Ascent Media Corporation

     Our Information Statement is filed as Exhibit 99.1 to this Form 10. For your convenience, we have provided below a cross-reference sheet identifying where the items required by Form 10 can be found in the Information Statement.

Item
No.		Item Caption		Location in Information Statement
1.		Business.		Summary; Risk Factors; Cautionary Statement Concerning Forward Looking Statements; The Spin-Off; Selected Financial Data; Management’s Discussion and Analysis of Financial Condition and Results of Operations; Description of Our Business; and Certain Inter-Company Agreements
1A.		Risk Factors.		Risk Factors
2.		Financial Information.		Summary; Risk Factors; Capitalization; Selected Financial Data; and Management’s Discussion and Analysis of Financial Condition and Results of Operations
3.		Properties.		Description of our Business—Properties
4.		Security Ownership of Certain Beneficial Owners and Management.		Management—Security Ownership of Management; and Security Ownership of Certain Beneficial Owners
5.		Directors and Executive Officers.		Management
6.		Executive Compensation.		Management; and Executive Compensation
7.		Certain Relationships and Related Transactions.		Summary; Risk Factors; Management; Certain Relationships and Related Party Transactions; and Certain Inter-Company Agreements
8.		Legal Proceedings.		Description of our Business—Legal Proceedings
9.		Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.		Summary; The Spin-Off; Risk Factors; and Description of our Capital Stock
10.		Recent Sales of Unregistered Securities.		Not Applicable
11.		Description of Registrant’s Securities to be Registered.		Description of our Capital Stock
12.		Indemnification of Directors and Officers.		Indemnification of Directors and Officers
13.		Financial Statements and Supplementary Data.		Summary; Selected Financial Data; and Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item
No.		Item Caption		Location in Information Statement
14.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.		Not Applicable
15.		Financial Statements and Exhibits.

(a)		Financial Statements: The following financial statements are included in the Information Statement and filed as part of this Registration Statement:
		Ascent Media Corporation
		Unaudited Condensed Pro Forma Combined Financial Statements
		Unaudited Condensed Pro Forma Combined Balance Sheet as of June 30, 2008
		Unaudited Condensed Pro Forma Combined Balance Sheet as of December 31, 2007
		Unaudited Condensed Pro Forma Combined Statement of Operations for the six months ended June 30, 2008
		Unaudited Condensed Pro Forma Combined Statement of Operations for the six months ended June 30, 2007
		Unaudited Condensed Pro Forma Combined Statement of Operations for the year ended December 31, 2007
		Unaudited Condensed Pro Forma Combined Statement of Operations for the year ended December 31, 2006
		Ascent Media Group
		Unaudited Condensed Combined Balance Sheets as of June 30, 2008 and December 31, 2007
		Unaudited Condensed Combined Statements of Operations and Comprehensive Loss for the six months ended June 30, 2008 and 2007
		Unaudited Condensed Combined Statements of Cash Flows for the six months ended June 30, 2008 and 2007
		Unaudited Condensed Combined Statement of Parent’s Investment for the six months ended June 30, 2008
		Notes to Condensed Combined Financial Statements (unaudited)
		Report of Independent Registered Public Accounting Firm
		Combined Balance Sheets as of December 31, 2007 and 2006
		Combined Statements of Operations and Comprehensive Loss for the years ended December 31, 2007, 2006 and 2005
		Combined Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
		Combined Statements of Parent’s Investment for the years ended December 31, 2007, 2006 and 2005
		Notes to Combined Financial Statements
(b)		Exhibits. The following documents are filed as exhibits hereto:

Exhibit Number		Exhibit Description
2.1		Reorganization Agreement, dated as of June 4, 2008, among Discovery Holding Company, Discovery Communications, Inc., the Registrant, Ascent Media Group, LLC, and Ascent Media Creative Sound Services, Inc.*
2.2		Purchase Agreement, dated as of August 8, 2008, by and among the Registrant, Ascent Media CANS, LLC and AccentHealth Holdings, LLC*
3.1		Form of Amended and Restated Certificate of Incorporation of the Registrant to be in effect at the time of the spin-off*
3.2		Form of Bylaws of the Registrant to be in effect at the time of the spin-off*
4.1		Specimen Certificate for shares of Series A common stock, par value $.01 per share, of the Registrant*
4.2		Specimen Certificate for shares of Series B common stock, par value $.01 per share, of the Registrant*
4.3		Form of Rights Agreement between the Registrant and Computershare Trust Company, N.A.*

Exhibit Number		Exhibit Description
10.1		Services Agreement, dated September 16, 2008, between Ascent Media Group, LLC and CSS Studios, LLC
10.2		Tax Sharing Agreement, dated as of September 17, 2008, by and among Discovery Holding Company, Discovery Communications, Inc., Ascent Media Corporation, Ascent Media Group, LLC and CSS Studios, LLC
10.3		Ascent Media Group, LLC 2006 Long-Term Incentive Plan (As Amended and Restated Effective September 9, 2008)*
10.4		Ascent Media Group, LLC 2007 Management Incentive Plan*
10.5		Form of Ascent Media Corporation 2008 Incentive Plan*
10.6		Services Agreement, dated as of July 21, 2005, by and between Discovery Holding Company and Liberty Media Corporation (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of Discovery Holding Company filed on August 10, 2005).
10.7		Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers*
10.8		Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and William E. Niles*
10.9		Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and George C. Platisa*
10.10		Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
10.11		Amendment, dated as of July 17, 2007, to Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
10.12		Employment Agreement, dated as of February 11, 2008, by and between Ascent Media Group, LLC and Jose A. Royo*
10.13		Ascent Media Corporation 2008 Non-Employee Director Incentive Plan
21		List of Subsidiaries*
99.1		Information Statement, dated September 17, 2008

SIGNATURES

     Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: September 17, 2008

EXHIBIT INDEX

Exhibit Number		Exhibit Description
2.1		Reorganization Agreement, dated as of June 4, 2008, among Discovery Holding Company, Discovery Communications, Inc., the Registrant, Ascent Media Group, LLC, and Ascent Media Creative Sound Services, Inc.*
2.2		Purchase Agreement, dated as of August 8, 2008, by and among the Registrant, Ascent Media CANS, LLC and AccentHealth Holdings, LLC*
3.1		Form of Amended and Restated Certificate of Incorporation of the Registrant to be in effect at the time of the spin-off*
3.2		Form of Bylaws of the Registrant to be in effect at the time of the spin-off*
4.1		Specimen Certificate for shares of Series A common stock, par value $.01 per share, of the Registrant*
4.2		Specimen Certificate for shares of Series B common stock, par value $.01 per share, of the Registrant*
4.3		Form of Rights Agreement between the Registrant and Computershare Trust Company, N.A.*
10.1		Services Agreement, dated September 16, 2008, between Ascent Media Group, LLC and CSS Studios, LLC
10.2		Tax Sharing Agreement dated as of September 17, 2008, by and among Discovery Holding Company, Discovery Communications, Inc., Ascent Media Corporation, Ascent Media Group, LLC and CSS Studios, LLC
10.3		Ascent Media Group, LLC 2006 Long-Term Incentive Plan (As Amended and Restated Effective September 9, 2008)*
10.4		Ascent Media Group, LLC 2007 Management Incentive Plan*
10.5		Form of Ascent Media Corporation 2008 Incentive Plan*
10.6		Services Agreement, dated as of July 21, 2005, by and between Discovery Holding Company and Liberty Media Corporation (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of Discovery Holding Company filed on August 10, 2005).
10.7		Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers*
10.8		Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and William E. Niles*
10.9		Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and George C. Platisa*
10.10		Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
10.11		Amendment, dated as of July 17, 2007, to Employment Agreement, dated as of September 1, 2006, by and between Ascent Media Group, LLC and Jose A. Royo*
10.12		Employment Agreement, dated as of February 11, 2008, by and between Ascent Media Group, LLC and Jose A. Royo*
10.13		Ascent Media Corporation 2008 Non-Employee Director Incentive Plan
21		List of Subsidiaries*
99.1		Information Statement, dated September 17, 2008

Exhibit 10.1

SERVICES AGREEMENT

     This SERVICES AGREEMENT (the “Agreement”), dated as of September 16, 2008 (the “Effective Date”), is entered into by and between CSS Studios, LLC, a New York limited liability company (“Company”), and Ascent Media Group, LLC, a Delaware limited liability company (“Provider”).

     WHEREAS Company and its wholly owned subsidiaries, Sound One Corporation and POP Sound, Inc., are engaged primarily in the business of providing (i) sound supervision, sound design and sound editorial services to create, and supervise the creation of, sound for feature films, television content, commercials, movie trailers, and other entertainment products, (ii) music composition, supervision, editing, scoring, recording and related services, (iii) mixing and re-recording services, including the editing and combining of sound effects, dialogue and music, and (iv) maintenance of and access to Company’s sound effects and music libraries (collectively, the “Company Business”);

     WHEREAS, prior to the restructuring (“DHC Restructuring”) of Discovery Holding Company, a Delaware corporation (“DHC”), pursuant to the Reorganization Agreement dated June 4, 2008 (the “Reorganization Agreement”), among DHC, Discovery Communications, Inc., a Delaware corporation and wholly-owned subsidiary of DHC (“New Discovery Holdco”), Company, Provider and Ascent Media Corporation, a newly-formed Delaware corporation and wholly-owned subsidiary of DHC (“Spinco”), Provider was an indirect wholly-owned subsidiary of DHC and Company was a wholly-owned subsidiary of Provider;

     WHEREAS, in connection with the DHC Restructuring, (i) the ownership of Company was restructured such that DHC retained its indirect ownership interests in Company but Company was no longer a direct, wholly-owned subsidiary of Provider, (ii) the ownership of Provider was restructured such that Provider became the wholly-owned subsidiary of Spinco and (iii) DHC distributed pro rata to its stockholders all of the issued and outstanding capital stock of Spinco, as a result of which distribution Spinco became an independent, publicly traded company (the “AMG Spinoff”);

     WHEREAS Company and Provider have determined that it is in their mutual interests for Company to obtain services from Provider in connection with the Company Business and for Company to compensate Provider for the performance of such services; and

     WHEREAS the parties desire to set forth in this Agreement the services to be performed by Provider to Company and the basis upon which Provider will be compensated by Company.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

ENGAGEMENT AND SERVICES

     Section 1.1 Engagement. Company hereby engages Provider to provide to Company the Services in connection with the Company Business, and Provider hereby accepts such engagement, on the terms and subject to the conditions set forth in this Agreement.

     Section 1.2 Services. Subject to Section 3.2 hereof, Provider will provide Company with respect to the Company Business services of the types described below, or the functional equivalent thereof:

          (a) the finance and accounting services described in Schedule 1.2(a) hereto;

          (b) the human resources services described in Schedule 1.2(b) hereto;

          (c) the information technology services described in Schedule 1.2(c) hereto;

          (d) the payroll services described in Schedule 1.2(d) hereto; and

          (e) the real estate management services described in Schedule 1.2(e) hereto;

(all or any services provided by Provider to Company hereunder, collectively, the “Services”).

     Section 1.3 Books and Records; Reporting. Provider will maintain books and records regarding provision of the Services to Company pursuant to this Agreement in accordance with Provider’s standard business practices. Upon Company’s reasonable request, Provider will give Company and its duly authorized representatives, agents, and attorneys reasonable access to such books and records (or to true copies thereof), during Provider’s regular business hours after reasonable advance notice; provided, however, that Provider shall be entitled to limit or restrict such access to the extent that, upon advice of Provider’s counsel, such limitation or restriction is necessary to comply with applicable law, regulation, order or agreement, or to prevent the loss of attorney-client privilege. Provider shall provide to Company from time to time during the Term the information and data regarding the Services provided by Provider to Company hereunder that Provider provided to or on behalf of the Company Business in the ordinary course prior to the Effective Date, and such additional information regarding the Services as Company shall reasonably request. Provider will maintain commercially reasonable accounting records and backup documentation relating to the Services performed hereunder during the Term and for a period of at least two years following the Term (the “Retention Period”) and Provider shall retain such accounting records and make them available to Company’s auditors during the Retention Period during Provider’s regular business hours after reasonable advance notice. In addition, each of Provider and Company agrees to use its reasonable good faith efforts to cooperate with and assist the other party hereto from time to time during the Term and during the Retention Period to provide on a timely basis any information requested by the requesting party that the other party has in its possession that is needed by the requesting party in order to comply with the regulations and filing requirements of the United States Securities and Exchange Commission and any other applicable state or federal governmental authorities.

     Section 1.4 Company Data. Company shall own all right, title, and interest in and to all databases, employee information, customer lists, research data, other Company Confidential Information and other information compiled by Provider in the exercise of its obligations under this Agreement, in each case to the extent specifically arising out of or relating to Company, its employees and the Company Business (the “Company Data”). Provider shall maintain and secure the Company Data in a manner that is substantially equivalent, in all material respects, to the manner in which Provider maintained and secured analogous information for the Company Business in the ordinary course prior to the Effective Date. Upon Company’s request and the expiration or termination of this Agreement, Provider shall furnish the Company Data to Company in a commercially reasonable timeframe in the format in which Provider maintained such Company Data during the Term and via a reasonable means of transmission specified by Company; provided that any out-of-pocket costs incurred by Provider in connection therewith shall be borne by Company. Prior to incurring any such out-of-pocket costs, Provider shall provide Company with notice and a good faith estimate of the amount thereof, to the extent commercially reasonable. Provider may retain archival copies of Company Data, provided that Provider shall use commercially reasonable efforts to safeguard any personally identifiable information, in accordance with and for the terms provided by applicable law and regulation, and shall comply with its obligations with respect thereto pursuant to Section 7.15.

     Section 1.5 Purchase of Goods and Services Pursuant to Provider’s Agreements with Vendors. At Company’s request, Provider will use commercially reasonable efforts to permit Company and its Subsidiaries to license software and to purchase connectivity and other goods and services for use in the Company Business during the Term pursuant to Provider’s existing agreements with third-party vendors, including using commercially reasonable efforts to obtain any and all necessary third-party consents, waivers and amendments under Provider’s vendor agreements and licenses, to the extent Company and its Subsidiaries utilized such arrangements prior to the DHC Restructuring, and pursuant to such other arrangements with third-party vendors as Provider and Company shall mutually agree. Provider shall give Company commercially reasonable prior notice of any material vendor agreements that are expiring or coming up for renewal and shall endeavor in good faith to include Company in the negotiation process regarding any such contract renewals. Provider and Company will negotiate in good faith to enter into any sublicenses, containing customary terms and conditions, necessary or appropriate to implement the provisions of this Section 1.5, and the execution and delivery of any such sublicenses, and receipt of any and all necessary third-party consents, waivers or amendments under Provider’s vendor agreements and licenses, shall be a condition precedent to Provider’s obligations under this Section 1.5. Upon any termination of this Agreement, and earlier at the reasonable request of Company (including in connection with any renewal by Provider of the relevant contract between Provider and its vendor), Provider will cooperate with Company in good faith and use commercially reasonable efforts to assist Company in entering into its own purchase agreements and/or other arrangements with the vendors referred to in this Section 1.5, at Company’s expense, to the extent Company wishes to do so.

     Section 1.6 Cash Management Advances. During the Term, Provider shall from time to time provide Company with cash advances as reasonably required by Company to meet its current payroll and to pay third-party vendors for goods and services used in the Company Business in the ordinary course of business; provided, however, that the aggregate outstanding amount of all advances made by Provider to Company, or on its behalf, shall not at any time

exceed $1,500,000. Any and all amounts advanced by Provider to Company, or on its behalf, under this Agreement shall be unconditional obligations of Company and its Subsidiaries, and shall be due and payable in full on the one-year anniversary of the Effective Date (or, if that is not a business day, the immediately following business day), with interest from the date advanced until paid at the prime rate from time to time published in The Wall Street Journal, calculated in accordance with the average daily balance method. Cash advances by Provider shall be deposited into a cash management account managed by Provider pursuant to this Agreement (the “Cash Management Account”). The Cash Management Account shall be owned by Company from and after the Effective Date but will be pledged to and under the control of Provider during the Term, as collateral security for all obligations of Company to Provider under this Agreement, the Reorganization Agreement or otherwise. Provider shall have the right, but not the obligation, to sweep cash from the Cash Management Account at any time and from time to time that Company has a balance payable to Provider. Upon Provider’s request, Company shall enter into and deliver such security agreements, account control agreements, bank instruction letters, signature cards, financing statements and/or other instruments and agreements as Provider shall reasonably deem necessary to effect the provisions of this Section 1.6.

ARTICLE II

COMPENSATION

     Section 2.1 Services Fee. In consideration for the Services listed on Schedule 1.2 and Provider’s obligation to make such Services available hereunder during the one year period beginning on the Effective Date, Company shall pay Provider a fee (the “Services Fee”) of One Million United States Dollars ($1,000,000). The Services Fee shall be payable quarterly in advance, and shall be non-refundable.

     Section 2.2 Cost Reimbursement. In addition to the Services Fee payable pursuant to Section 2.1, Company shall also reimburse Provider (without markup) for all out-of-pocket costs reasonably incurred by Provider in connection with the Services, including: postage and delivery charges; duplicating charges; filing fees; travel, meals and entertainment related to such Services; and the fees and disbursements of any outside legal counsel, accountants, independent fiduciaries, payroll services, financial institutions; employee communications consultants and other third-party service providers. Provider shall obtain prior approval from Company for any individual expenditure or series of related expenditures incurred by Provider, unless, in the business judgment of Provider, it would not be practicable to seek such prior approval, in which case Provider shall give Company prompt written notice of any expense so incurred, together with the reason that obtaining prior approval was impracticable. For the avoidance of doubt, Provider’s failure to give advance notice of, or obtain Company’s prior approval for, any expense shall not be deemed a breach of this Agreement and shall not release Company from its obligation to reimburse Provider for any reasonable and appropriate expenses. During the Terms, Provider shall use commercially reasonable efforts to advise Company regarding any out-of-pocket expenses expected to be incurred under this Agreement and Provider and Company shall cooperate with one another to minimize such expenses, including transitioning such expenses to Company to the extent practicable.

     Section 2.3 Payment Procedures.

          (a) Company will pay the Services Fee to Provider, by wire or intrabank transfer of funds or in such other manner specified by Provider to Company, in four installments of $250,000 each, due and payable on the Effective Date and on the same day in each of the third, sixth and ninth months thereafter (or if that is not business day, the immediately following business day).

          (b) Any amounts required to be reimbursed by Company to Provider pursuant to Section 2.2 will be paid by Company to Provider within 30 days after receipt by Company of any invoice therefor, by wire or intrabank transfer of funds or in such other manner as specified by Provider to Company. Provider will invoice Company monthly for reimbursable expenses incurred by Provider on behalf of Company during the preceding calendar month; provided, however, that Provider may separately invoice Company at any time for any single reimbursable expense incurred by Provider on behalf of Company, with Company’s prior approval, in an amount equal to or greater than $25,000. Any invoice or statement pursuant to this Section 2.3(b) will be accompanied by supporting documentation in reasonable detail with respect to the actual costs or expenses incurred by Provider for which Provider is entitled to reimbursement.

          (c) Any payments not made when due under this Section 2.3 (or Section 1.6) will bear interest at the rate of 1.5% per month on the outstanding amount from and including the due date to but excluding the date paid, provided that Provider has given Company ten days written notice of any such overdue payment prior to the assessment of any such interest charges.

ARTICLE III

TERM

     Section 3.1 Term Generally. The term of this Agreement shall be one year, commencing on the Effective Date, unless earlier terminated in accordance with Section 3.3 (the “Term”).

     Section 3.2 Certain Services Discontinued. At any time during the Term, upon at least 30 days’ prior notice by Company to Provider, Company may elect to discontinue obtaining from Provider some or all of the Services. However, no such election and no discontinuation of Services following any such election shall result in a reduction of the Services Fee or entitle Company to any refund hereunder, and the other terms of this Agreement shall survive any such election or discontinuation of Services in accordance with their terms.

     Section 3.3 Termination. This Agreement will be terminated in the following events:

          (a) immediately upon notice (or at any time specified in such notice) by Provider to Company if a Change in Control occurs with respect to Company;

          (b) immediately upon notice (or at any time specified in such notice) by Company or Provider if a Bankruptcy Event occurs with respect to the other party hereto; or

          (c) by either party in the event of a breach of this Agreement by the other party that if capable of being cured, remains uncured after 20 days written notice to the non-terminating party.

          For purposes of this Section 3.3:

     “Change in Control” means, with respect to Company, if DHC shall at any time cease to own, directly or indirectly, at least 80% of the value and 80% of the voting power of the outstanding equity securities or other ownership interests in Company; and

     “Bankruptcy Event” means, with respect to Company or Provider, as the case may be, the insolvency of such party, any general assignment by such party for the benefit of creditors, voluntary commencement of any case, proceeding, or other action by such party seeking reorganization, arrangement, adjustment, liquidation, dissolution, or consolidation of such party’s debts under any law relating to bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking appointment of a receiver, trustee, custodian, or other similar official for such party or for all or any substantial part of its assets, or the involuntary filing against such party (as applicable) of any such proceeding that is not stayed within 60 days after such filing.

ARTICLE IV

PERSONNEL AND EMPLOYEES

     Section 4.1 Personnel to Provide Services.

          (a) Provider will make available to Company on a non-exclusive basis (except with respect to the personnel indicated on the attached Schedules as being fully-dedicated to Company in which case such personnel shall be dedicated exclusively to Company), the appropriate personnel to perform the Services, as may be reasonably requested by Company to be performed by Provider and as necessary and appropriate for the proper and efficient administration and operation of the Company Business, to the same extent and in the same manner as performed in the ordinary course prior to the Effective Date. Provider will be responsible for hiring, supervising, instructing, disciplining, discharging, and otherwise managing such employees, and administering any employee benefit plans applicable to such employees.

          (b) Company acknowledges that:

          (i) Except as specified in Section 4.1(a) above, the employees of Provider performing the Services for Company and its Subsidiaries (“Provider Employees”) also will be performing services for Provider and may be performing services for certain Affiliates of Provider; and

          (ii) Provider may elect, in its discretion, to utilize independent contractors rather than employees of Provider to perform the Services from time to time, and such independent contractors will be included within the definition of Provider Employees under this Agreement, where applicable.

     Section 4.2 Provider as Employer. Notwithstanding the Services provided by Provider Employees to Company, the parties acknowledge that Provider is and will remain the employer of all Provider Employees who are employees and will be responsible for the employment and training of all Provider Employees and for the payment of salaries, wages, benefits (including health insurance, retirement, and other similar benefits, if any) and other compensation applicable to all Provider Employees. All Provider Employees will be subject to the personnel policies of Provider and will be entitled to participate in Provider’s employee benefit plans to the same extent as similarly situated employees of Provider performing services in connection with Provider’s business. Provider will be responsible for the payment of all federal, state, and local withholding taxes on the compensation of all Provider Employees and other such employment related taxes as are required by law. Company will cooperate with Provider to facilitate Provider’s compliance, and Provider will cooperate with Company to facilitate Company’s compliance, with applicable federal, state, and local laws, rules, regulations, and ordinances applicable to the employment of all Provider Employees by Provider and their provision of Services to Company pursuant to this Agreement.

