to offset the tax payable on such reimbursement, in whole or in part, taking into account the tax payable by the recipient on such tax gross-up as well.

Changes to Compensation Programs for 2009

 

Fitzgerald Employment Agreement

 

On February 9, 2009, we entered into the Fitzgerald Employment Agreement with Mr. Fitzgerald, setting the terms and conditions, including compensation terms, of Mr. Fitzgerald’s employment as chairman of our board of directors and our chief executive officer, the terms of which employment agreement supersede the terms of the Fitzgerald Compensation Package.

 

Term.  The initial term of the Fitzgerald Employment Agreement is five years, commencing effective as of the date of the spin-off from DHC.

 

Base Salary.  Under the Fitzgerald Employment Agreement, Mr. Fitzgerald’s annual base salary is $426,000, subject to annual review and increase in the sole discretion of the compensation committee.

 

Bonus.  Under the Fitzgerald Employment Agreement, Mr. Fitzgerald is eligible to receive an annual bonus ranging from 75% to 150% of Mr. Fitzgerald’s base salary. Mr. Fitzgerald’s entitlement to receive any bonus, and the actual amount thereof, will be determined by the compensation committee in its sole discretion based upon Mr. Fitzgerald’s achievement of certain performance criteria.

 

Incentive Awards.  The Fitzgerald Employment Agreement references the option and restricted stock grants to Mr. Fitzgerald described under “Executive Compensation — Compensation Discussion and Analysis — Elements of 2008 Executive Compensation — Equity Incentive Compensation.”

 

Gross-Up.  Under the Fitzgerald Employment Agreement, if any payment or distribution in the nature of compensation (as defined in Section 280G(b)(2) of the Code) to or for the benefit of Mr. Fitzgerald would be subject to excise tax imposed by Section 4999 of the Code, Mr. Fitzgerald will be entitled to receive a gross-up payment.

 

Termination of Employment.  For amounts payable to Mr. Fitzgerald under the Fitzgerald Employment Agreement upon termination of Mr. Fitzgerald’s employment, see “Executive Compensation — Potential Payments Upon Termination or Change-in-Control.”

 

Orr Employment Agreement

 

On April 13, 2009, we entered into the Orr Employment Agreement with Mr. Orr, setting the terms and conditions, including compensation terms, of Mr. Orr’s employment as Senior Vice President of Corporate Development of our company, the terms of which employment agreement supersede the terms of the Orr Compensation Package.

 

Term.  The initial term of the Orr Employment Agreement is five years, commencing effective as of the date of the spin-off from DHC.

 

Base Salary.  Under the Orr Employment Agreement, Mr. Orr’s annual base salary is $325,000, subject to annual review and increase in the sole discretion of the compensation committee.

 

Bonus.  Under the Orr Employment Agreement, Mr. Orr is eligible to receive an annual bonus ranging from 50% to 75% of Mr. Orr’s base salary. Mr. Orr’s entitlement to receive any bonus, and the actual amount thereof, will be determined by the compensation committee in its sole discretion based upon Mr. Orr’s achievement of certain performance criteria.

 

Incentive Awards.  The Orr Employment Agreement references the option and restricted stock grants to Mr. Orr described under “Executive Compensation — Compensation Discussion and Analysis — Elements of 2008 Executive Compensation — Equity Incentive Compensation.”

 

Termination of Employment.  For amounts payable to Mr. Orr under the Orr Employment Agreement upon termination of Mr. Orr’s employment, see “Executive Compensation — Potential Payments Upon Termination or Change-in-Control.”

Additional Equity Incentive Grants

 

On January 16, 2009, under the Incentive Plan, each of Messrs. Niles and Platisa received a grant of options to purchase 27,640 shares of our Series A common stock and Mr. Royo received a grant of options to purchase 41,460 shares of our Series A common stock at an exercise price of $25.09 (which was the closing market price on the grant date). The options vest quarterly over a four-year period and have a term of ten years, subject to certain specified early termination events.

 

The following table sets forth information regarding the compensation paid to our named executive officers during the years ended December 31, 2008, 2007 and 2006 for services to Ascent Media and its subsidiaries. Such compensation includes amounts paid:

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table contains information regarding plan-based incentive awards granted during the year ended December 31, 2008.

 

 

 

 

 

The following table contains information regarding unexercised options to acquire shares of our common stock, and unvested restricted stock awards, which were outstanding as of December 31, 2008 and held by any of our named executive officers.

 

 

 

 

No options to purchase shares of our common stock were exercised by our named executive officers during the year ended December 31, 2008.

 

The following table sets forth information regarding the vesting of restricted stock held by our named executive officers, in each case, during the year ended December 31, 2008.

 

 

 

 

Each of the employment agreements of our named executive officers provides 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 our company.