     Section 4.3 Additional Employee Provisions. Provider will have the right to terminate the employment of any Provider Employee at any time.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

     Section 5.1 Representations and Warranties of Provider. Provider represents and warrants to Company as follows:

          (a) Provider is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware.

          (b) Provider has the power and authority to enter into this Agreement and to perform its obligations under this Agreement, including the Services.

          (c) Provider is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

          (d) The individual executing this Agreement on behalf of Provider has the authority to do so.

          (e) Provider is in compliance with the laws, rules and regulations applicable to Provider, except as would not reasonably be expected to have a material adverse effect on Provider, the Company, or Provider’s ability to perform its obligations hereunder.

          (f) The operations of Provider do not infringe on the intellectual property rights of any third party, including, without limitation, copyright, patent and trademark rights, except as would not reasonably be expected to have a material adverse effect on Provider, the Company, or Provider’s ability to perform its obligations hereunder.

     Section 5.2 Representations and Warranties of Company. Company represents and warrants to Provider as follows:

          (a) Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of New York.

          (b) Company has the power and authority to enter into this Agreement and to perform its obligations under this Agreement.

          (c) Company is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

          (d) The individual executing this Agreement on behalf of Company has the authority to do so.

          (e) Company shall perform its obligations under this Agreement in compliance with all applicable laws, rules and regulations, except as would not reasonably be expected to have a material adverse effect on Provider, the Company, or Company’s ability to perform its obligations hereunder.

ARTICLE VI

INDEMNIFICATION

     Section 6.1 Indemnification by Provider. Provider shall indemnify, defend, and hold harmless Company, DHC, Discovery Communications, Inc., and any Subsidiary of DHC, and each of their respective officers, directors, employees and agents, and the successors and assigns of any of them (collectively, the “Company Indemnitees”), from and against any and all claims, judgments, liabilities, losses, costs, damages, or expenses, including court costs and reasonable counsel fees and disbursements (collectively, “Losses”), that any Company Indemnitee may suffer arising out of, or resulting from, (a) any material breach by Provider of its obligations under this Agreement or (b) the willful misconduct, fraud or bad faith of Provider in performing its obligations under this Agreement.

     Section 6.2 Indemnification by Company. Company shall indemnify, defend, and hold harmless Provider, Spinco, any Subsidiary of Spinco, and each of their respective officers, directors, employees and agents, and the successors and assigns of any of them (collectively, the “Provider Indemnitees”), from and against any and all Losses that any Provider Indemnitee may suffer arising out of, or resulting from, (a) any breach by Company of its obligations under this Agreement or (b) any acts or omissions of Provider in providing the Provider Employees and Services to be provided by Provider pursuant to this Agreement (except to the extent such Losses (i) arise from or relate to any breach by Provider of its obligations under this Agreement, or (ii) are attributable to the willful misconduct, fraud or bad faith of Provider or such other Provider Indemnitee seeking indemnification under this Section 6.2).

     Section 6.3 Indemnification Procedures.

          (a) In connection with any indemnification provided for in this Article 6, the party seeking indemnification (the “Indemnitee”) will give the party from which indemnification is sought (the “Indemnitor”) prompt notice whenever it comes to the Indemnitee’s attention that the Indemnitee has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under this Article 6, and, when known, the facts constituting the basis for such claim (in reasonable detail). Failure by the Indemnitee to so notify the Indemnitor will not relieve the Indemnitor of any liability under this Agreement except to the extent that such failure prejudices the Indemnitor in any material respect.

          (b) After receipt of a notice pursuant to Section 6.3(a), the Indemnitor will be entitled, if it so elects, to take control of the defense and investigation with respect to any third-party claim subject to indemnification hereunder and to employ and engage attorneys reasonably satisfactory to the Indemnitee to handle and defend such claim, at the Indemnitor’s sole cost, risk, and expense, upon written notice to the Indemnitee of such election, which notice acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or resulting from the claim in question. The Indemnitor will not settle any third-party claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will not be unreasonably withheld, delayed or conditioned; provided, however, that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s consent if such settlement (i) makes no admission or acknowledgment of liability or culpability with respect to the Indemnitee, (ii) includes a complete release of (A) if Indemnitee is a Company Indemnitee, all Company Indemnitees, and (B) if Indemnitee is a Provider Indemnitee, all Provider Indemnitees, and (iii) does not contain any term or provision to affirmatively require the Indemnitee to make any payment not covered by indemnification by the Indemnitor hereunder or to forego or take any action. The Indemnitee will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial, and defense of any lawsuit or action with respect to such claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross claims and counterclaims). The Indemnitee may, at its own cost, participate in any investigation, trial, and defense of such lawsuit or action controlled by the Indemnitor and any appeal arising therefrom. If there are one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not available to, the Indemnitor, the Indemnitee will have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to participate in the defense of the lawsuit or action.

          (c) If, after receipt of a notice pursuant to Section 6.3(a), the Indemnitor does not undertake to defend any such claim, the Indemnitee may, but will have no obligation to, contest any lawsuit or action with respect to such claim, and the Indemnitor will be bound by the result obtained with respect thereto by the Indemnitee. The Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor, which consent will not be unreasonably withheld, delayed, or conditioned.

     Section 6.4 Limitation on Liability; Exclusive Remedy. In no event will either party be liable to the other party for any indirect, special, incidental, punitive or consequential damages with respect to any matter relating to this Agreement.

     Section 6.5 Survival. The terms and conditions of this Article 6 will survive the termination of this Agreement, regardless of the reason for such termination.

ARTICLE VII

MISCELLANEOUS

     Section 7.1 Defined Terms.

          (a) The following terms will have the following meanings for all purposes of this Agreement:

     “Affiliate” means, with respect to any Person, any other Person controlling, controlled by, or under common control with such Person, with “control” for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract, or otherwise; provided, however, that, for purposes of this Agreement, unless otherwise specified, Provider shall not constitute an Affiliate of Company and Company shall not constitute an Affiliate of Provider.

     “Confidential Information” means any information marked, noticed, or treated as confidential by a party which such party holds in confidence or that, given the nature of the information, reasonably should be considered as confidential, including all trade secret, technical, business, or other information, including customer or client information, however communicated or disclosed, relating to past, present and future research, development and business activities.

     “Person” means any natural person, corporation, limited liability company, partnership, trust, unincorporated organization, association, governmental authority, or other entity.

     “Subsidiary” when used with respect to any Person, means any other Person of which (x) in the case of a corporation, at least (A) a majority of the equity and (B) a majority of the voting interests are owned or controlled, directly or indirectly, by such first Person, by any one or more of its Subsidiaries, or by such first Person and one or more of its Subsidiaries or (y) in the case of any Person other than a corporation, such first Person, one or more of its Subsidiaries, or such first Person and one or more of its Subsidiaries (A) owns a majority of the equity interests thereof and (B) has the power to elect or direct the election of a majority of the members of the governing body thereof or otherwise has control over such organization or entity.

          (b) The following terms will have the meanings for all purposes of this Agreement set forth in the Section reference provided next to such term:

Definition		Section Reference
Agreement		Preamble
AMG Spinoff		Recitals
Bankruptcy Event		3.3
Cash Management Account		1.6
Change in Control		3.3
Company		Preamble
Company Business		Recitals
Company Data		1.4
Company Indemnitees		6.1
DHC		Recitals
DHC Restructuring		Recitals
Effective Date		Preamble
Indemnitee		6.3(a)
Indemnitor		6.3(a)
Look-Back Period		4.3
Losses		6.1
Provider		Preamble
Provider Employees		4.1(b)(i)
Provider Indemnitees		6.2
Retention Period		1.3
Services		1.2
Services Fee		2.1(a)
Spinco		Recitals
Term		3.1

     Section 7.2 Entire Agreement; Severability. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter of this Agreement. Each provision of this Agreement will be considered separable and if for any reason any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such illegal, void or unenforceable provision.

     Section 7.3 Notices. All notices, consents, demands, approvals, or other communications under this Agreement will be made in writing and will be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) or sent by nationally recognized overnight delivery service to the respective parties as follows:

If to Provider:		Ascent Media Group, LLC
		520 Broadway, 5th Floor
		Santa Monica, CA 90401
		Attention: General Counsel
		Telecopy: (310) 434-7005
If to Company:		CSS Studios, LLC
		7080 Hollywood Blvd., Suite 1100
		Hollywood, CA 90028
		Attention: Bob Rosenthal
		Telecopy: (323) 603-5132
		with copies sent simultaneously to
		Discovery Communications, LLC
		8045 Kennett Street
		Silver Spring, MD 20910
		Attn: John K. Honeycutt, Chief Media
		Technology Officer
		and
		Discovery Communications, LLC
		One Discovery Place
		Silver Spring, MD 20910
		Attn: General Counsel

or to such other address as the party to whom notice is given may have previously furnished to the other party in writing in the manner set forth above. Any notice or communication delivered in person will be deemed effective on delivery. Any notice or communication sent by telecopy will be deemed effective when receipt is confirmed. Any notice or communication sent by registered or certified mail, return receipt requested, will be deemed effective when received, as evidenced by the return receipt. Any notice or communication sent by nationally recognized overnight delivery service will be deemed effective one business day after delivery to such delivery service.

     Section 7.4 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED THEREIN, WITHOUT REGARD TO ANY OTHERWISE-APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.

     Section 7.5 Rules of Construction. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Words used in this Agreement, regardless of the gender and number specifically used, will be construed to include any other gender or any other number, as the context requires. As used in this Agreement, the word “including” or any

variation thereof is not limiting, and the word “or” is not exclusive. Unless modified by the word “business”, the word “day” means a calendar day. If the last day for giving any notice or taking any other action is a Saturday, Sunday, or a day on which banks in New York, New York or Los Angeles, California are permitted or required to close, the time for giving such notice or taking such action will be extended to the next day that is not such a day (a “business day”).

     Section 7.6 Parties in Interest; No Liability or Obligation of DHC. This Agreement will be binding on and inure solely to the benefit of each party to this Agreement, and its successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Without limiting the generality of the foregoing, nothing in this Agreement, express or implied, is intended to impose upon DHC or any Affiliate of DHC other than Company and its Subsidiaries any obligation or liability of any nature whatsoever under or by reason of this Agreement.

     Section 7.7 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed to be an original, but all of which will constitute one and the same agreement.

     Section 7.8 Payment of Expenses. Except as otherwise expressly provided in this Agreement, each of the parties to this Agreement will bear its own expenses, including the fees of any attorneys and accountants engaged by such party, in connection with the preparation of this Agreement.

     Section 7.9 No Personal Liability. This Agreement will not create or be deemed to create any personal liability or obligation on the part of any direct or indirect member, manager, or shareholder of either party to this Agreement or any officer, director, employee, agent, representative, or investor of either party, or of any member, manager, or shareholder of either party to this Agreement.

     Section 7.10 Binding Effect; Assignment.

          (a) This Agreement will inure to the benefit of and be binding on the parties to this Agreement and their respective legal representatives, successors and permitted assigns.

          (b) Except as expressly contemplated hereby (including by Section 4.1), this Agreement, and the obligations arising hereunder, may not be assigned by either party to this Agreement without the prior written consent of the other party, except that, subject to Section 3.3, either party hereto may assign its rights and delegate its obligations under this Agreement in connection with the acquisition of substantially all of its assets (by merger, consolidation, operation of law, or otherwise).

     Section 7.11 Amendment. Any amendment, modification or supplement of or to any term or condition of this Agreement shall be effective only if in writing and signed by all parties hereto, and the parties waive the right to amend the provisions of this Section orally.

     Section 7.12 Extension; Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party to this Agreement,

or (b) waive compliance by the other party with any of the agreements or conditions contained herein or any breach thereof. Any agreement on the part of either party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. No consent or waiver, express or implied, by a party of any breach or default by the other party in the performance of its obligations under this Agreement will be deemed to be a consent to or waiver of any further or other breach or default by such other party. Failure on the part of a party to complain of an act, or failure to act, of the other party or to declare the other party to be in default, irrespective of how long such failure continues, will not constitute a waiver by such party of its rights under this Agreement.

     Section 7.13 Force Majeure. Neither party will be liable to the other party with respect to any nonperformance or delay in performance of its obligations under this Agreement to the extent such failure or delay is due to any action or claims by any third party, labor dispute, strike or other job action, weather conditions, act of war or insurrection, domestic or foreign terrorist activity, or any other cause beyond a party’s reasonable control.

     Section 7.14 Specific Performance. If either party threatens to take any action in violation of the terms of this Agreement, the other party may apply to any court of competent jurisdiction for an injunctive order prohibiting such proposed action. Either party may institute and maintain any action or proceeding against the other party to compel the specific performance of this Agreement.

     Section 7.15 Confidentiality.

          (a) Except with the prior consent of the disclosing party, each party will:

          (i) limit access to the Confidential Information of the other party disclosed to such party hereunder to its employees, agents, representatives, and consultants who have a need-to-know;

          (ii) advise its employees, agents, representatives, and consultants having access to such Confidential Information of the proprietary nature thereof and of the obligations set forth in this Agreement; and

          (iii) safeguard such Confidential Information by using a reasonable degree of care to prevent disclosure of the Confidential Information to third parties, but not less than that degree of care used by that party in safeguarding its own similar information or material.

          (b) A party’s obligations respecting confidentiality under Section 7.15 will not apply to any of the Confidential Information of the other party that: (i) was, at the time of disclosure to it, in the public domain; or (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the recipient.; or (iii) was independently developed by it and such party has evidence to show the same; or (iv) becomes available on a non-confidential basis from another source, provided that such other source is not bound by a confidentiality agreement with respect to such information.

          (c) A party may disclose Confidential Information of the other party (i) as required to comply with binding orders of any regulatory body having jurisdiction over a party or any of their respective clients or (ii) as required to be disclosed by reason of legal, accounting, or regulatory requirements applicable to the recipient, provided that the recipient (x) gives the disclosing party reasonable notice (to the extent possible and to the extent permitted by law) to allow the disclosing party to seek a protective order or other appropriate remedy, (y) discloses only such information as is required, and (z) does not take any action to interfere with the disclosing party’s efforts to obtain confidential treatment for any Confidential Information so disclosed

          (d) The provisions of this Section 7.15 will survive for a period of two years after the termination of this Agreement, regardless of the reason for such termination.

     Section 7.16 Non-Solicitation. From the Effective Date through the second anniversary thereof, notwithstanding any prior termination of this Agreement:

          (a) Provider will not, directly or indirectly, (i) solicit any individual who was an employee of Company on or after the Effective Date to leave his or her employment with Company, or (ii) subject to the last sentence of this Section 7.16, hire any individual who was an employee of Company on or after the Effective Date without the prior consent of Company, unless and until (A) Company terminates the employment of such individual or (B) six months after any other expiration of such individual’s employment with Company; and

          (b) Company will not, directly or indirectly, (i) solicit any individual who was an employee of Provider on or after the Effective Date to leave his or her employment with Provider or (ii) subject to the last sentence of this Section 7.16, hire any individual who was an employee of Provider on or after the Effective Date without the prior consent of Provider, unless and until (A) Provider terminates the employment of such individual or (B) six months after any other expiration of such individual’s employment with Provider;

provided, however, that this Section 7.16 shall not prohibit either Provider or Company from soliciting or hiring any individuals through the placement of general advertisements of employment opportunities which are not specifically directed at any of the individuals covered by the foregoing restrictions; and provided further that all references to a party in this Section 7.16 shall be deemed to include such party’s then Subsidiaries. Anything contained herein to the contrary notwithstanding, the provisions of Section 7.16(a)(ii) and Section 7.16(b)(ii) shall not apply to any person within the State of California to the extent that the application of such provision to such person would be contrary to public policy or otherwise not legally enforceable without penalty in that state.

     Section 7.17. Transition Efforts. Provider agrees to use its reasonable good faith efforts to cooperate with and assist Company, at Company’s request and at Company’s sole expense, from time to time during the Term, in connection with the transition from the performance of the Services by Provider to the performance of the Services by Company or a third party after the expiration of this Agreement, or such earlier time as requested by Company, subject to the terms of this Agreement. The parties agree that if as part of such transition ownership of any system or systems owned by Provider is to be transferred to Company, then the parties shall negotiate the

terms and conditions of any such transfer (including the purchase price and any related expenses to be paid to Provider therefor) and memorialize such transfer(s) under the terms of one or more separate written agreements to be negotiated and executed by and between the parties. Company and Provider shall cooperate with one another in good faith during the Term to identify any assets used in connection with the Services that are owned by Company.

     Section 7.18. Disaster Recovery. In the event of any material disruption in Provider’s systems used to provide the Services, as a result of material disaster, strike, act of war or terrorism or other force majeure, Provider shall use commercially reasonable efforts in good faith to make Provider’s then existing disaster recovery resources, if any, which are in place with respect to Provider’s systems used to provide the Services (including any redundancy in affected systems and recovery efforts), available to support the provision of Services on a basis that does not discriminate between services provided to Company and similar services provided to Provider’s own business units.

     IN WITNESS WHEREOF, each of the parties has signed this Agreement, or has caused this Agreement to be signed by its duly authorized officer, as of the date first above written.

		COMPANY:
		CSS STUDIOS, LLC
		By:		/s/ William E. Niles
		Name:		William E. Niles
		Title:		Executive Vice President
		PROVIDER:
		ASCENT MEDIA GROUP, LLC
		By:		/s/ William E. Niles
		Name:		William E. Niles
		Title:		Executive Vice President

SCHEDULE 1.2(a)

Finance and Accounting Services

The finance and accounting services substantially in the same form as provided to Company by Provider in the ordinary course prior to the Closing Date, and performed in the same timelines by Provider in the ordinary course prior to the Closing Date, including the following:

     General Accounting:

	§		All Company transactional accounting activity in accordance with Generally Accepted Accounting Principles (GAAP)
	§		G/L file creation to post labor and fringe expense (post labor to Provider JDE G/L)
	§		Maintain separate set of books on JDE for the Company and its subsidiaries
	§		Balance sheet reconciliations for all accounts
	§		Detailed monthly trial balance

     Credit and Collections:

	§		Credit Application review and processing
	§		Customer Management
	§		Collections
	§		Allowance for doubtful account analysis
	§		Cash Applications
	§		Credit card processing
	§		Customer Statements and Dunning Letters
	§		Reporting (Age/ DSO/Cash Receipts/Bad debt write-offs/Metrics)
	§		Provider will continue using the unique Company brands for invoicing (for example Soundelux, Todd-AO West, Todd-AO Burbank, Modern Music)
	§		Communications to customers directing Company payments to new lockbox (Company Cash Account)

     Accounts Payable:

	§		Invoice processing and disbursement (Checks/ACH/Wires/Foreign Draft/Swifts)
	§		Vendor relations
	§		Escheatment processing
	§		Garnishments
	§		Access to A/P support documentation
	§		1099 reporting and filing
	§		T&E processing and reimbursement

     Procurement:

	§		Maintain/administer procurement card programs
	§		Manage travel agency relationship and individual traveler issues (until the Company is transitioned to Discovery’s travel relationships)
	§		Manage/administer purchasing systems (ProCure, JD Edwards, Corp Express EWAY, DocuMedia)
	§		Manage Equipment Support Agreements (e.g., Panasonic)
	§		Manage office equipment and vehicle leases (assigning to Company where possible)

     Financial Reporting:

Monthly:

	§		Detailed support for all transactions between all Company legal entities and Discovery legal entities (i.e., intercompany transactions)
	§		Support for all material significant, unusual, and/or non-recurring activities
	§		Company “Wall” report summarizing Revenue and EBITDA
	§		Cause of change (COC) templates for Balance Sheet and Income Statement

Quarterly:

	§		Submit financial statement and rollforward templates for upload (to be provided by Discovery)
	§		U.S. GAAP financial statements including balance sheet, income statement, cash flow and stockholders’ equity
	§		Supporting documentation for required footnote and SEC (e.g., MD&A analysis) disclosures, including but not limited to:

	o		Derivative financial instruments
	o		Goodwill and intangible assets
	o		PP&E
	o		Debt including capital leases
	o		Related party transactions
	o		Summary of rent expense (office and equipment rental)
	o		Cash paid for taxes (federal income, state income and foreign income)

§

Disclosure of all changes in internal control and identification of significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting

     Tax Reporting:

Provide and make available all information (or Provider personnel) requested by New Discovery Holdco so that New Discovery Holdco may:

§

Prepare, file and document tax return filings, including:

	o		File extensions
	o		Make payments (estimated and actual)

	o		Federal, state and local income tax
	o		Sales and use tax
	o		Property tax

	§		File Annual Reports and local business license filings in states in which Company does business
	§		Respond to notices and manage tax audits
	§		Preparation of provision, including FIN 48 items
	§		Provide tax inputs to business plan

For the avoidance of doubt, Provider shall have no obligation to make or prepare any filings, respond to any notices, or participate in the response to any tax audits, on behalf of the Company.

     Treasury:

	§		Establish and maintain a unique Company bank account structure, that provides for clear separation between Provider and Company cash flows. This would include a Company Concentration (cash) account mapped to the following ZBA accounts: Receivables & Lockbox, Merchant (Credit Card), Payables and Payroll.
	§		Add and maintain authorized Company signatories to all Company accounts (per Company policy).
	§		Provide the same cash management services as provided to Company by Provider in the ordinary course prior to the Closing Date (excluding brokerage services).
	§		Provide the same check/wire/ACH request and authorizations processes as provided to Company by Provider in the ordinary course prior to the Closing Date.
	§		Provider will transfer the Company’s misdirected checks received in Provider’s lock box to the Company’s cash account.
	§		The Provider will maintain a high level cash forecast for the Company and perform a daily bank reconciliation against it.
	§		Provide the Company with access to the bank’s web portal (CEO) for the purpose of monitoring the Company’s accounts.
	§		Provide Account Analysis (monthly bank statement) detailing fees and services performed on the Company’s accounts.
	§		Bank will directly bill the Company’s concentration account for monthly bank fees for services performed (monthly bank statement).
	§		Company acknowledges and agrees that Provider may act on the Company’s behalf with respect to establishing and maintaining bank accounts at Wells Fargo with the Tax Identification Number (“TIN”) of the Company.

     Asset Accounting:

	§		Company Asset Listing / Asset Rollfoward schedule
	§		Supporting documentation for Asset additions and disposals
	§		Depreciation calculations

SCHEDULE 1.2(b)

Human Resources Services

Limited human resources support services to assist in the transition to the Company’s newly hired HR administrator, including the following administrative functions:

	§		HRIS input of all new hires and other HR events
	§		Update benefit and PTO plans in HRIS as policy changes may require
	§		Entry of benefit deductions, dependent data, etc into HRIS
	§		Provide regular feeds to Ultralink and Conexis benefit vendors for Company employees
	§		Continue to provide access to Benefits Call Center/On Line Enrollment Systems via intranet portal for Company Employees
	§		Billing Reconciliation — Reconcile premium statements and invoices for benefits, vendors, etc.
	§		Request Ultralink notification to Company HR regarding Disability participants
	§		Via Ultralink, mail out FMLA paperwork per DOL guidelines
	§		Create and process export files to and import files from Ultralink
	§		Assist the Company’s HR person with any information required for Filing forms 5500 and other legally required filings

SCHEDULE 1.2(c)

Information Technology Services

The information technology services substantially in the same form as provided to Company by Provider in the ordinary course prior to the Closing Date, and performed in the same timelines by Provider in the ordinary course prior to the Closing Date, including the following:

Technical Services Support:

§

Helpdesk (Ascent Media Helpdesk) using centralized number and email

ú

1st Tier Support

	§		Printing Issues (Printing supplies and parts, e.g., toner, paper, cleaning cartridges and replacement parts are not covered under the Services Fee.)
	§		User Accounts
	§		Desktop Support — Hardware (service existing hardware; does not cover replacement of hardware if needed) and Software (service existing software; does not cover purchase of additional software)

ú

2nd Tier Support (Branched depending on need)

§

Network Operations (servers, network issues, Terminal Services); provided, however, that the following costs are not covered under the Services Fee:

	•		The cost of backup media;
	•		The cost of an account with Iron Mountain or another vaulting operation for the disposition of backup tapes and subsequent vaulting of the Company’s backups; and
	•		The cost to replace hardware.

§

Business Systems — Application issues

ú

3rd Tier (outsourced — not covered under Services Fee) Vendor Support — Support agreements for applications, hardware

§

Telco support

	ú		Localized support
	ú		Add/Moves/Changes
	ú		PBX Support (outsourced — not covered under Services Fee)

§

Desktop Security

ú

Centrally managed, regionally distributed anti-virus

Business Systems Support: (does not include software development)

	§		Ultipro — Software as a Service (Outsourced to third party. Subscription fees are covered under the Service Fee, but any costs for development or programming services or Forms or Report modifications requested by the Company would be an additional cost and would not be covered under the Services Fee.)
	§		JDEdwards/Oracle (back office financial system) (Outsourced to third party. Support fees are covered under the Service Fee, but any costs for development or programming services or Forms or non standard Report modifications requested by the Company would be an additional cost and would not be covered under the Services Fee.)

	ú		Deployments as scheduled on weekly cycle
	ú		Standard reporting
	ú		Account separation

§

Xytech (operational system)

	ú		Work with the Company on support through 3rd tier Vendor support. (Outsourced to third party. Support/maintenance fees are covered under the Service Fee, but any costs for development or programming services or Forms or Report modifications requested by the Company would be an additional cost and would not be covered under the Services Fee.)
	ú		NOTE: Working on new master agreement, but likely that agreement will NOT be signed so will go on Time & Materials in March 2009.

§

Microsoft (Outsourced to third party. Support fees are covered under the Service Fee, but any costs for development, programming services or additional software requested by the Company would be an additional cost and would not be covered under the Services Fee.)

	ú		Support of all Microsoft software currently supported by Provider’s EA Agreements
	ú		Desktop and Server

Network Operations Support: (does not include network redesign)

	§		Network connectivity and server support — hardware (service existing hardware; does not cover replacement of hardware if needed) and support. (If equipment fails and needs replacement, the Company must purchase the replacement as originally provisioned. Provider cannot support network equipment it does not standardize upon.)
	§		Monitoring existing circuits and servers (as monitored in the ordinary course prior to the Closing Date)
	§		Add/Moves/Changes
	§		Network management

	§		Management of all existing connectivity except provisioning. (The cost of the actual connectivity is not covered under the Services Fee.)
	§		Domain Name Management. (The registration cost of new or renewed domain names is not covered under the Services Fee.)
	§		Intranet Portal
	§		Management of internet access and internet connection. (Does not include the cost of the internet connection.)

Application Development Support: (does not include new website or application development)

§

Website Support: Internal hosting and maintenance of current websites and in-house applications. (Any costs associated with external website hosting or the cost of new/reissued SSL certificates are not covered under the Services Fee.)

Note: Any costs listed above as not covered under the Services Fee shall be charged to the Company pursuant to Section 2.2 of this Agreement.

SCHEDULE 1.2(d)

Payroll Services

The payroll services substantially in the same form as provided to Company by Provider in the ordinary course prior to the Closing Date, and performed in the same timelines by Provider in the ordinary course prior to the Closing Date, including the following:

	§		Time and Attendance Tracking
	§		Gross to Net calculation
	§		Direct deposits
	§		Pay Check Preparation and Distribution (including, without limitation, payment of all commissions, incentive compensation, profit participation, bonuses, PTO, severance and any other form of wages payable).
	§		All required Tax filings (Federal / State / City / local municipalities)
	§		FUI and SUI deductions and filings
	§		Payroll reporting
	§		Relocation payments (Company HR will have to authorize)
	§		Garnishment Administration and Child Support
	§		Payroll tax deposits and quarterly/annual returns via MasterTax
	§		Preparation and distribution of W-2s
	§		Facilitation of the Company’s response to MPIPHP audits of the Company by the Plans and/or outside audit firms. (For the avoidance of doubt, Provider shall have no obligation to manage the response to any such audits.)
	§		Filing for UI and SIT accounts in the necessary states/locals
	§		Union personnel: evaluate hours and apply CBA and/or employment agreements to derive payable hours/dollars. Perform applicable fringe benefits calculations (union vacation, holiday, hours subject to P&W calculations, days eligible toward other union benefits). Allocate multiple rates, department codes, job codes as needed.
	§		Non-Union: perform calculations for exempt and non-exempt employees according to company Policy and Labor Law, as required.
	§		Performers: pay freelance voice over talent as per each daily agreement
	§		Timecard entry and audit
	§		PTO program tracking
	§		Perform annual union holiday payout reconciliation
	§		Weekly contribution reports by business unit to Motion Picture Pension and Health Plans (“MPIPHP”) for union employees and for affiliated loan out corporations

	§		Prepare monthly reports for use in evaluating accruals required for weekly, monthly and annual minimum compensation employee arrangements
	§		Quarterly wage reports for the Unions
	§		401(k) Plan Administration-Weekly Activities

	§		Creation, auditing and balancing of contribution and census export file from HRIS to Schwab
	§		Timely request of wire transfer to Schwab to fund contributions, match, etc
	§		Maintenance of employee data for contribution changes, suspensions, loan activity, etc.

SCHEDULE 1.2(e)

Facilities / Real Estate Management Services

The facilities and real estate management services substantially in the same form as provided to Company by Provider in the ordinary course prior to the Closing Date, and performed in the same timelines by Provider in the ordinary course prior to the Closing Date, including the following:

	§		Security services (badge scanning, facility access and surveillance cameras) for Southern California locations only
	§		Inter-office mail delivery for Southern California locations only
	§		Safety inspection for Sound One — 1619 Broadway, New York. (outsourced — not covered under Services Fee)
	§		Safety training, inspections and fire drills for the following properties (outsourced — not covered under Services Fee):

	ú		POP Sound — 1252 7th/625 Arizona, Santa Monica
	ú		1143-1145 Vine, Hollywood (currently vacant, and company lease expires 3/09)
	ú		Todd-AO — 900 N. Seward, Hollywood
	ú		Audio located on First and Second Floors of 2901 Alameda, Burbank

§

2901 Alameda — Ground Floor receptionist (shared with all occupants of 2901 Alameda)

Exhibit 10.2

TAX SHARING AGREEMENT

by and among

DISCOVERY HOLDING COMPANY,

DISCOVERY COMMUNICATIONS, INC.,

ASCENT MEDIA CORPORATION,

ASCENT MEDIA GROUP, LLC

and

CSS STUDIOS, LLC

Dated as of September 17, 2008

TABLE OF CONTENTS

ARTICLE I DEFINITIONS			2
1.01 General			2
1.02 Interpretation			8
ARTICLE II TAX RETURNS AND TAX PAYMENTS			8
2.01 Obligations To File Tax Returns			8
2.02 Obligation To Remit Taxes			9
2.03 Tax Sharing Obligations And Prior Agreements			9
2.04 Amended Returns			11
ARTICLE III REPRESENTATIONS AND COVENANTS			12
3.01 Compliance With The Tax Opinion			12
3.02 Consistent Treatment			12
ARTICLE IV INDEMNITY OBLIGATIONS AND PAYMENTS			12
4.01 Indemnity Obligations			12
4.02 Notice			13
4.03 Timing Of Payments			13
4.04 Treatment Of Payments			14
ARTICLE V TAX CONTESTS AND THIRD-PARTY CLAIMS			14
5.01 Notice of Tax Contests			14
5.02 Control Of Tax Contests By DHC			14
5.03 Control Of Tax Contests By Spinco			15
5.04 Third-Party Claims			15
ARTICLE VI COOPERATION			15
ARTICLE VII RETENTION OF RECORDS; ACCESS; CONFIDENTIALITY			15
7.01 Retention of Records; Access			15
7.02 Confidentiality			16
ARTICLE VIII DISPUTE RESOLUTION			16
ARTICLE IX MISCELLANEOUS PROVISIONS			17
9.01 Governing Law			17
9.02 Application To Present And Future Subsidiaries			17
9.03 Binding Effect; Benefit; Successors			17
9.04 Further Assurances			17
9.05 Survival; Termination			17
9.06 Reorganization Agreement			18

TAX SHARING AGREEMENT

     THIS TAX SHARING AGREEMENT (this “Agreement”) is entered into by and among DISCOVERY HOLDING COMPANY, a Delaware corporation (“DHC”), DISCOVERY COMMUNICATIONS, INC., a Delaware corporation (“New DHC”), ASCENT MEDIA CORPORATION, a Delaware corporation (“Spinco”), ASCENT MEDIA GROUP, LLC, a Delaware limited liability company (“AMG”), and CSS STUDIOS, LLC, a New York limited liability company (the “Audio Company”, and together with DHC, New DHC, Spinco, and AMG, the “Parties”). Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to such terms in the Reorganization Agreement, dated as of June 4, 2008, as amended as of September 16, 2008, by and among the Parties (the “Reorganization Agreement”).

RECITALS

     WHEREAS, DHC is the common parent corporation of the DHC Affiliated Group; and

     WHEREAS, Spinco is a newly-formed, wholly-owned Subsidiary of DHC; and

     WHEREAS, DHC will effect the DHC restructuring transactions described in the Reorganization Agreement and/or the Tax Opinion for the purpose of aggregating the Spinco Business and Assets in the Spinco Group, and separating the Audio Business therefrom, prior to the Distribution (collectively, the “Restructuring”); and

     WHEREAS, on the Distribution Date, DHC will distribute all of the issued and outstanding common stock of Spinco to the holders of record on the record date for the Distribution of Discovery Holding Company Series A Common Stock (“DHC Series A Common Stock”) and Discovery Holding Company Series B Common Stock (“DHC Series B Common Stock” and, together with the DHC Series A Common Stock, the “DHC Common Stock”) (the “Distribution”); and

     WHEREAS, the Parties intend that the Distribution will qualify as a tax-free transaction under Sections 368(a) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”) (or any corresponding provision of any successor statute), and that as a result of such transaction, the Spinco Entities will cease to be members of the DHC Affiliated Group for federal income Tax purposes; and

     WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes.

     NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     1.01 General. As used in this Agreement, the following terms shall have the following meanings:

     “Agreement” shall have the meaning set forth in the Preamble to this Agreement.

     “AMG” shall have the meaning set forth in the Preamble to this Agreement.

     “Audio Business” shall have the meaning set forth in the Reorganization Agreement.

     “Audio Company” shall have the meaning set forth in the Preamble to this Agreement.

     “Business Day” shall mean any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by law to be closed in New York, New York.

     “CFO” shall have the meaning set forth in Article VIII.

     “Claim” shall have the meaning set forth in Section 4.02.

     “Code” shall have the meaning set forth in the Recitals.

     “DHC” shall have the meaning set forth in the Preamble to this Agreement.

     “DHC/ANPP Transaction Agreement” shall mean the Transaction Agreement dated as of June 4, 2008, as amended as of September 12, 2008, among DHC, New DHC, DHC Merger Sub, Inc., Advance/Newhouse Programming Partnership, and with respect to Section 5.14 thereof only, Advance Publications, Inc., and Newhouse Broadcasting Corporation.

     “DHC Affiliated Group” shall mean an affiliated group of corporations within the meaning of Section 1504(a) of the Code, of which DHC or New DHC is the common parent corporation, that files consolidated federal income Tax Returns.

     “DHC Common Stock” shall have the meaning set forth in the Recitals.

     “DHC Filed Tax Return” shall have the meaning set forth in Section 2.01(a).

     “DHC Group” shall mean (i) DHC, (ii) each of its Subsidiaries, other than Discovery Communications Holding, LLC, a Delaware limited liability company (“Discovery”), and each of Discovery’s Subsidiaries, in each case, as determined immediately after the Distribution, and (iii) Persons that become Subsidiaries of DHC thereafter. For the avoidance of doubt, immediately following the Distribution, the DHC Group shall include New DHC and shall not include any of the Spinco Entities.

     “DHC Series A Common Stock” shall have the meaning set forth in the Recitals.

     “DHC Series B Common Stock” shall have the meaning set forth in the Recitals.

     “DHC Taxes” shall have the meaning set forth in Section 2.03(a).

     “Dispute” shall have the meaning set forth in Article VIII.

     “Distribution” shall have the meaning set forth in the Recitals.

     “Distribution Date” shall have the meaning set forth in the Reorganization Agreement.

     “Final Determination” shall mean a determination within the meaning of Section 1313 of the Code or any similar provision of state or local Tax law.

     “Governmental Entity” shall mean any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, commission, department, board, bureau or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any official thereof.

     “Group” shall mean the DHC Group or the Spinco Group, as the context requires.

     “Indemnifiable Losses” shall mean any and all damages, losses, deficiencies, liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including, without limitation, the costs and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), including direct and consequential damages. For the avoidance of doubt, the Parties agree that any and all amounts required to be paid by any member of the DHC Group to any ANPP Indemnified Parties (as such term is defined in the DHC/ANPP Transaction Agreement) pursuant to the indemnification provisions in Article IX of the DHC/ANPP Transaction Agreement, as a result of any matter for which the DHC Group is entitled to indemnification by the Spinco Group pursuant to this Agreement, shall constitute direct damages incurred by such DHC Group member for all purposes of this Agreement.

     “Indemnified Party” shall have the meaning set forth in Section 4.02.

     “Indemnifying Party” shall have the meaning set forth in Section 4.02.

     “LMC Tax Sharing Agreement” shall mean the Tax Sharing Agreement dated as of July 20, 2005, as amended, between Liberty Media Corporation, a Delaware corporation, and DHC, and any entities which became parties thereto pursuant to Section 10.8 thereof.

     “LMC TSA Liabilities” shall mean any obligation or liability to make any payment to LMC or any LMC Indemnitee (as defined in the LMC Tax Sharing Agreement) or to any Governmental Entity pursuant to the terms of the LMC Tax Sharing Agreement.

     “New DHC” shall have the meaning set forth in the Preamble to this Agreement.

     “Parties” shall have the meaning set forth in the Preamble to this Agreement.

     “Payment Period” shall have the meaning set forth in Section 4.03.

     “Person” shall have the meaning set forth in the Reorganization Agreement.

     “Post-Distribution Period” shall mean any Taxable Period beginning after the Distribution Date and, in the case of any Straddle Period, that part of the Taxable Period that begins on the day following the Distribution Date.

     “Pre-Distribution Period” shall mean any Taxable Period that ends on or before the Distribution Date and, in the case of any Straddle Period, that part of the Taxable Period through and including the Distribution Date.

     “Reorganization” shall have the meaning set forth in the Recitals.

     “Reorganization Agreement” shall have the meaning set forth in the Preamble to this Agreement.

     “Restructuring” shall have the meaning set forth in the Recitals.

     “Spinco” shall have the meaning set forth in the Preamble to this Agreement.

     “Spinco Business and Assets” shall mean the assets and businesses owned or operated by the Spinco Entities on the Distribution Date.

     “Spinco Common Stock” shall have the meaning set forth in the Reorganization Agreement.

     “Spinco Entities” shall have the meaning set forth in the Reorganization Agreement.

     “Spinco External Distribution Tax Liability” shall mean any Taxes arising as a result of the Distribution, except to the extent such Taxes arise as a result of any breach on or after the Distribution Date of any representation, warranty, covenant or other obligation contained in the Tax Materials or this Agreement by DHC or any member of the DHC Group or any shareholder of DHC.

     “Spinco Filed Tax Return” shall have the meaning set forth in Section 2.01(b).

     “Spinco Group” shall mean Spinco, all Persons that are Subsidiaries of Spinco immediately after the Distribution, and Persons that become Subsidiaries of Spinco thereafter.

     “Spinco Restructuring Tax Liability” shall mean any Taxes arising as a result of the Restructuring, except to the extent such Taxes arise as a result of any action undertaken after the Distribution Date by DHC, any member of the DHC Group or any shareholder of DHC.

     “Spinco Tax Asset” shall mean any Tax Asset of the DHC Affiliated Group or any member of the DHC Group (including any adjustment to any such Tax Asset) that has accrued for Tax purposes but has not been utilized during a Pre-Distribution Period, determined as of the Distribution Date in accordance with the principles of Section 2.03(c).

     “Spinco Tax Benefit Amount” shall mean, as of any date, the aggregate amount (without duplication) of any Tax Benefits realized on or before such date by the DHC Affiliated Group or any member of the DHC Group as a result of the utilization of a Spinco Tax Asset in any Post-Distribution Period.

     “Spinco Taxes” shall have the meaning set forth in Section 2.03(b).

     “Straddle Period” shall mean any Taxable Period that begins on or before and ends after the Distribution Date.

     “Straddle Tax Return” shall mean any Tax Return for a Straddle Period.

     “Subsidiary” shall have the meaning set forth in the Reorganization Agreement.

     “Tax” or “Taxes” shall mean (i) all taxes, charges, fees, duties, levies, imposts, rates or other assessments or governmental charges of any kind imposed by any federal, state, local or foreign Governmental Entity, including, without limitation, whether disputed or not and including any interest, penalties, charges or additions attributable thereto, income, gross receipts, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, custom duties, property, sales, use, license, capital stock, transfer, franchise, registration, payroll, withholding, social security, unemployment, disability, value added, alternative or add-on minimum or other taxes and unclaimed property assessments, (ii) liability for the payment of any amount of the type described in clause (i) above arising as a result of being (or having been) a member of any group or being (or having been) included or required to be included in any Tax Return related thereto, and (iii) liability for the payment of any amount of the type described in clauses (i) or (ii) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person.

     “Tax Advisor” shall have the meaning set forth in Article VIII.

     “Tax Asset” shall mean any net operating loss, net capital loss, investment tax credit, foreign tax credit, research and experimentation credit, charitable deduction, credit related to alternative minimum tax, or any other loss, credit, deduction or Tax attribute which could reduce any Tax.

     “Tax Benefit” shall mean the sum of the amounts by which the Tax liability of a corporation or affiliated group (within the meaning of Section 1504(a) of the Code) or other relevant group of corporations to the appropriate Governmental Entity for any Taxable Period is actually reduced (including by deduction, entitlement to refund, credit or otherwise) plus any interest received from such Governmental Entity relating to such Tax liability.

     “Tax Certificates” shall mean certificates of officers of DHC and Spinco, dated as of September 17, 2008, provided to Skadden, Arps, Slate, Meagher & Flom LLP in connection with the Tax Opinion.

     “Tax Contest” shall have the meaning set forth in Section 5.01.

     “Tax Information Packages” shall mean any information required in order to prepare and file any DHC Filed Tax Return.

     “Tax Item” shall mean, with respect to any Tax, any item of income, gain, loss, deduction or credit, or other attribute that may have the effect of increasing or decreasing any Tax.

     “Tax Materials” shall have the meaning set forth in Section 3.01(a).

     “Tax Opinion” shall mean the written opinion of Skadden, Arps, Slate, Meagher & Flom LLP, dated as of September 17, 2008, regarding certain U.S. federal income tax consequences of certain transactions effected as part of the Reorganization and the Distribution.

     “Tax Return” shall mean any return, report, certificate, form or similar statement or document (including any related supporting information or schedule attached thereto and any information return, claim for refund or declaration of estimated Tax), or any amendment to any of the foregoing, supplied to or filed with, or required to be supplied to or filed with, a Governmental Entity, or any bill for or notice related to ad valorem or other similar Taxes received from a Governmental Entity, in each case, in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

     “Taxable Period” shall mean, with respect to any Tax, the year, or shorter period, if applicable, with respect to which the Tax is incurred as provided under applicable Tax law.

     “Third-Party Claim” shall mean any claim, investigation action, suit or proceeding made or commenced by a third party for which the Indemnifying Party may be liable under this Agreement, other than a Tax Contest.

     “Treasury Regulations” shall mean the regulations promulgated from time to time under the Code as in effect for the relevant Taxable Period.

     1.02 Interpretation(a) . For all purposes of this Agreement: (i) the terms defined in this Agreement include the plural as well as the singular; (ii) all references in this Agreement to “Preamble”, “Recitals”, “Articles”, “Sections” and other subdivisions are to the designated Preamble, Recitals, Articles, Sections and other subdivisions of the body of this Agreement; (iii) pronouns of either gender or neuter include, as appropriate, the other pronoun forms; (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (v) “or” is not exclusive; (vi) “including” shall be deemed to be followed by “but not limited to”; and (vii) any definition of or reference to any statute shall be construed as referring also to any rules and regulations promulgated thereunder.

ARTICLE II

TAX RETURNS AND TAX PAYMENTS

     2.01 Obligations To File Tax Returns.

          (a) The DHC Group shall have the sole and exclusive responsibility for the preparation and filing of each Tax Return filed or required to be filed after the Distribution Date that includes any member of the DHC Group (each, a “DHC Filed Tax Return”). Upon DHC’s request, Spinco shall prepare and deliver to DHC in a manner consistent with past practices pro forma Tax Returns and Tax Information Packages with respect to each member of the Spinco Group or portion of the Spinco Business and Assets required to be included in, or reflected on, a DHC Filed Tax Return no later than ninety (90) days before the due date for the filing of the relevant Tax Return. DHC shall provide to Spinco no later than thirty (30) days in advance of the due date for the filing thereof, and Spinco shall have a reasonable opportunity to review and comment on, any such DHC Filed Tax Return (or the relevant portion thereof) to the extent that Spinco is responsible for any portion of the Taxes reported on such DHC Filed Tax Return. Each member of the Spinco Group hereby irrevocably authorizes and designates DHC as its agent for the purpose of taking any and all actions necessary or incidental to the filing of any such DHC Filed Tax Returns and, except as otherwise provided herein, for the purpose of making payments to, or collecting refunds from, any Governmental Entity in respect of a DHC Filed Tax Return. Except as otherwise provided herein, DHC shall have the exclusive right to file, prosecute, compromise or settle any claim for, or refund of, Taxes in respect of a DHC Filed Tax Return and to determine whether any refunds of Taxes to which the DHC Group may be entitled shall be received by way of refund or credit against the Tax liability of the DHC Group. For purposes of this Section 2.01, validly filed extensions of time to file tax returns should be treated as extending the date such returns are required to be filed.