 

Change of Control

 

Under each of the employment agreements of Messrs. Fitzgerald and Orr, a change of control of our company will be deemed to have occurred if any of the following occurs:

 

(i) any person or group (other than Mr. Malone and certain affiliates, each of whom we refer to as an Ascent Permitted Holder) acquires, together with stock already held by such person or group, more than 50% of the total fair market value or more than 50% of the total voting power of the stock of our company;

 

(ii) any person or group (other than an Ascent Permitted Holder) acquires, in a single transaction or in multiple transactions during a 12-month period, assets of our company having a gross fair market value of 40% or more of the total gross fair market value of all of our company’s assets immediately prior to such acquisition or acquisitions;

 

(iii) any person or group (other than an Ascent Permitted Holder) acquires, in a single transaction or in multiple transactions during a 12-month period, 30% or more of the total voting power of the stock of our company; or

 

(iv) a majority of our company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the board of directors before the date of appointment or election.

 

Under each of the employment agreements of Messrs. Royo, Niles and Platisa, a change of control of AMG will be deemed to have occurred if any person or group (other than one or more of DHC, a parent entity of AMG, Mr. Malone and certain affiliates of each, each of whom we refer to as an AMG Permitted Holder):

 

(i) acquires, directly or indirectly, all or substantially all of the assets of AMG; or

 

(ii) becomes the beneficial owner of more than 50% of the aggregate voting power of AMG’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 AMG Permitted Holders, subject to certain exceptions.

 

Termination for Cause

 

If our company (in the case of Messrs. Fitzgerald and Orr) or AMG (in the case of Messrs. Niles, Platisa and Royo) terminates any named executive officer’s employment for “Cause,” our company or AMG, as applicable, will have no further liability or obligations under the applicable 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 a felony or crime of moral turpitude; and other misconduct that is materially injurious to our financial condition or business reputation.

 

Termination Without Cause

 

If our company terminates the employment of Mr. Fitzgerald or Mr. Orr, our company becomes obligated to pay the applicable named executive officer:

 

(i) accrued but unpaid base salary and vacation time;

 

(ii) a severance payment equal to:

 

 

 

(iii) accrued but unpaid bonus for the calendar year prior to the year in which the termination occurs; and

 

(iv) incurred but unpaid expenses.

 

If AMG terminates the employment of Mr. Royo, Mr. Niles or Mr. Platisa, AMG becomes obligated to pay the applicable named executive officer:

 

(i) accrued but unpaid base salary and vacation time;

 

(ii) a severance payment equal to:

 

 

(iii) in lieu of any award payable under the MIP with respect to the applicable year of termination:

 

 

(iv) incurred but unpaid expenses.

 

Termination with Good Reason

 

Subject to certain notice provisions and our company’s rights with respect to a cure period or AMG’s rights with respect to a renegotiation period, as applicable, each of our named executive officers 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:

 

 

 

Death or Disability

 

In the event any of our named executive officers dies or becomes disabled during such named executive officer’s term of employment, our company or AMG, as applicable, 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;

 

(iii) in the case of Mr. Fitzgerald, a lump sum amount equal to Mr. Fitzgerald’s annual base salary in effect on the date of termination multiplied by 2 (except if Mr. Fitzgerald is covered by our company’s basic life insurance group benefit plan, in which case the lump sum will be reduced to an amount equal to Mr. Fitzgerald’s annual base salary in effect on the date of termination);

 

(iv) in the case of Messrs. Niles or Platisa, 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; and

 

(v) in the case of Mr. Royo an amount equal to the present value of the payments of base salary Mr. Royo would have received during the 24-month period following such termination, calculated by applying a 6% annual rate of interest without compounding.

 

Non-Renewal

 

Each of the employment agreements of Messrs. Fitzgerald, Niles, Platisa and Royo 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 — Elements of Compensation — Long-Term Incentive Plan”. In the event of a change of control of AMG with respect to each PAR granted to a grantee that remains an employee of AMG or one of its subsidiaries on the date of such change of control:

 

 

Under the LTIP, a “change in control” will be deemed to have occurred if there occurs a change in ownership of AMG or a change in ownership in a substantial portion of AMG’s assets. A change in ownership is value or more than 50% of the total voting power of the stock of AMG. 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 AMG 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 AMG’s assets is deemed to have occurred if any person or group acquires 40% or more of the total gross fair market value of AMG’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 AMG immediately after the transfer.

Incentive Plan

 

For a description of the effect of termination, death or disability on awards outstanding under the incentive plan, see “Proposals of Our Board — Proposal 2 — The Incentive Plan Proposal — Incentive Plan.”

 

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, 2008 (and applying, in the case of Mr. Fitzgerald and Mr. Orr, the terms of the Fitzgerald Employment Agreement and the Orr Employment Agreement, respectively, as if each such employment agreement was in effect on December 31, 2008), (ii) assumes that all salary, bonus and expense reimbursement amounts due on or before December 31, 2008 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, 2008 was zero on such date. The number of PARs held by our named executive officers that had vested as of December 31, 2008 were (i) 0 vested PARs held by Mr. Fitzgerald, (ii) 45,000 vested PARs held by Mr. Niles, (iii) 0 vested PARs held by Mr. Orr, (iv) 45,000 vested PARs held by Mr. Platisa and (v) 34,992 vested PARs held by Mr. Royo. The number of PARs held by our named executive officers that would have vested as of December 31, 2008 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) 70,000 vested PARs held by Mr. Royo.