          (b) The Spinco Group shall have the sole and exclusive responsibility for the preparation and filing of each Tax Return that is required to be filed after the Distribution Date that includes any member of the Spinco Group or the Spinco Business and Assets that is not

a DHC Filed Tax Return (each, a “Spinco Filed Tax Return”); provided, however, that, except as otherwise required by law, (x) all Spinco Filed Tax Returns shall be prepared on a basis that is consistent with the Tax Opinion with respect to the Restructuring transactions and the Distribution addressed therein and consistent with DHC’s past Tax accounting practices and reporting positions to the extent relevant to the Spinco Business and Assets, and (y) Spinco shall provide to DHC no later than thirty (30) days in advance of the due date for the filing thereof (giving effect to any validly filed extensions thereto), and DHC shall have a reasonable opportunity to review and comment on, any such Spinco Filed Tax Return (or the relevant portion thereof) to the extent that DHC is responsible for any portion of the Taxes reported on such Spinco Filed Tax Return.

     2.02 Obligation To Remit Taxes. The DHC Group and the Spinco Group shall each remit or cause to be remitted to the applicable Governmental Entity in a timely manner any Taxes due in respect of any Tax Return that such Group is required to file (or, in the case of a Tax for which no Tax Return is required to be filed, which is otherwise payable by such Group or a member of such Group to any Governmental Entity). In the case of any DHC Filed Tax Return or Spinco Filed Tax Return, for which the Group not required to file such Tax Return is obligated under this Agreement to pay all or a portion of the Taxes reported as due on such Tax Return, the Group filing such Tax Return shall notify the other Group, in writing, of its obligation to pay such Taxes and the Group receiving such notice shall pay such amount to the Group filing such Tax Return in accordance with the notice and payment provisions contained in Article IV.

     2.03 Tax Sharing Obligations And Prior Agreements.

          (a) DHC Responsibility. DHC and the members of the DHC Group shall be responsible for the payment of (and shall be entitled to any refund of, whether received in cash or applied against future Tax obligations): (i) all Taxes attributable to any member of the DHC Group for any Post-Distribution Period (other than Taxes arising as a result of the Distribution or the Restructuring), (ii) Taxes arising as a result of the Distribution to the extent such Taxes arise as a result of any breach on or after the Distribution Date of any representation, warranty, covenant or other obligation contained in the Tax Materials or this Agreement by DHC or any member of the DHC Group or any shareholder of DHC, and (iii) Taxes arising as a result of the Restructuring to the extent such Taxes arise as a result of any action undertaken after the Distribution Date by DHC, any member of the DHC Group or any shareholder of DHC (all or any of such Taxes, collectively, the “DHC Taxes”).

          (b) Spinco Responsibility. Subject to Section 4.01(b), Spinco and the members of the Spinco Group shall be responsible for the payment of (and shall be entitled to any refund of, whether received in cash or applied against future Tax obligations, except as otherwise provided in Section 2.03(e)): (i) all Taxes attributable to any member of the DHC Group for any Pre-Distribution Period (other than Taxes arising as a result of the Distribution or the Restructuring), (ii) all Taxes attributable to any member of the Spinco Group or the operation or ownership of the Spinco Business and Assets for any Pre-Distribution Period or Post-Distribution Period, (iii) the Spinco External Distribution Tax Liability, and (iv) the Spinco Restructuring Tax Liability (all or any of such Taxes, collectively, the “Spinco Taxes”).

          (c) Allocation of Taxes. For purposes of Section 2.01, this Section 2.03 and the determination of a Spinco Tax Asset, in the case of any Straddle Period or Straddle Tax Return, Tax Items shall be allocated between the portion of the Straddle Period that is a Pre-Distribution Period and the portion of the Straddle Period that is a Post-Distribution Period based on an actual or hypothetical closing of the books method at the close of the Distribution Date, as if the Distribution Date were the end of the Taxable Period; provided, that any Tax Items not susceptible to such allocation shall be apportioned pro rata on the basis of elapsed days during the relevant portion of the Taxable Period. No election shall be made under Treasury Regulations Section 1.1502-76(b)(2)(ii)(D) (relating to ratable allocation of a year’s items). Notwithstanding the foregoing or Treasury Regulations Section 1.1502-76(b)(1)(ii)(B), in determining the allocation of Tax Items between Pre-Distribution Periods and Post-Distribution Periods, any Tax Items relating to the Distribution or the Restructuring shall be treated as extraordinary items described in Treasury Regulations Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to a Pre-Distribution Period, and any Taxes related to such Tax Items shall be treated under Treasury Regulations Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be allocated to a Pre-Distribution Period.

          (d) Deposits. If, prior to the Distribution, a deposit is made with respect to any Tax for which any member of the Spinco Group is responsible under this Agreement, such deposit shall be assigned to the Spinco Group and the Spinco Group shall only be liable for the amount of such Tax ultimately due in excess of the applicable deposit. Refunds of such deposits shall be remitted to, and any credits with respect to Taxes attributable to such deposits shall be for the benefit of, the Spinco Group.

          (e) Refunds; Carrybacks.

          (i) Except as provided in Section 2.03(e)(ii), if, with respect to any Spinco Taxes, the DHC Group receives a refund of Taxes or other Tax Benefit from a Governmental Entity, DHC shall remit to Spinco within fifteen (15) days of the receipt of such refund or the actual realization of such Tax Benefit, the amount of such refund or Tax Benefit. Any payment required to be made under this Section 2.03(e) shall be paid net of any Tax liability of any member of the DHC Group resulting from the receipt of such refund or the realization of such Tax Benefit.

          (ii) Any refund of Taxes or other Tax Benefit arising or resulting from the carryback of any Tax Asset of the DHC Group that is not a Spinco Tax Asset from a Post-Distribution Period to a Pre-Distribution Period shall be for the account of the DHC Group, and no member of the DHC Group shall have any obligation to compensate or make a payment to any member of the Spinco Group with respect thereto.

          (f) Spinco Tax Asset.

          (i) Except as set forth in Section 4.01(b), any refund or other Tax Benefit obtained in any Post-Distribution Period as a result of or pursuant to the utilization of a Spinco Tax Asset shall be for the account of the

DHC Group, and no member of the DHC Group shall have any obligation to compensate or make a payment to any member of the Spinco Group with respect thereto.

          (ii) For the avoidance of doubt, Spinco makes no representation under this Agreement as to the amount, if any, of a Spinco Tax Asset, or the amount, if any, of the Spinco Tax Benefit Amount.

          (g) LMC TSA Liabilities. Notwithstanding any other provision in this Section 2.03, DHC shall be liable for, and shall indemnify and hold harmless each member of the Spinco Group from and against, any LMC TSA Liabilities.

          (h) Prior Agreements. Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement, any and all prior Tax sharing or allocation agreements or practices between any member of the DHC Group and any member of the Spinco Group shall be terminated as of the Distribution Date, and no member of the DHC Group or the Spinco Group shall have any continuing rights or obligations thereunder.

     2.04 Amended Returns.

          (a) Spinco Amended Returns. Spinco shall not, and shall not permit any member of the Spinco Group, to file any amended Tax Return that includes any member of the DHC Group or any of the assets or operations of the Audio Business or that includes any Tax for which DHC is responsible under this Agreement without the consent of DHC, not to be unreasonably withheld. DHC shall provide a response to a request for such consent from Spinco within seven (7) Business Days following the receipt of such request. Receipt of consent by Spinco or a member of the Spinco Group from DHC under the provisions of this Section 2.04(a) shall not limit or modify Spinco’s continuing indemnification obligation under Section 4.01(b).

          (b) DHC Amended Returns. DHC shall not, and shall not permit any member of the DHC Group, to file any amended Tax Return that includes any member of the Spinco Group or any of the Spinco Business and Assets or that includes any Tax for which Spinco is responsible under this Agreement without the consent of Spinco, not to be unreasonably withheld. Spinco shall provide a response to a request for such consent from DHC within seven (7) Business Days following the receipt of such request. Receipt of consent by DHC or a member of the DHC Group from Spinco under the provisions of this Section 2.04(b) shall not limit or modify DHC’s continuing indemnification obligation under Section 4.01(a).

ARTICLE III

REPRESENTATIONS AND COVENANTS

     3.01 Compliance With The Tax Opinion.

          (a) DHC (on behalf of itself and all other members of the DHC Group) hereby represents and warrants (and shall be deemed to represent and warrant on and as of the Distribution Date) that (i) it has examined (A) the Tax Opinion, (B) the Tax Certificates, and (C) any other materials delivered or deliverable in connection with the rendering of the Tax Opinion, as such materials, if any, are identified or deliverable in connection with the rendering of the Tax Opinion or the Tax Certificates (the materials referenced in (A), (B) and (C) are collectively referred to herein as the “Tax Materials”), and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to DHC or any member of the DHC Group or the Audio Business, were true, correct and complete in all material respects at the time presented or represented and from such time until and including the date hereof. DHC (on behalf of itself and all other members of the DHC Group) hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to DHC or any member of the DHC Group or the Audio Business.

          (b) Spinco (on behalf of itself and all other members of the Spinco Group) hereby represents and warrants (and shall be deemed to represent and warrant on and as of the Distribution Date) that (i) it has examined the Tax Materials and (ii) the facts presented and representations made therein, to the extent descriptive of or otherwise relating to Spinco or any member of the Spinco Group or the Spinco Business and Assets, were true, correct and complete in all material respects at the time presented or represented and from such time until and including the date hereof. Spinco (on behalf of itself and all other members of the Spinco Group) hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable to Spinco or any member of the Spinco Group or the Spinco Business and Assets.

     3.02 Consistent Treatment. Unless and until there has been a Final Determination to the contrary, each Party agrees not to take any position on any Tax Return, in connection with any Tax Contest or otherwise that is inconsistent with (a) the allocation of Taxes and any Tax Items (including, without limitation, any Spinco Tax Asset) between the DHC Group and the Spinco Group as set forth in this Agreement, (b) the Tax Opinion, or (c) the Tax treatment of any transaction described in the Reorganization Agreement.

ARTICLE IV

INDEMNITY OBLIGATIONS AND PAYMENTS

     4.01 Indemnity Obligations.

          (a) DHC Indemnity. The DHC Group shall indemnify and hold harmless Spinco and any member of the Spinco Group from and against, and will reimburse Spinco for (i) all DHC Taxes and (ii) all Taxes and Indemnifiable Losses arising out of, based upon or relating or attributable to any breach on or after the Distribution Date of any representation, warranty, covenant or obligation contained in the Tax Materials or this Agreement by DHC or any member of the DHC Group or any shareholder of DHC.

          (b) Spinco Indemnity.

          (i) The Spinco Group shall indemnify and hold harmless DHC and any member of the DHC Group from and against, and will reimburse DHC for (i) all Spinco Taxes and (ii) all Taxes and Indemnifiable Losses arising out of, based upon or relating or attributable to any inaccuracy in or breach on or after the Distribution Date of any representation, warranty, covenant or obligation contained in the Tax Materials or this Agreement by Spinco or any member of the Spinco Group or any shareholder of Spinco after the Distribution.

          (ii) Notwithstanding anything herein to the contrary, no indemnification by the Spinco Group under this Section 4.01(b), and no obligation of the Spinco Group pursuant to Section 2.03(b), will be due and payable unless and until the sum of the aggregate amount of all Spinco Taxes and the aggregate amount of all other Taxes and Indemnifiable Losses for which DHC or any member of the DHC Group would otherwise be entitled to indemnification or reimbursement pursuant to Section 4.01(b)(i) exceeds the Spinco Tax Benefit Amount as then in effect, whereupon the Spinco Group will be obligated to pay to DHC or any member of the DHC Group only those Spinco Taxes and other Taxes and Indemnifiable Losses that exceed the Spinco Tax Benefit Amount.

          (iii) In the event that the Spinco Group makes any indemnification payments under this Section 4.01(b) and the Spinco Tax Benefit Amount is subsequently increased (as a result of the utilization of a Spinco Tax Asset), DHC shall repay to Spinco the amount of such increase, but only to the extent of any such indemnification payments previously made by the Spinco Group.

     4.02 Notice. A Party making a claim for indemnification under this Agreement (the “Indemnified Party”) shall provide the Party from whom such indemnification is sought (the “Indemnifying Party”) with written notice of such claim describing such claim in reasonable detail and accompanied by reasonable documentation supporting such claim (the “Claim”) no later than twenty (20) Business Days after the Indemnified Party (i) files a Tax Return reporting Taxes due which are subject to reimbursement or (ii) receives written notice from any Governmental Entity with respect to Taxes that may be subject to indemnification under this Agreement; provided, however, that in the event that timely notice is not provided, the Indemnifying Party shall be relieved of its obligation to indemnify the Indemnified Party only to the extent that such delay results in actual increased costs or actual prejudice.

     4.03 Timing Of Payments. The Indemnifying Party shall pay the amount of any Claim to the Indemnified Party within ten (10) Business Days after receipt of the Claim, provided that, if such Claim is still subject to the outcome of any Tax Contest, then payment shall not be due until ten (10) Business Days after such Claim either is resolved through a Final Determination, or prior to a Final Determination, if the Indemnified Party and the Indemnifying Party agree on the indemnification obligation under this Agreement with respect to such Claim. All indemnification payments due under this Agreement shall be made by wire transfer of immediately available funds to a bank account of the Indemnified Party. Any payment that is not

made within the period prescribed in this Agreement or, if no period is prescribed, within ten (10) Business Days after demand for payment is made (the “Payment Period”) shall be subject to interest at a rate per annum equal to the annualized six month LIBOR rate plus seventy-five basis points (or the maximum legal rate, whichever is lower). Unless the Parties otherwise agree, the annualized six month LIBOR rate used shall be the per annum rate for deposits in U.S. dollars for a six-month period that appears on Bridge’s Telerate Service display at page 3750 (or such other page as may replace such page) as of 11:00 A.M. London time on the last day of the Payment Period. Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days for which due.

     4.04 Treatment Of Payments. For all Tax purposes and to the extent permitted by applicable Tax law, the Parties shall treat any payment made pursuant to this Agreement as a capital contribution or a distribution, as the case may be, occurring immediately prior to the Distribution. If any such payment (or portion thereof) causes, directly or indirectly, an increase in the Tax liability of the recipient (or any of the members of its Group) under one or more applicable Tax laws, after taking into account the Tax treatment of the item or event giving rise to such payment, the payor’s payment obligation (or portion thereof) under this Agreement shall be grossed-up to take into account the additional Taxes owed by the recipient (or any of the members of its Group); provided, however, that the payor shall not be required to gross-up any such payment obligation in the event, and to the extent, the increase in the Tax liability of the recipient (or any member of its Group) caused by such payment is attributable to any breach on or after the Distribution Date of a representation, covenant or obligation of the recipient (or any member of its Group) contained in the Tax Materials or this Agreement.

ARTICLE V

TAX CONTESTS AND THIRD-PARTY CLAIMS

     5.01 Notice of Tax Contests. The Indemnified Party shall promptly notify the Indemnifying Party in writing upon receipt by the Indemnified Party or any member of its group of a written communication from any Governmental Entity with respect to any pending or threatened audit, claim, dispute, suit, action, proposed assessment or other proceeding (a “Tax Contest”) concerning any Taxes for which the Indemnifying Party may be liable under this Agreement.

     5.02 Control Of Tax Contests By DHC. DHC shall have the sole responsibility and control over the handling of any Tax Contest, including the exclusive right to communicate with agents of the Governmental Entity and to control, resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Tax Contest, involving any DHC Filed Tax Return; provided, however, that DHC shall not resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Tax Contest that affects the liability of Spinco or a member of the Spinco Group under this Agreement without the consent of Spinco, not to be unreasonably withheld. Spinco shall provide a response to a request for such consent from DHC within seven (7) Business Days following the receipt of such request. Subject to DHC’s rights

under this Section 5.02, upon request by Spinco, Spinco shall, at its own expense, be allowed to participate in the handling of any such Tax Contest with respect to any item that may affect the liability of Spinco (or any member of the Spinco Group) under this Agreement; provided, however, that such rights shall be limited to the extent that DHC’s right to control or otherwise participate in the relevant Tax Contest are limited pursuant to the LMC Tax Sharing Agreement.

     5.03 Control Of Tax Contests By Spinco. Spinco shall have the full responsibility and control over the handling of any Tax Contest, including the exclusive right to communicate with agents of the Governmental Entity and to control, resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Tax Contest, involving any Spinco Filed Tax Return; provided, however, that Spinco’s right to control or otherwise participate in a Tax Contest involving a Spinco Filed Tax Return shall be limited to the extent that DHC’s right to control or otherwise participate in the relevant Tax Contest are limited pursuant to the LMC Tax Sharing Agreement; provided, further, that Spinco shall not resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Tax Contest that affects the liability of DHC or a member of the DHC Group under this Agreement without the consent of DHC, not to be unreasonably withheld. DHC shall provide a response to a request for such consent from Spinco within seven (7) Business Days following the receipt of such request. Subject to Spinco’s rights under this Section 5.03, upon request by DHC, DHC shall, at its own expense, be allowed to participate in the handling of any such Tax Contest with respect to any item that may affect the liability of DHC or any member of the DHC Group, as the case may be, under this Agreement.

     5.04 Third-Party Claims. To the extent not inconsistent with any specific term of this Agreement, the procedures set forth in Section 5.1 of the Reorganization Agreement shall apply in relevant part to any Third-Party Claim.

ARTICLE VI

COOPERATION

     Except as otherwise provided herein, each Party shall fully cooperate, and shall cause all members of such Party’s Group to fully cooperate, with the other Parties in connection with the preparation and filing of any Tax Return or the conduct of any Tax Contest (including, where appropriate or necessary, providing a power of attorney) concerning any issues or any other matter contemplated under this Agreement. Each Party shall make its employees and facilities available on a mutually convenient basis to facilitate such cooperation.

ARTICLE VII

RETENTION OF RECORDS; ACCESS; CONFIDENTIALITY

     7.01 Retention of Records; Access.

          (a) For so long as the contents thereof may become material in the administration of any matter under applicable Tax law, but in any event until the later of (x) the expiration of any applicable statutes of limitation and (y) seven (7) years after the Distribution Date, the Parties shall (i) retain records, documents, accounting data and other information (including computer data) necessary for the preparation and filing of all Tax Returns in respect of Taxes of any member of either the DHC Group or the Spinco Group for any Pre-Distribution Period or any Post-Distribution Period or for any Tax Contests relating to such Tax Returns, and (ii) give to the other Parties reasonable access to such records, documents, accounting data and other information (including computer data), or relevant portion thereof, and to its personnel and premises, for the purpose of the review or audit of such Tax Returns to the extent relevant to an obligation or liability of a Party under this Agreement or for purposes of the preparation or filing of any such Tax Return, the conduct of any Tax Contest or any other matter reasonably and in good faith related to the Tax affairs of the requesting Party.

          (b) At any time after the Distribution Date that the DHC Group proposes to destroy such materials or information, it shall first notify the Spinco Group in writing and the Spinco Group shall be entitled to receive such materials or information proposed to be destroyed that relate to any member of the Spinco Group or the Spinco Assets and Business for any Pre-Distribution Period. At any time after the Distribution Date that the Spinco Group proposes to destroy such materials or information, it shall first notify the DHC Group in writing and the DHC Group shall be entitled to receive such materials or information proposed to be destroyed.

     7.02 Confidentiality. Each Party shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such Party) concerning the other Party hereto furnished to it by such other Party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (x) in the public domain through no fault of such Party, (y) later lawfully acquired from other sources not known to be under the duty of confidentiality by the Party to which it was furnished, or (z) independently developed), and each Party shall not release or disclose such information to any other Person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 7.02. Each Party shall be deemed to have satisfied its obligations to hold confidential information concerning or supplied by the other Party if it exercises the same care as it takes to preserve confidentiality for its own similar information.

ARTICLE VIII

DISPUTE RESOLUTION

     In the event of any disagreement arising under this Agreement, including any dispute in connection with a claim by a third party (a “Dispute”), the Parties shall promptly

notify the chief financial officer of each of DHC and Spinco (each, a “CFO” and, together, the “CFOs”) of such Dispute, who together shall attempt in good faith to resolve such Dispute. If such Dispute is not resolved within seven (7) Business Days following the date on which the CFOs receive notification, the Parties to such Dispute shall jointly retain an independent, nationally recognized law or accounting firm (the “Tax Advisor”) to act as an arbitrator in order to resolve the Dispute. The Tax Advisor’s determination as to any Dispute shall be made in accordance with the terms of this Agreement and shall be final and binding on the Parties and not subject to collateral attack for any reason (other than manifest error). All fees and expenses of the Tax Advisor shall be shared equally by each of the Parties to the Dispute.

ARTICLE IX

MISCELLANEOUS PROVISIONS

     9.01 Governing Law. THIS AGREEMENT AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS OR RULES THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

     9.02 Application To Present And Future Subsidiaries. This Agreement is being entered into by DHC and Spinco on behalf of themselves and the members of their respective Groups. This Agreement shall constitute a direct obligation of each such entity and shall be deemed to have been readopted and affirmed on behalf of any entity that becomes a Subsidiary of DHC or Spinco in the future.

     9.03 Binding Effect; Benefit; Successors. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors (including, but not limited to, any successor of DHC or Spinco succeeding to the Tax attributes of such Party under Section 381 of the Code), to the same extent as if such successor had been an original party hereto.

     9.04 Further Assurances. Subject to the provisions hereof, the Parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby.

     9.05 Survival; Termination. Notwithstanding any other provision of this Agreement to the contrary, all representations, warranties, covenants and obligations contained in this Agreement shall survive for the term of this Agreement, notwithstanding any investigation by the Parties or the consummation of the Distribution, the transactions contemplated by the DHC/ANPP Transaction Agreement or any other transaction contemplated hereby. This Agreement shall terminate at such time as all obligations and liabilities of the Parties have been satisfied. The obligations and liabilities of the Parties arising under this Agreement shall continue

in full force and effect until all such obligations have been met and such liabilities have been paid in full, whether by expiration of time, operation of law, or otherwise.

     9.06 Reorganization Agreement. To the extent not inconsistent with any specific term of this Agreement, the provisions of the Reorganization Agreement shall apply in relevant part to this Agreement, including 4.1(b) Authorization and Validity of Agreement; 5.3 Specific Performance; 8.2 No Third-Party Rights; 8.3 Notices; 8.4 Complete Agreement; 8.5 Amendment, Modification or Waiver; 8.8 Severability; 8.9 Headings.

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     IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of the day and year first above written.

Exhibit 10.13

ASCENT MEDIA CORPORATION

2008 NON-EMPLOYEE DIRECTOR INCENTIVE PLAN

ARTICLE I

PURPOSE OF PLAN

     1.1 PURPOSE. The purpose of the Plan is to provide a method whereby eligible Non-Employee Directors of the Company may be awarded additional remuneration for services rendered and encouraged to invest in capital stock of the Company, thereby increasing their proprietary interest in the Company’s businesses and increasing their personal interest in the continued success and progress of the Company. The Plan is also intended to aid in attracting Persons of exceptional ability to become Non-Employee Directors of the Company.

ARTICLE II

DEFINITIONS

     2.1 CERTAIN DEFINED TERMS. Capitalized terms not defined elsewhere in the Plan shall have the following meanings (whether used in the singular or plural):

          “Affiliate” of the Company means any corporation, partnership, or other business association that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company.

          “Agreement” means a stock option agreement, stock appreciation rights agreement, restricted shares agreement, stock units agreement, or agreement evidencing more than one type of Award, in any case as specified in Section 11.4, as any such Agreement may be supplemented or amended from time to time.

          “Approved Transaction” means any transaction in which the Board (or, if approval of the Board is not required as a matter of law, the stockholders of the Company) shall approve (i) any consolidation or merger of the Company, or binding share exchange, pursuant to which shares of Common Stock of the Company would be changed or converted into or exchanged for cash, securities, or other property, other than any such transaction in which the common stockholders of the Company immediately prior to such transaction have the same proportionate ownership of the Common Stock of, and voting power with respect to, the surviving corporation immediately after such transaction, (ii) any merger, consolidation, or binding share exchange to which the Company is a party as a result of which the Persons who are common stockholders of the Company immediately prior thereto have less than a majority of the combined voting power of the outstanding capital stock of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors immediately following such merger, consolidation, or binding share exchange, (iii) the

adoption of any plan or proposal for the liquidation or dissolution of the Company, or (iv) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company.

          “Award” means a grant of Options, SARs, Restricted Shares, Stock Units and/or cash under this Plan.

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

          “Board Change” means, during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board cease for any reason to constitute a majority thereof unless the election, or the nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include any successor section.

          “Common Stock” means each or any (as the context may require) series of the Company’s common stock.

          “Company” means Ascent Media Corporation, a Delaware corporation.

          “Control Purchase” means any transaction (or series of related transactions) in which (i) any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation, or other entity (other than the Company, any Subsidiary of the Company, or any employee benefit plan sponsored by the Company or any Subsidiary of the Company) shall purchase any Common Stock of the Company (or securities convertible into Common Stock of the Company) for cash, securities, or any other consideration pursuant to a tender offer or exchange offer, without the prior consent of the Board, or (ii) any person (as such term is so defined), corporation, or other entity (other than the Company, any Subsidiary of the Company, any employee benefit plan sponsored by the Company, or any Subsidiary of the Company or any Exempt Person (as defined below)) shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities of the Company ordinarily (and apart from the rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) under the Exchange Act in the case of rights to acquire the Company’s securities), other than in a transaction (or series of related transactions) approved by the Board. For purposes of this definition, “Exempt Person” means each of (a) each of the directors of the Company as of immediately following the close of business on September 17, 2008, (b) any person or entity that, as of immediately following the close of business on September 17, 2008, was the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the then outstanding securities of the Company, and (c) the respective family members, estates, and heirs of each of the Persons referred to in clauses (a) and (b) above and any trust or other investment vehicle for the primary benefit of any of such

Persons or their respective family members or heirs. As used with respect to any Person, the term “family member” means the spouse, siblings and lineal descendants of such Person.

          “Director Compensation” means the annual retainer and meeting fees, and any other regular cash compensation payable by the Company to a Non-Employee Director for service on the Board, as established from time to time.

          “Disability” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

          “Dividend Equivalents” means, with respect to Restricted Shares to be issued at the end of the Restriction Period, to the extent specified by the Board only, an amount equal to all dividends and other distributions (or the economic equivalent thereof) which are payable to stockholders of record during the Restriction Period on a like number and kind of shares of Common Stock.

          “Domestic Relations Order” means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.

          “Effective Date” means September 15, 2008, the date on which the Plan was approved by the sole stockholder of the Company.

          “Equity Security” shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, and an equity security of an issuer shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Exchange Act section shall include any successor section.

          “Fair Market Value” of a share of any series of Common Stock on any day means the last sale price (or, if no last sale price is reported, the average of the high bid and low asked prices) for a share of such series of Common Stock on such day (or, if such day is not a trading day, on the next preceding trading day) as reported on the consolidated transaction reporting system for the principal national securities exchange on which shares of such series of Common Stock are listed on such day, or, if such shares are not then listed on a national securities exchange, then as reported on any automated quotation system operated by a national securities association, or, if such shares are not then listed or quoted on such an automated quotation system, then as quoted by the OTC Bulletin Board. If for any day the Fair Market Value of a share of the applicable series of Common Stock is not determinable by any of the foregoing means, then the Fair Market Value for such day shall be determined in good faith by the Board on the basis of such quotations and other considerations as the Board deems appropriate.

          “Free Standing SAR” has the meaning ascribed thereto in Section 7.1.

          “Holder” means a Person who has received an Award under this Plan.

          “Non-Employee Director” means an individual who is a member of the Board and who is not an employee of the Company or any Subsidiary.

          “Nonqualified Stock Option” means a stock option granted under Article VI.

          “Option” means a Nonqualified Stock Option.

          “Person” means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

          “Plan” means this Ascent Media Corporation 2008 Non-Employee Director Incentive Plan.

          “Restricted Shares” means shares of any series of Common Stock or the right to receive shares of any specified series of Common Stock, as the case may be, awarded pursuant to Article VIII.

          “Restriction Period” means a period of time beginning on the date of each Award of Restricted Shares and ending on the Vesting Date with respect to such Award.

          “Retained Distribution” has the meaning ascribed thereto in Section 8.3.

          “SARs” means stock appreciation rights, awarded pursuant to Article VII, with respect to shares of any specified series of Common Stock.

          “Stock Unit Awards” has the meaning ascribed thereto in Section 9.1.

          “Subsidiary” of a Person means any present or future subsidiary (as defined in Section 424(f) of the Code) of such Person or any business entity in which such Person owns, directly or indirectly, 50% or more of the voting, capital, or profits interests. An entity shall be deemed a subsidiary of a Person for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.

          “Tandem SARs” has the meaning ascribed thereto in Section 7.1.

          “Vesting Date,” with respect to any Restricted Shares awarded hereunder, means the date on which such Restricted Shares cease to be subject to a risk of forfeiture, as designated in or determined in accordance with the Agreement with respect to such award of Restricted Shares pursuant to Article VIII. If more than one Vesting Date is designated for an award of Restricted Shares, reference in the Plan to a Vesting Date in respect of such Award shall be deemed to refer to each part of such Award and the Vesting Date for such part.

ARTICLE III

ADMINISTRATION

     3.1 ADMINISTRATION. The Plan shall be administered by the Board, provided that it may delegate to employees of the Company certain administrative or ministerial duties in carrying out the purposes of the Plan.

     3.2 POWERS. The Board shall have full power and authority to grant to eligible Persons Options under Article VI of the Plan, SARs under Article VII of the Plan, Restricted Shares under Article VIII of the Plan, and/or Stock Units under Article IX of the Plan, to determine the terms and conditions (which need not be identical) of all Awards so granted, to interpret the provisions of the Plan and any Agreements relating to Awards granted under the Plan, and to supervise the administration of the Plan. The Board in making an Award may provide for the granting or issuance of additional, replacement, or alternative Awards upon the occurrence of specified events, including the ` of the original Award. The Board shall have sole authority in the selection of Persons to whom Awards may be granted under the Plan and in the determination of the timing, pricing, and amount of any such Award, subject only to the express provisions of the Plan. In making determinations hereunder, the Board may take into account such factors as the Board in its discretion deems relevant.

     3.3 INTERPRETATION. The Board is authorized, subject to the provisions of the Plan, to establish, amend, and rescind such rules and regulations as it deems necessary or advisable for the proper administration of the Plan and to take such other action in connection with or in relation to the Plan as it deems necessary or advisable. Each action and determination made or taken pursuant to the Plan by the Board, including any interpretation or construction of the Plan, shall be final and conclusive for all purposes and upon all Persons. No member of the Board shall be liable for any action or determination made or taken by him or the Board in good faith with respect to the Plan.

ARTICLE IV

SHARES SUBJECT TO THE PLAN

     4.1 NUMBER OF SHARES. Subject to the provisions of this Article IV, the maximum number of shares of Common Stock (i) which may be issued in lieu of Director Compensation pursuant to Section 10.1 and (ii) with respect to which Awards may be granted during the term of the Plan shall be [500,000] shares. Shares of Common Stock will be made available from the authorized but unissued shares of the Company or from shares reacquired by the Company, including shares purchased in the open market. The shares of Common Stock subject to (i) any Award granted under the Plan that shall expire, terminate or be annulled for any reason without having been exercised (or considered to have been exercised as provided in Section 7.2), (ii) any Award of any SARs granted under the Plan that shall be exercised for cash, and (iii) any Award of Restricted Shares or Stock Units that shall be forfeited prior to becoming vested (provided that the Holder received no benefits of ownership of such Restricted Shares or Stock Units other than voting rights and the accumulation of Retained Distributions and unpaid

Dividend Equivalents that are likewise forfeited) shall again be available for purposes of the Plan.

     4.2 ADJUSTMENTS. If the Company subdivides its outstanding shares of any series of Common Stock into a greater number of shares of such series of Common Stock (by stock dividend, stock split, reclassification, or otherwise) or combines its outstanding shares of any series of Common Stock into a smaller number of shares of such series of Common Stock (by reverse stock split, reclassification, or otherwise) or if the Board determines that any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase such series of Common Stock, or other similar corporate event (including mergers or consolidations other than those which constitute Approved Transactions, adjustments with respect to which shall be governed by Section 11.1(b)) affects any series of Common Stock so that an adjustment is required to preserve the benefits or potential benefits intended to be made available under this Plan, then the Board, in such manner as the Board, in its sole discretion, deems equitable and appropriate, shall make such adjustments to any or all of (i) the number and kind of shares of stock which thereafter may be awarded, optioned, or otherwise made subject to the benefits contemplated by the Plan, (ii) the number and kind of shares of stock subject to outstanding Awards, and (iii) the purchase or exercise price and the relevant appreciation base with respect to any of the foregoing, PROVIDED, HOWEVER, that the number of shares subject to any Award shall always be a whole number. Notwithstanding the foregoing, if all shares of any series of Common Stock are redeemed, then each outstanding Award shall be adjusted to substitute for the shares of such series of Common Stock subject thereto the kind and amount of cash, securities or other assets issued or paid in the redemption of the equivalent number of shares of such series of Common Stock and otherwise the terms of such Award, including, in the case of Options or similar rights, the total exercise price, and, in the case of Free Standing SARs, the base price, shall remain constant before and after the substitution (unless otherwise determined by the Board and provided in the applicable Agreement). The Board may, if deemed appropriate, provide for a cash payment to any Holder of an Award in connection with any adjustment made pursuant to this Section 4.2.

ARTICLE V

ELIGIBILITY

     5.1 GENERAL. The Persons who shall be eligible to participate in the Plan and to receive Awards under the Plan shall be such Persons who are Non-Employee Directors as the Board shall select. Awards may be made to Non-Employee Directors who hold or have held Awards under this Plan or any similar or other awards under any other plan of the Company or any of its Affiliates.

     5.2 INELIGIBILITY. No Person who is not a Non-Employee Director shall be eligible to receive an Award.

ARTICLE VI

STOCK OPTIONS

     6.1 GRANT OF OPTIONS. Subject to the limitations of the Plan, the Board shall designate from time to time those eligible Persons to be granted Options, the time when each Option shall be granted to such eligible Persons, the series and number of shares of Common Stock subject to such Option, and, subject to Section 6.2, the purchase price of the shares of Common Stock subject to such Option.

     6.2 OPTION PRICE. The price at which shares may be purchased upon exercise of an Option shall be fixed by the Board, but shall not be less than the Fair Market Value of the shares of the applicable series of Common Stock subject to the Option as of the date the Option is granted.

     6.3 TERM OF OPTIONS. Subject to the provisions of the Plan with respect to death, retirement and termination of service, the term of each Option shall be for such period as the Board shall determine as set forth in the applicable Agreement.

     6.4 EXERCISE OF OPTIONS. An Option granted under the Plan shall become (and remain) exercisable during the term of the Option to the extent provided in the applicable Agreement and this Plan and, unless the Agreement otherwise provides, may be exercised to the extent exercisable, in whole or in part, at any time and from time to time during such term; PROVIDED, HOWEVER, that subsequent to the grant of an Option, the Board, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part (without reducing the term of such Option).

     6.5 MANNER OF EXERCISE.

          (a) FORM OF PAYMENT. An Option shall be exercised by written notice to the Company upon such terms and conditions as the Agreement may provide and in accordance with such other procedures for the exercise of Options as the Board may establish from time to time. The method or methods of payment of the purchase price for the shares to be purchased upon exercise of an Option and of any amounts required by Section 11.8 shall be determined by the Board and may consist of (i) cash, (ii) check, (iii) whole shares of any series of Common Stock, (iv) the withholding of shares of the applicable series of Common Stock issuable upon such exercise of the Option, (v) the delivery, together with a properly executed exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the purchase price, or (vi) any combination of the foregoing methods of payment, or such other consideration and method of payment as may be permitted for the issuance of shares under the Delaware General Corporation Law. The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash, shall be set forth in the applicable Agreement and may be subject to such conditions as the Board deems appropriate.

          (b) VALUE OF SHARES. Unless otherwise determined by the Board and provided in the applicable Agreement, shares of any series of Common Stock delivered in

payment of all or any part of the amounts payable in connection with the exercise of an Option, and shares of any series of Common Stock withheld for such payment, shall be valued for such purpose at their Fair Market Value as of the exercise date.

          (c) ISSUANCE OF SHARES. The Company shall effect the transfer of the shares of Common Stock purchased under the Option as soon as practicable after the exercise thereof and payment in full of the purchase price therefor and of any amounts required by Section 11.8, and within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. Unless otherwise determined by the Board and provided in the applicable Agreement, (i) no Holder or other Person exercising an Option shall have any of the rights of a stockholder of the Company with respect to shares of Common Stock subject to an Option granted under the Plan until due exercise and full payment has been made, and (ii) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment.

     6.6 NONTRANSFERABILITY. Unless otherwise determined by the Board and provided in the applicable Agreement, Options shall not be transferable other than by will or the laws of descent and distribution or pursuant to a Domestic Relations Order, and, except as otherwise required pursuant to a Domestic Relations Order, Options may be exercised during the lifetime of the Holder thereof only by such Holder (or his or her court-appointed legal representative).

ARTICLE VII

SARs

     7.1 GRANT OF SARs. Subject to the limitations of the Plan, SARs may be granted by the Board to such eligible Persons in such numbers, with respect to any specified series of Common Stock, and at such times during the term of the Plan as the Board shall determine. A SAR may be granted to a Holder of an Option (hereinafter called a “related Option”) with respect to all or a portion of the shares of Common Stock subject to the related Option (a “Tandem SAR”) or may be granted separately to an eligible Non-Employee Director (a “Free Standing SAR”). Subject to the limitations of the Plan, SARs shall be exercisable in whole or in part upon notice to the Company upon such terms and conditions as are provided in the Agreement.

     7.2 TANDEM SARs. A Tandem SAR may be granted either concurrently with the grant of the related Option or at any time thereafter prior to the complete exercise, termination, expiration, or cancellation of such related Option. Tandem SARs shall be exercisable only at the time and to the extent that the related Option is exercisable (and may be subject to such additional limitations on exercisability as the Agreement may provide) and in no event after the complete termination or full exercise of the related Option. Upon the exercise or termination of the related Option, the Tandem SARs with respect thereto shall be canceled automatically to the extent of the number of shares of Common Stock with respect to which the related Option was so exercised or terminated. Subject to the limitations of the Plan, upon the exercise of a Tandem SAR and unless otherwise determined by the Board and provided in the applicable Agreement, (i) the Holder thereof shall be entitled to receive from the Company, for each share of the applicable series of Common Stock with respect to which the Tandem SAR is being exercised,

consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of the applicable series of Common Stock with respect to which the Tandem SAR was granted on the date of exercise over the related Option purchase price per share, and (ii) the related Option with respect thereto shall be canceled automatically to the extent of the number of shares of Common Stock with respect to which the Tandem SAR was so exercised.

     7.3 FREE STANDING SARs. Free Standing SARs shall be exercisable at the time, to the extent and upon the terms and conditions set forth in the applicable Agreement. The base price of a Free Standing SAR shall be fixed by the Board, but shall not be less than the Fair Market Value of the shares of the applicable series of Common Stock with respect to which the Free Standing SAR was granted as of the date the Free Standing SAR is granted. Subject to the limitations of the Plan, upon the exercise of a Free Standing SAR and unless otherwise determined by the Board and provided in the applicable Agreement, the Holder thereof shall be entitled to receive from the Company, for each share of the applicable series of Common Stock with respect to which the Free Standing SAR is being exercised, consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of the applicable series of Common Stock with respect to which the Free Standing SAR was granted on the date of exercise over the base price per share of such Free Standing SAR.

     7.4 CONSIDERATION. The consideration to be received upon the exercise of a SAR by the Holder shall be paid in cash, shares of the applicable series of Common Stock with respect to which the SAR was granted (valued at Fair Market Value on the date of exercise of such SAR), a combination of cash and such shares of the applicable series of Common Stock or such other consideration, in each case, as provided in the Agreement. No fractional shares of Common Stock shall be issuable upon exercise of a SAR, and unless otherwise provided in the applicable Agreement, the Holder will receive cash in lieu of fractional shares. Unless the Board shall otherwise determine, to the extent a Free Standing SAR is exercisable, it will be exercised automatically for cash on its expiration date.

     7.5 LIMITATIONS. The applicable Agreement may provide for a limit on the amount payable to a Holder upon exercise of SARs at any time or in the aggregate, for a limit on the number of SARs that may be exercised by the Holder in whole or in part for cash during any specified period, for a limit on the time periods during which a Holder may exercise SARs, and for such other limits on the rights of the Holder and such other terms and conditions of the SAR, including, without limitation, a condition that the SAR may be exercised only in accordance with rules and regulations adopted from time to time, as the Board may determine. Unless otherwise so provided in the applicable Agreement, any such limit relating to a Tandem SAR shall not restrict the exercisability of the related Option. Such rules and regulations may govern the right to exercise SARs granted prior to the adoption or amendment of such rules and regulations as well as SARs granted thereafter.

     7.6 EXERCISE. For purposes of this Article VII, the date of exercise of a SAR shall mean the date on which the Company shall have received notice from the Holder of the SAR of the exercise of such SAR (unless otherwise determined by the Board and provided in the applicable Agreement).

     7.7 NONTRANSFERABILITY. Unless otherwise determined by the Board and provided in the applicable Agreement, (i) SARs shall not be transferable other than by will or the laws of descent and distribution or pursuant to a Domestic Relations Order, and (ii) except as otherwise required pursuant to a Domestic Relations Order, SARs may be exercised during the lifetime of the Holder thereof only by such Holder (or his or her court-appointed legal representative).

ARTICLE VIII

RESTRICTED SHARES

     8.1 GRANT. Subject to the limitations of the Plan, the Board shall designate those eligible Persons to be granted awards of Restricted Shares, shall determine the time when each such Award shall be granted, shall determine whether shares of Common Stock covered by awards of Restricted Shares will be issued at the beginning or the end of the Restriction Period and whether Dividend Equivalents will be paid during the Restriction Period in the event shares of the applicable series of Common Stock are to be issued at the end of the Restriction Period, and shall designate (or set forth the basis for determining) the Vesting Date or Vesting Dates for each award of Restricted Shares, and may prescribe other restrictions, terms, and conditions applicable to the vesting of such Restricted Shares in addition to those provided in the Plan. The Board shall determine the price, if any, to be paid by the Holder for the Restricted Shares; PROVIDED, HOWEVER, that the issuance of Restricted Shares shall be made for at least the minimum consideration necessary to permit such Restricted Shares to be deemed fully paid and nonassessable. All determinations made by the Board pursuant to this Section 8.1 shall be specified in the Agreement.

     8.2 ISSUANCE OF RESTRICTED SHARES AT BEGINNING OF THE RESTRICTION PERIOD. If shares of the applicable series of Common Stock are issued at the beginning of the Restriction Period, the stock certificate or certificates representing such Restricted Shares shall be registered in the name of the Holder to whom such Restricted Shares shall have been awarded. During the Restriction Period, certificates representing the Restricted Shares and any securities constituting Retained Distributions shall bear a restrictive legend to the effect that ownership of the Restricted Shares (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and conditions provided in the Plan and the applicable Agreement. Such certificates shall remain in the custody of the Company or its designee, and the Holder shall deposit with the custodian stock powers or other instruments of assignment, each endorsed in blank, so as to permit retransfer to the Company of all or any portion of the Restricted Shares and any securities constituting Retained Distributions that shall be forfeited or otherwise not become vested in accordance with the Plan and the applicable Agreement.

     8.3 RESTRICTIONS. Restricted Shares issued at the beginning of the Restriction Period shall constitute issued and outstanding shares of the applicable series of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Shares, to receive and retain such dividends and distributions, as the Board may designate, paid or distributed on such Restricted Shares, and to exercise all other rights, powers, and privileges of a Holder of shares of the applicable series of Common Stock with respect to such Restricted

Shares; EXCEPT, THAT, unless otherwise determined by the Board and provided in the applicable Agreement, (a) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Shares until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled or waived; (b) the Company or its designee will retain custody of the stock certificate or certificates representing the Restricted Shares during the Restriction Period as provided in Section 8.2; (c) except as determined by the Board at the time of grant and set forth in the applicable Agreement, the Company or its designee will retain custody of all distributions (“Retained Distributions”) made or declared with respect to the Restricted Shares (and such Retained Distributions will be subject to the same restrictions, terms and vesting, and other conditions as are applicable to the Restricted Shares) until such time, if ever, as the Restricted Shares with respect to which such Retained Distributions shall have been made, paid, or declared shall have become vested, and such Retained Distributions shall not bear interest or be segregated in a separate account; (d) the Holder may not sell, assign, transfer, pledge, exchange, encumber, or dispose of the Restricted Shares or any Retained Distributions or his interest in any of them during the Restriction Period; and (e) a breach of any restrictions, terms, or conditions provided in the Plan or established by the Board with respect to any Restricted Shares or Retained Distributions will cause a forfeiture of such Restricted Shares and any Retained Distributions with respect thereto.

     8.4 ISSUANCE OF STOCK AT END OF THE RESTRICTION PERIOD. Restricted Shares issued at the end of the Restriction Period shall not constitute issued and outstanding shares of the applicable series of Common Stock, and the Holder shall not have any of the rights of a stockholder with respect to the shares of Common Stock covered by such an award of Restricted Shares, in each case until such shares shall have been transferred to the Holder at the end of the Restriction Period. If and to the extent that shares of Common Stock are to be issued at the end of the Restriction Period, the Holder shall be entitled to receive Dividend Equivalents with respect to the shares of Common Stock covered thereby either (i) during the Restriction Period or (ii) in accordance with the rules applicable to Retained Distributions, as determined by the Board at the time of grant and set forth in the applicable Agreement.

     8.5 CASH AWARDS. In connection with any award of Restricted Shares, an Agreement may provide for the payment of a cash amount to the Holder of such Restricted Shares at any time after such Restricted Shares shall have become vested. Subject to Section 11.16, such cash awards shall be payable in accordance with such additional restrictions, terms, and conditions as shall be prescribed by the Board in the Agreement and shall be in addition to any other compensation payments which such Holder shall be otherwise entitled or eligible to receive from the Company.

     8.6 COMPLETION OF RESTRICTION PERIOD. On the Vesting Date with respect to each award of Restricted Shares and the satisfaction of any other applicable restrictions, terms, and conditions set forth in the Agreement or this Plan, (a) all or the applicable portion of such Restricted Shares shall become vested, (b) any Retained Distributions and any unpaid Dividend Equivalents with respect to such Restricted Shares shall become vested to the extent that the Restricted Shares related thereto shall have become vested, and (c) any cash award to be received by the Holder with respect to such Restricted Shares shall become payable, all in accordance with the terms of the applicable Agreement. Any such Restricted Shares, Retained Distributions, and any unpaid Dividend Equivalents that shall not become vested shall

be forfeited to the Company, and the Holder shall not thereafter have any rights (including dividend and voting rights) with respect to such Restricted Shares, Retained Distributions, and any unpaid Dividend Equivalents that shall have been so forfeited. Subject to Section 11.16, the Board may, in its discretion, at the time of grant, provide in the applicable Agreement that the delivery of any Restricted Shares, Retained Distributions, and unpaid Dividend Equivalents that shall have become vested, and payment of any cash awards that shall have become payable, shall be deferred until such date or dates as the recipient may elect. Any election of a recipient pursuant to the preceding sentence shall be filed in writing with the Board in accordance with such rules and regulations, including any deadline for the making of such an election, as the Board may provide, subject to Section 11.16.

ARTICLE IX

STOCK UNITS

     9.1 GRANT. In addition to granting awards of Options, SARs, and Restricted Shares, the Board shall, subject to the limitations of the Plan, have authority to grant to eligible Persons awards of Stock Units which may be in the form of shares of any specified series of Common Stock or units, the value of which is based, in whole or in part, on the Fair Market Value of the shares of any specified series of Common Stock. Subject to the provisions of the Plan, including any rules established pursuant to Section 9.2, awards of Stock Units shall be subject to such terms, restrictions, conditions, vesting requirements, and payment rules as the Board may determine in its discretion, which need not be identical for each Award. The determinations made by the Board pursuant to this Section 9.1 shall be specified in the applicable Agreement.

     9.2 RULES. At the time of grant, the Board may, in its discretion, establish any or all of the following rules for application to an Award of Stock Units, which shall be set forth in the applicable Agreement:

          (a) Any shares of Common Stock which are part of an award of Stock Units may not be assigned, sold, transferred, pledged, or otherwise encumbered prior to the date on which the shares are issued or, if later, the date provided by the Board at the time of the Award.

          (b) Such Awards may provide for the payment of cash consideration by the Person to whom such Award is granted or provide that the Award, and any shares of Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; PROVIDED, HOWEVER, that the issuance of any shares of Common Stock in connection with an Award of Stock Units shall be for at least the minimum consideration necessary to permit such shares to be deemed fully paid and nonassessable.

          (c) Subject to Section 11.16, awards of Stock Units may relate in whole or in part to performance or other criteria established by the Board at the time of grant.

          (d) Awards of Stock Units may provide for deferred payment schedules, vesting over a specified period of service, the payment (on a current or deferred basis) of dividend equivalent amounts with respect to the number of shares of Common Stock covered by

the Award, and elections by the Holder to defer payment of the Award or the lifting of restrictions on the Award, if any, subject in any such case to Section 11.16, to the extent applicable.

          (e) Subject to Section 11.16, in such circumstances as the Board may deem advisable, the Board may waive or otherwise remove, in whole or in part, any restrictions or limitations to which a Stock Unit Award was made subject at the time of grant.

ARTICLE X

STOCK AWARDS IN LIEU OF CASH DIRECTOR FEES

     10.1 GENERAL. Each Non-Employee Director shall have the option to elect to receive shares of one or more series of Common Stock, as prescribed by the Board, in lieu of all or part of the Director Compensation otherwise payable by the Company during each calendar quarter. Subject to any applicable Purchase Restriction as described in Section 10.3, to the extent a Non-Employee Director has elected in writing to receive stock in lieu of Director Compensation, such Non-Employee Director will receive shares of Common Stock on the last day of the calendar quarter for which the Director Compensation was earned. The Director Compensation shall be converted to a number of shares of Common Stock equal in value to such Director Compensation based on the Fair Market Value of such shares on the last day of the calendar quarter for which the Director Compensation would otherwise be payable to the Non-Employee Director, with any fractional shares paid in cash. For this purpose, if the last day of the calendar quarter is not a trading day, then Fair Market Value shall be determined as of the next succeeding trading day. Any shares issued in lieu of Director Compensation shall be issued free of all restrictions except as required by law.

     10.2 TIMING OF ELECTION. A Non-Employee Director’s election pursuant to Section 10.1 must be made no later than the 30th calendar day (or such other day as the Board may prescribe) prior to the end of the calendar quarter to which the election applies in accordance with the procedures established by the Board. Once an election is made with respect to a particular calendar quarter, it may not be withdrawn or substituted unless the Board determines, in its sole discretion, that the withdrawal or substitution is occasioned by an extraordinary or unanticipated event.

     10.3 PURCHASE RESTRICTIONS . If, on the date shares would be purchased pursuant to an election under Section 10.1, there is in place any restriction under (x) applicable law (including, without limitation, a blackout period under the Sarbanes-Oxley Act of 2002) or (y) the rules of the principal national securities exchange on which shares of the applicable series of Common Stock are traded or (z) any trading policies adopted by the Company in writing and generally applicable to executive officers of the Company (any such restriction, a “Purchase Restriction”) which would prohibit the Non-Employee Director from making such a purchase, then such shares shall not be purchase on such date but, subject to Section 11.16, shall be purchased on the first trading day following the lapse or removal of the Purchase Restriction based on the Fair Market Value of the shares on such trading day.

     10.4 CONDITIONS. Subject to Section 11.16, nothing contained herein shall preclude the Board, in its sole discretion, from imposing conditions on any election made under Section 10.1, including, without limitation, the conditions described in Section 10.3.

ARTICLE XI

GENERAL PROVISIONS

     11.1 ACCELERATION OF OPTIONS, SARs, RESTRICTED SHARES AND STOCK UNITS.

          (a) DEATH OR DISABILITY. If a Holder’s service shall terminate by reason of death or Disability, notwithstanding any contrary waiting period, installment period, vesting schedule, or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option or SAR, each outstanding Option or SAR granted under the Plan shall immediately become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares, any related Retained Distributions and any unpaid Dividend Equivalents shall become vested and any cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and (iii) in the case of Stock Units, each such award of Stock Units shall become vested in full.

          (b) APPROVED TRANSACTIONS; BOARD CHANGE; CONTROL PURCHASE. In the event of any Approved Transaction, Board Change or Control Purchase, notwithstanding any contrary waiting period, installment period, vesting schedule, or Restriction Period in any Agreement or in the Plan, unless the applicable Agreement provides otherwise: (i) in the case of an Option or SAR, each such outstanding Option or SAR granted under the Plan shall become exercisable in full in respect of the aggregate number of shares covered thereby; (ii) in the case of Restricted Shares, the Restriction Period applicable to each such Award of Restricted Shares shall be deemed to have expired and all such Restricted Shares, any related Retained Distributions, and any unpaid Dividend Equivalents shall become vested and any cash amounts payable pursuant to the applicable Agreement shall be adjusted in such manner as may be provided in the Agreement; and (iii) in the case of Stock Units, each such award of Stock Units shall become vested in full, in each case effective upon the Board Change or Control Purchase or immediately prior to consummation of the Approved Transaction. Notwithstanding the foregoing, unless otherwise provided in the applicable Agreement, the Board may, in its discretion, determine that any or all outstanding Awards of any or all types granted pursuant to the Plan will not vest or become exercisable on an accelerated basis in connection with an Approved Transaction if effective provision has been made for the taking of such action which, in the opinion of the Board, is equitable and appropriate to substitute a new Award for such Award or to assume such Award and to make such new or assumed Award, as nearly as may be practicable, equivalent to the old Award (before giving effect to any acceleration of the vesting or exercisability thereof), taking into account, to the extent applicable, the kind and amount of securities, cash, or other assets into or for which the applicable series of Common Stock may be changed, converted, or exchanged in connection with the Approved Transaction.

     11.2 TERMINATION OF SERVICE.

          (a) GENERAL. If a Holder’s service on the Board shall terminate prior to the complete exercise of an Option or SAR (or deemed exercise thereof, as provided in Section 7.2) or during the Restriction Period with respect to any Restricted Shares or prior to the vesting or complete exercise of any Stock Units, then such Option, SAR, or Stock Unit shall thereafter be exercisable, and the Holder’s rights to any unvested Restricted Shares, Retained Distributions, unpaid Dividend Equivalents, and cash amounts and any such unvested Stock Units shall thereafter vest, in each case solely to the extent provided in the applicable Agreement; PROVIDED, HOWEVER, that, unless otherwise determined by the Board and provided in the applicable Agreement, (i) no Option or SAR may be exercised after the scheduled expiration date thereof; (ii) if the Holder’s service terminates by reason of death or Disability, the Option or SAR shall remain exercisable for a period of at least one year following such termination (but not later than the scheduled expiration of such Option or SAR); and (iii) any termination of the Holder’s service for cause will be treated in accordance with the provisions of Section 11.2(b).

          (b) TERMINATION FOR CAUSE. If a Holder’s service on the Board shall be terminated by the Company during the Restriction Period with respect to any Restricted Shares, or prior to the exercise of any Option or SAR, or prior to the vesting or complete exercise of any Stock Unit for cause (for these purposes, cause shall include, but not be limited to, insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind, and the refusal to perform his duties and responsibilities for any reason other than illness or incapacity; PROVIDED, HOWEVER, that if such termination occurs within 12 months after an Approved Transaction or Control Purchase or Board Change, termination for cause shall mean only a felony conviction for fraud, misappropriation, or embezzlement), then, unless otherwise determined by the Board and provided in the applicable Agreement, (i) all Options and SARs and all unvested or unexercised Stock Units held by such Holder shall immediately terminate and (ii) such Holder’s rights to all Restricted Shares, Retained Distributions, any unpaid Dividend Equivalents, and any cash awards shall be forfeited immediately.

     11.3 NONALIENATION OF BENEFITS. Except as set forth herein, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the Person entitled to such benefits.

     11.4 WRITTEN AGREEMENT. Each grant of an Option under the Plan shall be evidenced by a stock option agreement; each SAR shall be evidenced by a stock appreciation rights agreement; each award of Restricted Shares shall be evidenced by a restricted shares agreement; and each award of Stock Units shall be evidenced by a stock units agreement, each in such form and containing such terms and provisions not inconsistent with the provisions of the Plan as the Board from time to time shall approve; PROVIDED, HOWEVER, that if more than one type of Award is made to the same Holder, such Awards may be evidenced by a single Agreement with such Holder. Each grantee of an Option, SAR, Restricted Shares, or Stock Units shall be notified promptly of such grant, and a written Agreement shall be promptly executed and delivered by the Company. Any such written Agreement may contain (but shall

not be required to contain) such provisions as the Board deems appropriate (i) to insure that the penalty provisions of Section 4999 of the Code will not apply to any stock or cash received by the Holder from the Company or (ii) to provide cash payments to the Holder to mitigate the impact of such penalty provisions upon the Holder. Any such Agreement may be supplemented or amended from time to time as approved by the Board as contemplated by Section 11.6(b).

     11.5 DESIGNATION OF BENEFICIARIES. Each Person who shall be granted an Award under the Plan may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Board on a form to be prescribed by it, provided that no such designation shall be effective unless so filed prior to the death of such Person.

     11.6 TERMINATION AND AMENDMENT.

          (a) GENERAL. Unless the Plan shall theretofore have been terminated as hereinafter provided, no Awards may be made under the Plan on or after the tenth anniversary of the Effective Date. The Plan may be terminated at any time prior to the tenth anniversary of the Effective Date and may, from time to time, be suspended or discontinued or modified or amended if such action is deemed advisable by the Board.

          (b) MODIFICATION. No termination, modification or amendment of the Plan may, without the consent of the Person to whom any Award shall theretofore have been granted, adversely affect the rights of such Person with respect to such Award. No modification, extension, renewal, or other change in any Award granted under the Plan shall be made after the grant of such Award, unless the same is consistent with the provisions of the Plan. With the consent of the Holder and subject to the terms and conditions of the Plan (including Section 11.6(a) and Section 11.16), the Board may amend outstanding Agreements with any Holder, including, without limitation, any amendment which would (i) accelerate the time or times at which the Award may be exercised and/or (ii) extend the scheduled expiration date of the Award. Without limiting the generality of the foregoing, Subject to Section 11.16, the Board may, but solely with the Holder’s consent unless otherwise provided in the Agreement, agree to cancel any Award under the Plan and grant a new Award in substitution therefor, provided that the Award so substituted shall satisfy all of the requirements of the Plan as of the date such new Award is made. Nothing contained in the foregoing provisions of this Section 11.6(b) shall be construed to prevent the Board from providing in any Agreement that the rights of the Holder with respect to the Award evidenced thereby shall be subject to such rules and regulations as the Board may, subject to the express provisions of the Plan, adopt from time to time or impair the enforceability of any such provision.

     11.7 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company with respect to Awards shall be subject to all applicable laws, rules, and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of any registration statement required under the Securities Act of 1933, and the rules and regulations of any securities exchange or association on which the Common Stock may be listed or quoted. For so long as any series of Common Stock are registered under the Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (i) to maintain a registration statement in effect under the Securities Act

of 1933 with respect to all shares of the applicable series of Common Stock that may be issued to Holders under the Plan and (ii) to file in a timely manner all reports required to be filed by it under the Exchange Act.

     11.8 WITHHOLDING. The Company’s obligation to deliver shares of Common Stock or pay cash in respect of any Award under the Plan shall be subject to applicable federal, state, and local tax withholding requirements. Federal, state, and local withholding tax due at the time of an Award, upon the exercise of any Option or SAR or upon the vesting of, or expiration of restrictions with respect to, Restricted Shares or Stock Units, as appropriate, may, in the discretion of the Board, be paid in shares of the applicable series of Common Stock already owned by the Holder or through the withholding of shares otherwise issuable to such Holder, upon such terms and conditions (including, without limitation, the conditions referenced in Section 6.5) as the Board shall determine. If the Holder shall fail to pay, or make arrangements satisfactory to the Board for the payment to the Company of, all such federal, state and local taxes required to be withheld by the Company, then the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Holder an amount equal to any federal, state, or local taxes of any kind required to be withheld by the Company with respect to such Award.

     11.9 NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options and the awarding of stock and cash otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

     11.10 EXCLUSION FROM OTHER PLANS. By acceptance of an Award, unless otherwise provided in the applicable Agreement, each Holder shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as compensation or bonus in determining the amount of any payment under any pension, retirement or other benefit plan, program, or policy of the Company or any Subsidiary of the Company. In addition, each beneficiary of a deceased Holder shall be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Company on the life of the Holder which is payable to such beneficiary under any life insurance plan of the Company or any Subsidiary of the Company. Director Compensation elected to be received in the form of stock in lieu of cash shall be treated as regular compensation for purposes of any Director retirement or life insurance plan.

     11.11 UNFUNDED PLAN. Neither the Company nor any Subsidiary of the Company shall be required to segregate any cash or any shares of Common Stock which may at any time be represented by Awards, and the Plan shall constitute an “unfunded” plan of the Company. Except as provided in Article VIII with respect to Awards of Restricted Shares and except as expressly set forth in an Agreement, no Holder shall have voting or other rights with respect to the shares of Common Stock covered by an Award prior to the delivery of such shares. Neither the Company nor any Subsidiary of the Company shall, by any provisions of the Plan, be deemed to be a trustee of any shares of Common Stock or any other property, and the liabilities of the Company to any Holder pursuant to the Plan shall be those of a debtor pursuant to such contract obligations as are created by or pursuant to the Plan, and shall be limited to those of a general

creditor of the Company. In its sole discretion, the Board may authorize the creation of trusts or other arrangements to meet the obligations of the Company under the Plan, PROVIDED, HOWEVER, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

     11.12 GOVERNING LAW. The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware.

     11.13 ACCOUNTS. The delivery of any shares of Common Stock and the payment of any amount in respect of an Award shall be for the account of the Company or the applicable Subsidiary of the Company, as the case may be, and any such delivery or payment shall not be made until the recipient shall have paid or made satisfactory arrangements for the payment of any applicable withholding taxes as provided in Section 11.8.

     11.14 LEGENDS. Each certificate evidencing shares of Common Stock subject to an Award shall bear such legends as the Board deems necessary or appropriate to reflect or refer to any terms, conditions, or restrictions of the Award applicable to such shares, including, without limitation, any to the effect that the shares represented thereby may not be disposed of unless the Company has received an opinion of counsel, acceptable to the Company, that such disposition will not violate any federal or state securities laws.

     11.15 COMPANY’S RIGHTS. The grant of Awards pursuant to the Plan shall not affect in any way the right or power of the Company to make reclassifications, reorganizations, or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell, or otherwise dispose of all or any part of its business or assets.

     11.16 CODE SECTION 409A. This Plan and the Awards made hereunder are intended to be (i) “stock rights” exempt from Section 409A of the Code (“Section 409A”) pursuant to Treasury Regulations § 1.409A-1(b)(5), (ii) “short-term deferrals” exempt from Section 409A or (iii) payments which are deferred compensation and paid in compliance with Section 409A, and the Plan and each Agreement shall be interpreted and administered accordingly. Any adjustments of Awards intended to be “stock rights” exempt from Section 409A of the Code pursuant to Treasury Regulations § 1.409A-1(b)(5) shall be conducted in a manner so as not to constitute a grant of a new stock right or a change in the time and form of payment pursuant to Treasury Regulations §1.409A-1(b)(5)(v). In the event an Award is not exempt from Section 409A of the Code, (x) payment pursuant to the relevant Agreement shall be made only on a permissible payment event or at a specified time in compliance with Section 409A, (y) no accelerated payment shall be made pursuant to Section 11.1(b) unless the Board Change, Approved Transaction or Control Purchase constitutes a “change in control event” under Treasury Regulations §1.409A-3(i)(5) or otherwise constitutes a permissible payment event under Section 409A of the Code and (z) no amendment or modification of such Award may be made except in compliance with the anti-deferral and anti-acceleration provisions of Section 409A. No deferrals of compensation otherwise payable under this Plan or any Award shall be allowed, whether at the discretion of the Company or the Award recipient, except in a manner consistent with the requirements of Section 409A.

 

EXHIBIT 99.1

 

INFORMATION STATEMENT

 

ASCENT MEDIA CORPORATION

12300 Liberty Boulevard

Englewood, Colorado 80112

 

Series A Common Stock
(par value $0.01 per share)
Series B Common Stock
(par value $0.01 per share)

 

We are a holding company. Through our principal operating subsidiary, Ascent Media Group, LLC, we are primarily engaged in the business of providing creative and network services to the media and entertainment industries in the United States, the United Kingdom and Singapore. Prior to the effective time of the spin-off described herein, we were a subsidiary of Discovery Holding Company, which we refer to as “DHC”. This information statement is being provided to you in connection with the spin-off of our company by DHC, in which DHC is distributing to its shareholders all of our common stock, as a dividend.

 

In the spin-off, for each share of DHC Series A common stock or DHC Series B common stock held by you as of 5:00 p.m., New York City time, on September 17, 2008, the record date for the distribution, you will receive 0.05 of a share of the same series of our common stock. If as a result of the foregoing ratio you would be entitled to a fraction of a share of our common stock, you will receive cash in lieu of a fractional share interest.

 

No vote of DHC’s shareholders is required to authorize or effectuate the spin-off. No action is required of you to receive your shares of our common stock.

 

The spin-off was approved by the board of directors of DHC in connection with a transaction between DHC and Advance/Newhouse Programming Partnership (which we refer to as the “Discovery Transaction”), pursuant to which DHC and Advance/Newhouse agreed to combine their respective indirect interests in Discovery Communications, LLC, a leading global media and entertainment company.

 

The spin-off of our company was made effective at the close of business on September 17, 2008. At that time, DHC placed 100% of our common stock in a reserve account with Computershare Trust Company, N.A., as distribution agent for the spin-off, with irrevocable instructions to distribute such shares at the close of business on September 26, 2008 (which we refer to as the “share distribution date”).

 

There is no current trading market for our common stock. We have applied to list our Series A common stock on the Nasdaq Global Market under the symbol “ASCMA”. We expect that “when-issued” trading in our Series A common stock will commence on or following the record date under the symbol “ASCMV” and that “regular-way” trading in our Series A common stock and Series B common stock will begin on September 29, 2008, the first trading day following the share distribution date. Although no assurance can be given, we currently expect that our Series B common stock will trade on the OTC Bulletin Board under the symbol “ASCMB”.

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 6.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

 

This information statement does not constitute an offer to sell or a solicitation of an offer to buy any securities.

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

 

The date of this information statement is September 17, 2008.

TABLE OF CONTENTS

 

 

SUMMARY

 

Our Company

 

The Spin-Off

Q:		What is the spin-off?

A:		In the spin-off, DHC is distributing to its shareholders all the shares of our common stock. Following the spin-off, we will be a separate company from DHC, and DHC will not have any ownership interest in us. You do not have to pay any consideration or give up any portion of your DHC common stock to receive shares of our common stock in the spin-off.

Q:		What is being distributed in the spin-off?

A:		Approximately 13,402,982 shares of our Series A common stock and 659,912 shares of our Series B common stock will be distributed in the spin-off, based on the number of shares of DHC Series A common stock and DHC Series B common stock outstanding on June 30, 2008. The shares of our common stock to be distributed constitute all the issued and outstanding shares of our common stock immediately after the distribution.

Q:		When will the spin-off be effective?

A:		The spin-off became effective at the close of business on September 17, 2008, immediately prior to the closing of the Discovery Transaction. At that time, DHC placed 100% of our common stock in a reserve account with Computershare Trust Company, N.A., as distribution agent for the spin-off, with irrevocable instructions to distribute such shares on the share distribution date.

Q:		What is the record date for the spin-off?

A:		DHC established September 17, 2008 as the record date for the spin-off. This means that each holder of record of shares of DHC common stock as of the close of business on the record date will be entitled to receive the spin-off distribution. You must be a holder of record of shares of DHC common stock on the record date to receive the spin-off distribution.

Q:		What will I receive in the spin-off?

A:		Holders of DHC Series A common stock will receive a dividend of 0.05 of a share of our Series A common stock for each share of DHC Series A common stock held by them on the record date, and holders of DHC Series B common stock will receive a dividend of 0.05 of a share of our Series B common stock for each share of DHC Series B common stock held by them on the record date. At the time of the spin-off, each share of our Series A common stock and our Series B common stock will have attached to it one preferred share purchase right of the corresponding series, as more fully described in this information statement. See “Description of Our Capital Stock — Shareholder Rights Plan.”
Q:		When will the shares of Ascent Media Corporation be distributed to me?
A:		It is expected that Computershare Trust Company, the distribution agent for the spin-off, will distribute the shares of Ascent Media Corporation issued in the spin-off at the close of business on September 26, 2008.
Q:		What will the relationship be between Ascent Media Corporation and DHC after the spin-off?

A:		Following the spin-off, our company and DHC will operate independently, and neither will have any ownership interest in the other. In connection with the spin-off, however, we and DHC (and certain affiliates of DHC) have entered into certain agreements in order to govern the ongoing relationships between our company and DHC (and such affiliates) after the spin-off and to provide for an orderly transition. See “Certain Inter-Company Agreements.”

Q:		What are the reasons for the spin-off?

A:		The principal reason for the spin-off was to facilitate the transaction between DHC and Advance Newhouse Programming Partnership (“Advance/Newhouse”), pursuant to which DHC and Advance/Newhouse combined their respective indirect interests in Discovery. We refer to that transaction as the “Discovery Transaction”. The

		spin-off resolved differing views with respect to the value of Ascent Media that could have otherwise precluded the consummation of the Discovery Transaction on terms acceptable to both DHC and Advance/Newhouse. The board of directors of DHC determined that the Discovery Transaction was in the best interests of DHC and could not be consummated on terms acceptable to DHC without the spin-off. The obligations of DHC and Advance/Newhouse to complete the Discovery Transaction was, therefore, subject to the completion of the spin-off.

		Further, the spin-off will provide certain benefits for our company and our stockholders, including making it easier for investors to understand and value the Ascent Media assets, which DHC’s board of directors believed were overshadowed by DHC’s interest in Discovery, thus enhancing our ability to raise capital against our business to pursue our business strategy and fund acquisitions, including, possibly, acquisitions using our own publicly traded equity as currency, and internal growth. The spin-off will also enhance our ability to attract and retain qualified personnel, by enabling us to grant equity incentive awards based on our own publicly traded equity, which will directly reflect the performance of our businesses, and will further enable us to more effectively tailor employee benefit plans and retention programs, when compared with current alternatives, to provide improved incentives to the employees and future hires of our company that will better and more directly align the incentives for our management with their performance.

		For a discussion of additional factors, costs and risks associated with the spin-off considered by the board, see “The Spin-Off — Reasons for the Spin-Off.” The Discovery Transaction is described in the definitive proxy statement/prospectus DHC mailed to its stockholders on August 8, 2008 (which we refer to as the “DHC proxy statement/prospectus”). The DHC proxy statement/prospectus forms a part of the registration statement on Form S-4 of Discovery Communications, Inc., Registration No. 333-151586, as amended. Please review the DHC proxy statement/prospectus for the principal terms of the Discovery Transaction and other material information relating to such transaction. See “Where You Can Find More Information.”

Q:		Why was Ascent Sound excluded from the spin-off?

A:		Ascent Sound was not a necessary or integral component of our other businesses and retaining it at DHC allowed the spin-off to be structured to meet the requirements for treatment as a transaction under Sections 368(a) and 355 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax purposes.

Q:		What do I have to do to participate in the spin-off?
A:		Nothing. Shareholders of DHC on the record date for the spin-off are not required to pay any cash or deliver any other consideration, or give up any shares of DHC common stock, to receive the shares of our common stock distributable to them in the spin-off.
Q:		How will DHC distribute shares of Ascent Media Corporation common stock to me?
A:		On the share distribution date, holders of shares of either series of DHC common stock on the record date for the spin-off will receive shares of the same series of our common stock in the same form, certificated or book entry, as the form in which the recipient shareholder held its shares of DHC common stock on the record date.
Q:		How will fractional shares be treated in the spin-off?
A:		If you would otherwise be entitled to receive a fractional share of our common stock in the spin-off, you will instead receive a cash payment. See “The Spin-Off — Treatment of Fractional Shares” for an explanation of how the cash payments will be determined.
Q:		What are the federal income tax consequences to me of the spin-off?
A:		In connection with the filing of this registration statement, Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, has provided an opinion as to the material U.S. federal income tax consequences of the spin-off. Generally, as set forth in further detail in “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off”, for U.S. federal income tax purposes, no gain or loss should be recognized by, and no amount should be included in the income of, a holder of DHC common stock upon the receipt of shares of our

		common stock. A holder of DHC common stock should generally recognize gain or loss with respect to cash received in lieu of a fractional share of our common stock.

		In connection with the consummation of the Discovery Transaction, DHC received the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC (which opinion confirms the conclusions set forth in “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off”) substantially to the effect that, on the basis of facts and representations and assumptions as to factual matters set forth or referred to in such opinion, for U.S. federal income tax purposes, the spin-off should qualify as a transaction under Section 368(a) and 355 of the Code.

		Please see “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off” and “Risk Factors — Factors Relating to the Spin-Off — The spin-off could result in significant tax liability” and “— Potential liabilities associated with certain assumed obligations under the tax sharing agreement cannot be precisely quantified at this time” for more information regarding the tax opinion and the potential tax consequences to you of the spin-off.
Q:		Does Ascent Media Corporation intend to pay cash dividends?
A:		No. We currently intend to retain future earnings, if any, to finance the expansion of our businesses. As a result, we do not expect to pay any cash dividends in the foreseeable future. All decisions regarding the payment of dividends by our company will be made by our board of directors, from time to time, in accordance with applicable law.
Q:		Will Ascent Media Corporation common stock trade on a stock market?

A:		Currently, there is no public market for our common stock. We have applied to list our Series A common stock on the Nasdaq Global Market under the symbol “ASCMA”. We currently expect that our Series B common stock will trade on the OTC Bulletin Board under the symbol “ASCMB”. We cannot predict the trading prices for common stock when such trading begins.

		We expect that “when-issued” trading in our Series A common stock will commence on or following the record date under the symbol “ASCMV” and that “regular-way” trading in our Series A common stock and Series B common stock will begin on the first trading day following the share distribution date. As of the date hereof, there are no plans for our Series B common stock to trade on a when-issued basis; however, a when-issued trading market in our Series B common stock may commence prior to the share distribution date. When-issued trading of our common stock, in the context of the spin-off, refers to a transaction effected before the share distribution date and made conditionally because the securities of the spun-off entity have not yet been distributed. When-issued trades generally settle within two days after the share distribution date. Following the share distribution date, any when-issued trading in respect of our common stock will end and regular way trading will begin. We currently expect the first day of regular trading for our Series A common stock on Nasdaq will be September 29, 2008. Regular way trading refers to trading after the security has been distributed and typically involves a trade that settles on the third full trading day following the date of the sale transaction.

Q:		Will I have appraisal rights in connection with the spin-off?
A:		No. Holders of DHC common stock are not entitled to appraisal rights in connection with the spin-off.
Q:		Who is the transfer agent for your common stock?
A:		Computershare Trust Company, N.A. 250 Royall Street Canton, MA 02021
Q:		Who is the distribution agent for the spin-off?
A:		Computershare Trust Company, N.A. 250 Royall Street Canton, MA 02021

Q:		Whom can I contact for more information?
A:		If you have questions relating to the mechanics of the distribution of DHC shares, you should contact the distribution agent:
		Computershare Trust Company, N.A. 250 Royall Street Canton, MA 02021 Telephone: (877) 453-1510

		If you have questions relating to the spin-off or our company, you should contact:

		Ascent Media Corporation 12300 Liberty Blvd. Englewood, CO 80112 Telephone: (720) 875-5622

 

An investment in our common stock involves risk. You should carefully consider the risks described below, together with all the other information included in this information statement in evaluating our company and our common stock. Any of the following risks, if realized, could have a material adverse effect on the value of our common stock.

 

We have a history of losses and may incur losses in the future, which could materially and adversely affect the market price of our common stock.  On a combined basis, our subsidiaries incurred losses in three out of the last five fiscal years. In future periods, we may not be able to increase or sustain profitability on a consistent quarterly or annual basis. Failure to maintain profitability in future periods may materially and adversely affect the market price of our common stock. If we seek external debt financing to meet capital expenditures in the future, there can be no assurance that we will be able to obtain such financing on terms acceptable to us.

 

We have no operating history as a separate company upon which you can evaluate our performance.  Although our subsidiary Ascent Media was a separate public company prior to June 2003, we do not have an operating history as a separate public company, as currently constituted. There can be no assurance that our business strategy will be successful on a long-term basis. We may not be able to grow our businesses as planned and may not be profitable.

 

Our historical financial information may not be representative of our results as a separate company.  The historical financial information included in this information statement may not necessarily reflect what our results of operations, financial condition and cash flows would have been had we been a separate, stand-alone entity pursuing independent strategies during the periods presented.

 

We are a holding company with no direct operations.  We are a holding company with no direct operations of our own. Our principal assets are the equity interests we hold in our operating subsidiaries, which are separate legal entities. The ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or may become subject.

 

We cannot be certain that we will be successful in integrating any acquired businesses.  Our businesses may grow through acquisitions in selected markets. Integration of new businesses may present significant challenges, including: realizing economies of scale; eliminating duplicative overheads; and integrating networks, financial systems and operational systems. We cannot assure you that, with respect to any acquisition, we will realize anticipated benefits or successfully integrate any acquired business with our existing operations. In addition, while we intend to implement appropriate controls and procedures as we integrate acquired companies, we may not be able to certify as to the effectiveness of these companies’ disclosure controls and procedures or internal control over financial reporting (as required by U.S. federal securities laws and regulations) until we have fully integrated them.

 

Our businesses are subject to risks of adverse government regulation.  The industries in which we operate, and those of our customers, are subject to varying degrees of regulation in the United States by the Federal Communications Commission and other entities and in foreign countries by similar entities. There can be no assurance that our business, either directly or through Ascent Media’s reliance on customers or vendors impacted by such regulations, will not be adversely affected by any future legislation, new regulation or deregulation.

 

A loss of any of Ascent Media’s large customers would reduce its revenue.  Although Ascent Media serviced over 3,800 customers during the year ended December 31, 2007, its ten largest customers accounted for approximately 45% of its consolidated revenue. The ten largest customers of the Creative Services group accounted for approximately 44% of the revenue of the Creative Services operating segment during the 2007 fiscal year. The ten largest customers of the Network Services group accounted for approximately 62% of the revenue of the Network Services operating segment during the 2007 fiscal year. For the six months ended June 30, 2008, the Network Services group’s largest customer, Motorola, Inc., accounted for approximately 28% of the Network Services group revenue. The loss of, and failure to replace, any significant portion of the revenue generated from sales to any of Ascent Media’s largest customers could have a material adverse effect on the business of Ascent

Media or on the affected operating segment. The Creative Services group’s revenue generated by Ascent Media’s largest customers represents various types of services provided by various facilities within the group for multiple points of contact at the corporate customer. Network origination services are generally provided pursuant to contracts with terms of one to three years or longer. Ascent Media’s ten largest customers include, among others, the parent companies of six major motion picture studios.

 

Discovery and its subsidiaries accounted for approximately 6% of Ascent Media’s consolidated revenue, including 15% of Network Services group revenue during 2007. Discovery is a subsidiary of DHC. Sales by Ascent Media to Discovery in 2007 consisted primarily of $7.3 million in systems integration projects and $34.5 million in content distribution. Ascent Media provides content distribution services to Discovery primarily in Asia and Europe pursuant to contracts that currently extend to 2010 and 2011, respectively.

 

Ascent Media’s business depends on certain client industries.  Ascent Media derives substantially all its revenue from services provided to the motion picture, television and advertising industries. Fundamental changes in the business practices of any of these client industries could cause a material reduction in demand by Ascent Media’s clients for the services offered by Ascent Media. Ascent Media’s business benefits from the volume of motion picture and television content being created and distributed as well as the success or popularity of an individual television show. Accordingly, a decrease in either the supply of, or demand for, original entertainment content would have a material adverse effect on Ascent Media’s results of operations. Because spending for television advertising drives the production of new television programming, as well as the production and deployment of television commercials and the sale of existing content libraries for syndication, a reduction in television advertising spending would adversely affect Ascent Media’s business. Factors that could impact television advertising and the general demand for original entertainment content include the growing use of personal video recorders and video-on-demand services, continued fragmentation of and competition for the attention of television audiences, the proliferation of alternatives to traditional television viewing (including Internet video services) and general economic conditions.

 

Because Ascent Media uses third-party satellite and terrestrial connectivity services to provide certain of its creative, media management and network services, a material disruption to such connectivity services could have a negative impact on Ascent Media’s operations.  Ascent Media obtains satellite transponder capacity, fiber-optic capacity and Internet connectivity pursuant to long-term contracts and other arrangements with third-party vendors. Such connectivity services are used in connection with many aspects of Ascent Media’s business, including network origination, teleport services, digital media management, dailies, telecine services, distribution of advertising, syndicated television programming and other content, and various Web-based services and interfaces. Although Ascent Media believes that its arrangements with connectivity suppliers are adequate, disruptions in such services may occur from time to time as a result of technical malfunction, disputes with suppliers, force majeure or other causes. In the event of any such disruption in satellite or terrestrial connectivity services, Ascent Media may incur additional costs to supplement or replace the affected service, and may be required to compensate its own customers for any resulting declines in service levels.

 

A significant labor dispute in Ascent Media’s client industries could have a material adverse effect on its business.  An industry-wide strike or other job action by or affecting the Writers Guild, Screen Actors Guild or other major entertainment industry union could reduce the supply of original entertainment content, which would in turn reduce the demand for Ascent Media’s services. An extensive work stoppage would affect feature film production as well as episodic television and commercial production and could have a material adverse effect on the creative services group, including the potential loss of key personnel and the possibility that broadcast and cable networks will seek to reduce the proportion of their schedules devoted to scripted programming.

 

On November 5, 2007, Writers Guild of America West and Writers Guild of America East (which we refer to collectively as the “Writers Guild”) declared a strike affecting the script writing for television shows and films. During the fourth quarter of 2007 and the first quarter of 2008, the strike had a significant adverse effect on the revenue generated by Ascent Media’s creative services business for services provided on new entertainment projects utilizing scripted content and the production of new television commercials. The strike was terminated on February 12, 2008, after the Writers Guild negotiated the terms of a proposed new contract with the Alliance of

Motion Picture and Television Producers (“AMPTP”). On February 26, 2008, the Writers Guild announced that its members had ratified the new contract, the term of which runs through May 1, 2011.

 

The 2007-2008 television season was significantly affected by the strike. Networks and producers resumed production of some scripted television programming interrupted by the strike. However, certain programming did not resume production this season and we expect that certain programming will not resume production at all. We do not know if the Writers Guild strike will be a significant factor in connection with the changing viewing habits of television consumers and/or industry programming and production trends. Accordingly, the full impact of the strike cannot currently be determined.

 

On February 21, 2008, the Directors Guild of America announced that its members had ratified a new contract with the AMPTP for a term ending June 30, 2011.

 

The contract between the Screen Actors Guild and AMPTP for theatrical motion picture and television performances expired on June 30, 2008. A failure by the Screen Actors Guild to finalize and ratify a new agreement with the AMPTP within a reasonable period of time after expiration of the prior contract could lead to a strike or other job action. Any such labor dispute could have an adverse effect on the television and motion picture production industries, including Ascent Media’s business, and in the case of a severe or prolonged work stoppage, the adverse effect on Ascent Media’s business, operations, results of operations and/or financial condition could be material.

 

Changes in technology may limit the competitiveness of and demand for Ascent Media’s services.  The post-production industry is characterized by technological change, evolving customer needs and emerging technical standards, and the network origination and data transmission industries are currently saturated with companies providing services similar to Ascent Media’s. Historically, Ascent Media has expended significant amounts of capital to obtain equipment using the latest technology. Obtaining access to any new technologies that may be developed in Ascent Media’s industries will require additional capital expenditures, which may be significant and may have to be incurred in advance of any revenue that may be generated by such new technologies. In addition, the use of some technologies may require third party licenses, which may not be available on commercially reasonable terms. Although we believe that Ascent Media will be able to continue to offer services based on the newest technologies, we cannot assure you that Ascent Media will be able to obtain any of these technologies, that Ascent Media will be able to effectively implement these technologies on a cost-effective or timely basis or that such technologies will not render obsolete Ascent Media’s role as a provider of motion picture and television production services. If Ascent Media’s competitors providing network services have technology that enables them to provide services that are more reliable, faster, less expensive, reach more customers or have other advantages over the network origination and content distribution services Ascent Media provides, then the demand for Ascent Media’s network services may decrease.

 

While Ascent Media believes that its business methods and technical processes do not infringe upon the proprietary rights of any third parties, there can be no assurances that third parties will not assert infringement claims against Ascent Media.  Ascent Media’s business of providing creative and network services is highly dependent upon the technical abilities and knowledge of its personnel and business methods and processes developed by Ascent Media and its subsidiaries and their respective predecessors over time. There can be no assurance that third parties will not bring trade secret, copyright infringement or other proprietary rights claims against Ascent Media, or claim that Ascent Media’s use of certain technologies violates a patent. There can be no assurances as to the outcome of any such claims. However, even if these claims are not meritorious, they could be costly and could divert management’s attention from other more productive activities. If it is determined that Ascent Media has infringed upon or misappropriated a third party’s proprietary rights, there can be no assurance that any necessary license or rights could be obtained on terms satisfactory to Ascent Media, if at all. The inability to obtain any such license or rights could result in the incurrence of expenses and changes in the way Ascent Media operates its business.

 

Loss of key personnel could negatively impact Ascent Media’s business.  Ascent Media’s future success depends in large part on the retention, continued service and specific abilities of its key creative, technical and management personnel. A significant percentage of our revenue can be attributed to services that can only be performed by certain highly compensated, specialized employees, and in certain instances, our customers have

identified by name those personnel requested to work on such customers’ projects. Competition for highly qualified employees in the entertainment and media services industry is intense and the process of locating and recruiting key creative, technical and management personnel with the combination of skills and abilities required to execute Ascent Media’s strategy is time-consuming. Ascent Media has employment agreements with many of its key creative, technical and management personnel. However, there can be no assurance that Ascent Media will continue to attract, motivate and retain key personnel, and any inability to do so could negatively impact our business and our ability to grow.

 

Risk of loss from earthquakes or other catastrophic events could disrupt Ascent Media’s business.  Some of Ascent Media’s purpose-built facilities are located in Southern California, a region known for seismic activity. Due to the extensive amount of specialized equipment incorporated into specially designed editorial suites, digital intermediates suites and theaters, and other post-production facilities, as well as teleports, Ascent Media’s operations in this region may not be able to be temporarily relocated to mitigate the impacts of a catastrophic event. Ascent Media carries insurance for property loss and business interruption resulting from such events, including earthquake insurance, subject to deductibles, and for certain operations has facilities in other geographic locations. Although we believe Ascent Media has adequate insurance coverage relating to damage to its property and the temporary disruption of its business from casualties, and that it could provide services at other geographic locations, there can be no assurance that such insurance and other facilities would be sufficient to cover all of Ascent Media’s costs or damages or Ascent Media’s loss of income resulting from its inability to provide services in Southern California for an extended period of time.

 

Failure to obtain renewal of FCC licenses could disrupt Ascent Media’s business.  Ascent Media holds licenses, authorizations and registrations from the FCC required for the conduct of its network services business, including earth station and various classes of wireless licenses and an authorization to provide certain services. Most of the FCC licenses held by Ascent Media are for transmit/receive earth stations, which cannot be operated without individual licenses. The licenses for these stations are granted for a period of fifteen years and, while the FCC generally renews licenses for satellite earth stations routinely, there can be no assurance that Ascent Media’s licenses will be renewed at their expiration dates. Registration with the FCC, rather than licensing, is required for receiving transmissions from satellites from points within the United States. Ascent Media relies on third party licenses or authorizations when it transmits domestic satellite traffic through earth stations operated by third parties. Our failure, and the failure of third parties, to obtain renewals of such FCC licenses could disrupt the network services segment of Ascent Media and have a material adverse effect on Ascent Media. Further material changes in the law and regulatory requirements must be anticipated, and there can be no assurance that our businesses will not be adversely affected by future legislation, new regulation, deregulation or court decisions.

 

Ascent Media operates in an increasingly competitive market, and there is a risk that it may not be able to compete effectively with other providers in the future.  The entertainment and media services industries in which Ascent Media competes are highly competitive and service-oriented. Ascent Media has few long-term or exclusive service agreements with its creative services customers. Business generation in these markets is based primarily on the reputation of the provider’s creative talent and customer satisfaction with reliability, timeliness, quality and price. The major motion picture studios, which are Ascent Media’s customers, such as Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, The Walt Disney Company and Warner Bros. Entertainment, have the capability to perform similar services in-house. These studios also have substantially greater financial resources than Ascent Media’s, and in some cases significant marketing advantages. Thus, depending on the in-house capacity available to some of these studios, a studio may be not only a customer but also a competitor. There are also numerous independent providers of services similar to Ascent Media’s and we actively compete with certain industry participants that have a unique operating niche or specialty business. If there were a significant decline in the number of motion pictures or the amount of original television programming produced, or if the studios or Ascent Media’s other clients either established in-house post-production facilities or significantly expanded their in-house capabilities, Ascent Media’s operations could be materially and adversely affected. For the year ended December 31, 2007, 19.2% of Ascent Media’s total revenue was derived from creative services provided to Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, The Walt Disney Company and Warner Bros. Entertainment.

 

We may incur material costs as a result of our separation from DHC.  As a result of our separation from DHC, we may incur costs and expenses greater than those we currently incur. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with the federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), tax administration, employee benefit related functions and fees relating to the listing of our Series A common stock on the Nasdaq Global Market. We cannot assure you that these costs will not be material to our business.

 

The spin-off could result in significant tax liability.  At the effective time of the spin-off, DHC received the tax opinions of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, to the effect that, taking into account, among other things, the issuance of convertible preferred stock to Advance/Newhouse in the Discovery Transaction and the governance rights associated with such convertible preferred stock, the spin-off should qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes.

 

The conclusions in the tax opinions are based on existing legal authority and the lack of any authority directly on point. The tax opinions also are based on, among other things, assumptions and representations as to factual matters and certain undertakings that have been received from our company, DHC and certain DHC stockholders, including those contained in certificates of officers of our company and DHC and certain DHC stockholders, as requested by counsel. If any of those factual representations or assumptions were to be untrue or incomplete in any material respect, any undertaking was not complied with, or the facts upon which the opinions are and will be based were to be materially different from the facts at the time of the spin-off, the spin-off may not qualify for tax-free treatment. Opinions of counsel are not binding on the U.S. Internal Revenue Service (the “IRS”). As a result, the conclusions expressed in the opinions of tax counsel could be challenged by the IRS, and if the IRS were to prevail in such challenge, the tax consequences to you could be materially less favorable.

 

If the spin-off does not qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes, then, in general, DHC would be subject to tax as if it had sold its shares of common stock of our company in a taxable sale for their fair market value and would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of such shares over its tax basis in such shares. A DHC stockholder that received shares of our common stock in the spin-off would be treated as having received a distribution of property in an amount equal to the fair market value of such shares (including any fractional shares for which cash is received). That distribution would be taxable to such stockholder as a dividend to the extent of DHC’s current and accumulated earnings and profits. Any amount that exceeded DHC’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DHC stock with any remaining amount being taxed as a capital gain. As discussed below, pursuant to the tax sharing agreement between us and DHC, we have agreed to be responsible for and indemnify DHC with respect to all taxes arising as a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the tax sharing agreement. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off” for more information regarding the tax consequences of the spin-off and “Certain Inter-Company Agreements — Agreements with DHC — Tax Sharing Agreement” for more information regarding the tax sharing agreement and our obligations thereunder.

 

Potential liabilities associated with certain assumed obligations under the tax sharing agreement cannot be precisely quantified at this time.  In the tax sharing agreement with DHC, we have agreed to be responsible for all taxes attributable to us or any of our subsidiaries, whether accruing before, on or after the spin-off (other than any such taxes for which DHC is responsible under the tax sharing agreement). We have also agreed to be responsible for and indemnify DHC with respect to (i) all taxes attributable to DHC or any of its subsidiaries (other than Discovery) for any tax period that ends on or before the date of the spin-off (and for any tax period that begins on or before and ends after the date of the spin-off, for the portion of that period on or before the date of the spin-off), other than such taxes arising as a result of the spin-off and related internal restructuring of DHC and (ii) all taxes arising as a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the tax sharing agreement. This means that we will bear the liability for any taxes arising as a result of the spin-off failing to qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes (which could result, for example, from a merger or other transaction involving an acquisition of our stock)

unless such tax liability arises as a result of any breach on or after the date of the spin-off of any representation, warranty, covenant or other obligation of DHC or of a subsidiary or shareholder of DHC made in connection with the issuance of the tax opinion relating to the spin-off or in the tax sharing agreement, in which case DHC would bear the liability for such taxes under the terms of the tax sharing agreement. As described above, such tax liability would be calculated as though DHC had sold its shares of common stock of our company in a taxable sale for their fair market value, and DHC would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of such shares over its tax basis in such shares. Depending on the fair market value of DHC’s shares in our company at the time of the spin-off, such tax liability could be significant and any corresponding indemnification obligation could have a material adverse effect on our company. Our indemnification obligations to DHC and its subsidiaries, officers and directors are not limited in amount or subject to any cap. If we are required to indemnify DHC and its subsidiaries and their respective officers and directors under the circumstances set forth in the tax sharing agreement, we may be subject to substantial liabilities. At this time, we cannot precisely quantify the amount of these liabilities assumed pursuant to the tax sharing agreement and there can be no assurances as to their final amounts. For a more detailed discussion, see “Certain Inter-Company Agreements — Agreements with DHC — Tax Sharing Agreement.”

 

Potential indemnification liabilities to DHC pursuant to the reorganization agreement could materially adversely affect our company.  On June 4, 2008, we entered into a reorganization agreement with DHC and Ascent Media that provides for, among other things, the principal corporate transactions required to effect the spin-off, certain conditions to the spin-off and provisions governing the relationship between our company and DHC with respect to and resulting from the spin-off. For a description of the reorganization agreement, see “Certain Inter-Company Agreements — Agreements with DHC — Reorganization Agreement.” Among other things, the reorganization agreement provides for indemnification obligations designed to make our company financially responsible for substantially all liabilities that may exist relating to the business of Ascent Media (and, as between our company and DHC or New Discovery, AccentHealth), whether incurred prior to or after the spin-off, as well as those obligations of DHC assumed by us pursuant to the reorganization agreement. If we are required to indemnify DHC under the circumstances set forth in the reorganization agreement, we may be subject to substantial liabilities.

 

We cannot be certain that an active trading market will develop or be sustained after the spin-off, and following the spin-off our stock price may fluctuate significantly.  We cannot assure you that an active trading market will develop or be sustained for our common stock after the spin-off. Nor can we predict the prices at which either series of our common stock may trade after the spin-off. We cannot predict the effect of the spin-off on the trading prices of DHC’s common stock or whether the market value of the shares of a series of our common stock and the shares of the same series of DHC’s common stock held by a shareholder after the spin-off (as such shares of DHC common stock are adjusted in the Discovery Transaction) will be less than, equal to or greater than the market value of the shares of that series of DHC’s common stock held by such shareholder prior to the spin-off.

 

The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

 

 

If, following the spin-off, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.  Section 404 of the Sarbanes-Oxley Act of 2002 requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will be required to document and test our internal control procedures; our management will be required to assess and issue a report concerning our internal control over financial reporting; and our independent auditors will be required to issue an attestation regarding our internal control over financial reporting. Our compliance with Section 404 of the

Sarbanes-Oxley Act will first be tested in connection with the filing of our Annual Report on Form 10-K for the fiscal year ending December 31, 2009. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex, subject to change, and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal control, investor confidence in our financial results may weaken, and our stock price may suffer.

 

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders.  Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a change in control of our company that a shareholder may consider favorable. These provisions include the following:

 

 

Our board of directors has approved the adoption of a shareholder rights plan in order to encourage anyone seeking to acquire our company to negotiate with our board of directors prior to attempting a takeover. While the plan is designed to guard against coercive or unfair tactics to gain control of our company, the plan may have the effect of making more difficult or delaying any attempts by others to obtain control of our company. See “Description of Our Capital Stock — Shareholder Rights Plan.”

 

After the spin-off, John C. Malone will have the power to direct approximately 31% of the aggregate voting power in our company.  On the record date, Mr. Malone beneficially owned shares of DHC common stock representing approximately 31% of DHC’s voting power. Following the consummation of the spin-off, Mr. Malone will beneficially own shares of our common stock that may represent up to approximately 31% of our aggregate voting power, based upon his beneficial ownership of DHC common stock, as of June 30, 2008.

 

Holders of a single series of our common stock may not have any remedies if an action by our directors or officers has an adverse effect on only that series of our common stock.  Principles of Delaware law and the

provisions of our certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any single series of our common stock. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our shareholders, including the holders of all series of our common stock. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that a board of directors owes an equal duty to all common shareholders regardless of class or series and does not have separate or additional duties to any group of shareholders. As a result, in some circumstances, our directors may be required to make a decision that is adverse to the holders of one series of our common stock. Under the principles of Delaware law referred to above, you may not be able to challenge these decisions if our board of directors is disinterested and adequately informed with respect to these decisions and acts in good faith and in the honest belief that it is acting in the best interests of all our shareholders.

 

Our Series B common stock will likely be traded on the OTC Bulletin Board, which is often characterized by volatility and illiquidity.  We expect that our Series B common stock will trade on the OTC Bulletin Board, rather than on a national exchange or quotation system. The OTC Bulletin Board tends to be highly illiquid, in part, because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make markets in particular stocks. There is also a greater chance of market volatility for securities that trade on the OTC Bulletin Board as opposed to a national exchange or quotation system. This volatility is due to a variety of factors, including a lack of readily available price quotations, lower trading volume, absence of consistent administrative supervision of “bid” and “ask” quotations, and market conditions. The potential for illiquidity and volatility with respect to our Series B common stock may also be adversely affected by (i) the relatively small number of shares of our Series B common stock held by persons other than our officers, directors and persons who hold in excess of 10% of the Series B common stock outstanding, (ii) the relatively small number of such unaffiliated shareholders, and (iii) the expected low trading volume of such shares on the OTC Bulletin Board. There can be no assurance that the Series B common stock will ever be listed for trading on Nasdaq or another stock exchange or quotation system. However, holders of shares of our Series B common stock may convert such shares at any time into shares of our Series A common stock, on a one-for-one basis, and such shares of Series A common stock will be listed for trading on the Nasdaq Global Market.

 

Certain statements in this information statement and in the documents incorporated by reference herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including certain statements relating to our business strategies, market potential, future financial performance and other matters. In particular, information included under “The Spin-Off,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of our Business” contain forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. In addition to the risk factors described herein under the headings “Risk Factors,” the following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

 

 

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

 

Prior to the effective time of the spin-off, we were a wholly owned subsidiary of DHC. We were formed on May 29, 2008 to hold DHC’s 100% ownership interests in Ascent Media and AccentHealth. On the record date for the spin-off, in addition to the businesses and assets of our company, DHC owned, indirectly, 662/3% of the equity of Discovery and 100% of Ascent Sound.

 

On June 4, 2008, DHC and Advance/Newhouse entered into a transaction agreement, which provided for the terms and conditions of the Discovery Transaction. The Discovery Transaction, which was approved by the stockholders of DHC on September 16, 2008, is described in the DHC proxy statement/prospectus. A copy of the DHC proxy statement/prospectus was mailed to stockholders of DHC on August 8, 2008. Please review the DHC proxy statement/prospectus for the principal terms of the transaction between DHC and Advance/Newhouse and other material information relating to such transaction. See “Where You Can Find More Information.”

 

It was a condition to the Discovery Transaction that, prior to the closing of such transaction, DHC would separate its interest in Ascent Media from its other businesses and assets. The board of directors of DHC determined to separate its interest in Ascent Media from its other businesses and assets by means of a spin-off. To accomplish the spin-off, DHC is distributing all of the outstanding equity interest in our company, consisting of shares of our Series A common stock and our Series B common stock, to DHC’s shareholders on a pro rata basis. As a result of the spin-off, DHC does not own any equity interest in our company, and we are an independent, publicly traded company. No vote of DHC’s shareholders is required or being sought in connection with the spin-off, and DHC’s shareholders have no appraisal rights in connection with the spin-off. The spin-off became effective at the close of business on September 17, 2008, when DHC placed 100% of our common stock in a reserve account with Computershare Trust Company, N.A., as distribution agent for the spin-off, with irrevocable instructions to distribute such shares at the close of business on the share distribution date.

 

As described above, on August 8, 2008, we entered into an agreement to sell AccentHealth. This transaction was consummated on September 4, 2008. Our board approved the sale of AccentHealth based on its determination that AccentHealth is a non-core asset of our company. This sale is not related to, and would have occurred irrespective of, the spin-off.

 

The board of directors of DHC considered the following potential benefits in making its determination to consummate the spin-off:

 

 

 

 

 

DHC’s board of directors also considered a number of costs and risks associated with the spin-off, including:

 

 

The board evaluated the costs and benefits of the transaction as a whole and did not find it necessary to assign relative weights to the specific factors considered. DHC’s board of directors concluded, however, that the potential benefits of the spin-off outweighed its potential costs, and that separating our business from that of DHC in the form of a distribution to DHC’s stockholders that is generally tax-free was appropriate, advisable, and in the best interests of DHC and its stockholders.

 

DHC is effecting the spin-off by distributing to its shareholders as a dividend:

 

 

in each case, owned of record by each shareholder on the record date.

 

On September 17, 2008, immediately following the close of business, DHC delivered all of the issued and outstanding shares of our Series A common stock and Series B common stock to the distribution agent, together with irrevocable instructions to distribute such shares at the close of business on the share distribution date. On or about the share distribution date, the distribution agent will effect delivery of the shares of our common stock issuable in the spin-off in the same form, certificated or book-entry, as the form in which the recipient shareholder held its shares of DHC common stock on the record date. You must be a record holder of shares of DHC common stock at the close of business on the record date to receive shares of our common stock in the distribution. See “— Trading Prior to the Record Date” below for more information.

 

After the distribution, some of our shareholders may hold odd lots, or blocks not evenly divisible by 100, of our shares. A shareholder selling an odd lot may be required to pay a higher commission rate than a shareholder selling round lots or blocks of 100 shares.

 

Shareholders of DHC are not being asked to take any action in connection with the spin-off. No shareholder approval of the spin-off is required or being sought. We are not asking you for a proxy, and you are requested not to send us a proxy. You do not have to pay any consideration or give up any portion of your DHC common stock to receive shares of our common stock in the spin-off.

 

If any shareholder would be entitled to receive a fractional share of our common stock in the spin-off, that shareholder will instead receive a cash payment from us. As soon as practicable following the record date, the distribution agent will determine the fractional share interests in our common stock that would be attributable to each holder of record of DHC common stock on the record date as a result of the spin-off, but such fractional shares will not be issued. In lieu thereof, each such holder will receive a cash amount equal to the product of such applicable fraction multiplied by the average of the closing prices of the applicable series of our common stock on the Nasdaq Global Market over the first ten consecutive trading days that our common stock trades in the regular way market. The distribution agent will calculate such amounts and distribute a check to each such record holder as soon as practicable following such ten trading day period. No interest will be paid on any cash distributed in lieu of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient shareholders. See “— Material U.S. Federal Income Tax Consequences of the Spin-Off” below for more information.

 

Pursuant to the anti-dilution provisions of certain plans pursuant to which options to purchase shares of DHC common stock were granted, the compensation committee of the board of directors of DHC had the authority to make equitable adjustments to such DHC options in the event of certain transactions, including the spin-off and the Discovery Transaction. Pursuant to the agreement between DHC and Advance/Newhouse with respect to the Discovery Transaction, upon the consummation of the spin-off and the Discovery Transaction, all then outstanding DHC options (other than the DHC options held by Robert R. Bennett, a director of DHC) will be converted into options or stock appreciation rights of the new public parent company that results from the Discovery Transaction (which we call “New Discovery”), in a manner so that the aggregate intrinsic value of the awards resulting from such adjustments (based on average stock prices over the first 10 trading days following consummation of the Discovery Transaction) will equal the aggregate intrinsic value of the DHC options so adjusted (based on average stock prices over the 5 trading days immediately prior to consummation of the Discovery Transaction). Outstanding DHC options held by Mr. Bennett will be converted into (i) options to purchase shares of New Discovery common stock and (ii) options to purchase shares of our common stock, in a manner so that the aggregate intrinsic value of the New Discovery options resulting from such adjustment, plus the aggregate intrinsic value of the options to purchase our common stock resulting from such adjustment (in each case based on average stock prices over the first 10 trading days following the Discovery Transaction) equals the aggregate intrinsic value of the DHC options so adjusted (based on average stock prices over the 5 trading days immediately prior to the Discovery Transaction).

 

By way of illustration, the chart below shows, for each outstanding option to acquire shares of DHC Series A common stock or DHC Series B common stock held by Mr. Bennett, the aggregate number of shares of our Series A common stock and our Series B common stock, as applicable, subject to the converted options to purchase shares of our common stock and the exercise price for each such converted option. For purposes of the illustration, and in lieu of a volume weighted average price of the applicable common stock, we used the closing prices of DHC Series A and DHC Series B common stock as of September 16, 2008 (which were $19.38 and $20.50, respectively), as applicable, and assumed hypothetical post-closing trading prices for our Series A and Series B common stock. Because the value of our Series A and Series B common stock and the value of the DHC Series A and Series B common stock are likely to differ from the prices used in this example, the number of shares subject to, and the exercise price for, each converted option will probably be different.

 

 

 

The options to purchase stock of our company issued to Mr. Bennett in such adjustment shall be the responsibility of our company following the spin-off. All options to purchase stock of New Discovery issued in such adjustments shall be the responsibility of New Discovery following the spin-off and consummation of the Discovery Transaction.

 

Subject to the limitations and qualifications described herein, the following discussion constitutes the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, as to the material U.S. federal income tax consequences to DHC stockholders resulting from the spin-off. This discussion is based upon the Code, existing and proposed Treasury regulations promulgated thereunder and current administrative rulings and court decisions, all as in effect as of the date of this information statement, and all of which are subject to change, possibly with retroactive effect. This discussion is limited to DHC stockholders that are U.S. holders, as defined below, that hold their shares of DHC stock as a capital asset within the meaning of Section 1221 of the Code. Further, this discussion does not address all U.S. federal income tax considerations that may be relevant to particular stockholders in light of their particular circumstances, such as tax-exempt entities, partnerships (including entities treated as partnerships for U.S. federal income tax purposes), holders who acquired their shares of DHC stock pursuant to the exercise of employee stock options or otherwise as compensation, financial institutions, insurance companies, dealers or traders in securities, holders who are subject to alternative minimum tax, and holders who hold their shares of DHC stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes. In addition, the following discussion does not address the tax consequences of the spin-off under U.S. state or local or non-U.S. tax laws. Accordingly, DHC stockholders are encouraged to consult their tax advisors concerning the U.S. federal, state and local and non-U.S. tax consequences to them of the spin-off.

 

For purposes of this discussion, a U.S. holder is a beneficial owner of DHC stock that is, for U.S. federal income tax purposes:

 

 

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds shares of DHC stock, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships holding shares of DHC stock are encouraged to consult their tax advisors regarding the tax consequences of the spin-off.

 

Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to DHC, is of the opinion that for U.S. federal income tax purposes:

 

 

 

The conclusions in the tax opinion set forth above are based on existing legal authority and the lack of any authority directly on point. The tax opinion also is based on, among other things, assumptions and representations as to factual matters (including the consummation of the sale of 100% of the ownership interests in AccentHealth prior to the spin-off) and certain undertakings that have been received from our company, DHC and certain DHC stockholders, including those contained in certificates of officers of our company and DHC and certain DHC stockholders, as requested by counsel. If any of those factual representations or assumptions were to be incorrect or untrue in any material respect, any undertaking was not complied with, or the facts upon which the opinion is based were to be materially different from the facts at the time of the spin-off, the spin-off may not qualify for tax-free treatment. DHC has not sought and does not intend to seek a ruling from the IRS as to the U.S. federal income tax treatment of the spin-off. The tax opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS will not challenge the qualification of the spin-off as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes or that any such challenge would not prevail.

 

Treasury regulations require certain “significant” DHC stockholders (who immediately before the effective date of the spin-off own 5% or more, by vote or value, of the total outstanding DHC stock) that receive shares of our common stock pursuant to the spin-off to attach to their U.S. federal income tax returns for the year in which the stock is received a detailed statement setting forth such data as may be appropriate to demonstrate the applicability of Section 355 of the Code to the distribution. Within a reasonable period of time after the spin-off, DHC will provide the information necessary to comply with this requirement.

 

At the effective time of the spin-off, DHC received a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP to the effect that, taking into account, among other things, the issuance of convertible preferred stock to Advance/Newhouse and the governance rights associated with such convertible preferred stock, the spin-off should qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes. Receipt of such opinion was a condition to closing of the Discovery Transaction, and such opinion confirmed the conclusions set forth in the opinion of Skadden, Arps, Slate, Meagher & Flom LLP above.

 

An opinion of counsel represents counsel’s best legal judgment and is not binding on the IRS or any court. If the IRS were to assert successfully that the spin-off was taxable, the above consequences would not apply and both DHC and its stockholders that received shares of our common stock in the spin-off could be subject to tax, as described below. In addition, future events that may or may not be within DHC’s or our control, including extraordinary purchases of DHC stock or our stock, could cause the spin-off not to qualify as tax free to DHC and/or DHC stockholders. Depending on the circumstances, we may be required to indemnify DHC for some or all of the taxes and losses resulting from the spin-off not qualifying as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes.

 

If the spin-off did not qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes, then DHC would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by DHC immediately prior to the spin-off over DHC’s tax basis in such shares. In addition, a DHC stockholder that received shares of our common stock in the spin-off would be treated as having received a distribution of property in an amount equal to the fair market value of such shares (including any fractional shares for which cash is received). That distribution would be taxable to such stockholder as a dividend to the extent of DHC’s current and accumulated earnings and profits. Any amount that exceeded DHC’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DHC stock with any remaining amount being taxed as a capital gain. Certain stockholders may be subject to additional special rules governing distributions, such as those that relate to the dividends received deduction and extraordinary dividends.

 

Even if the spin-off otherwise qualifies for tax-free treatment to the DHC stockholders, it may be disqualified as tax-free to DHC under Section 355(e) of the Code if 50% or more of either the total combined voting power or the total fair market value of our stock or the stock of DHC is acquired as part of a plan or series of related transactions that includes the spin-off. Any acquisitions of our stock or DHC stock after the spin-off are generally part of such a plan only if there was an agreement, understanding, arrangement or substantial negotiations regarding the acquisition or a similar acquisition at some time during the two-year period ending on the date of the spin-off. All of the facts and circumstances must be considered to determine whether the spin-off and any acquisition of stock are part of such a plan, and certain acquisitions of stock pursuant to public sales are exempted by applicable Treasury regulations. In this regard, while the issuance of convertible preferred stock to Advance/Newhouse in the Discovery Transaction should generally be treated as part of a plan or series of related transactions that includes the spin-off, such issuance by itself, taking into account the governance rights associated with such convertible preferred stock, should not result in DHC recognizing gain in connection with the spin-off. If Section 355(e) of the Code applies as a result of such an acquisition of our stock or DHC stock, DHC would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by DHC immediately prior to the spin-off over DHC’s tax basis in such shares, but the spin-off would nevertheless generally be tax-free to each DHC stockholder that received shares of our common stock in the spin-off.

 

Under the tax sharing agreement between DHC and our company, we will be responsible for all taxes attributable to us or one of our subsidiaries, whether accruing before, on or after the spin-off (other than any such taxes for which DHC is responsible under the tax sharing agreement). We have also agreed to be responsible for and to indemnify DHC with respect to (i) all taxes attributable to DHC or any of its subsidiaries (other than Discovery) for any tax period that ends on or before the date of the spin-off (and for any tax period that begins on or before and ends after the date of the spin-off, for the portion of that period on or before the date of the spin-off), other than such taxes arising as a result of the spin-off and related internal restructuring of DHC and (ii) all taxes arising as a result of the spin-off or the internal restructuring of DHC to the extent such taxes are not the responsibility of DHC under the

tax sharing agreement. This means that we will bear the liability for any taxes arising as a result of the spin-off failing to qualify as a transaction under Sections 368(a) and 355 of the Code for U.S. federal income tax purposes (which could result, for example, from a merger or other transaction involving an acquisition of our stock) unless such tax liability arises as a result of any breach on or after the date of the spin-off of any representation, warranty, covenant or other obligation of DHC or of a subsidiary or shareholder of DHC made in connection with the issuance of the tax opinion relating to the spin-off or in the tax sharing agreement, in which case DHC would bear the liability for such taxes under the terms of the tax sharing agreement. See “Certain Inter-Company Agreements — Agreements with DHC — Tax Sharing Agreement” for a more detailed discussion of the tax sharing agreement between DHC and our company.

 

For U.S. federal income tax purposes, the distribution of the rights that will be attached to our common stock pursuant to the shareholders rights plan will not be taxable to us, and the receipt in the spin-off of such rights will not be taxable to the DHC stockholders. Depending upon the circumstances, holders of the rights could recognize taxable income or gain on or after the date that the rights become exercisable or in the event that the rights are redeemed by us. See “Description of Our Capital Stock — Shareholder Rights Plan.”

 

As noted above, this discussion does not address any tax consequences of the spin-off other than the material U.S. federal income tax consequences set forth above. DHC stockholders are encouraged to consult their tax advisors concerning all possible state tax consequences to them of the spin-off.

 

Immediately following the spin-off, we expect to have outstanding approximately 13,402,982 shares of our Series A common stock and approximately 659,912 shares of our Series B common stock, based upon the number of shares of DHC Series A common stock and DHC Series B common stock outstanding on June 30, 2008. The actual number of shares of our Series A common stock and Series B common stock to be distributed in the spin-off will depend upon the actual number of shares of DHC Series A common stock and DHC Series B common stock outstanding on the record date, as well as the effects of rounding.

 

Immediately following the spin-off, we expect to have approximately 3,000 holders of record of our Series A common stock and 140 holders of record of our Series B common stock, based upon the number of record holders of such series of DHC common stock on June 30, 2008 (which amount does not include the number of shareholders whose shares are held of record by banks, brokerage houses or other institutions, but includes each such institution as one shareholder).

 

Prior to the effective time of the spin-off, we were a wholly owned subsidiary of DHC. Accordingly, there is currently no public market for our common stock. We have applied to list our shares of Series A common stock on the Nasdaq Global Market under the symbol “ASCMA” and we expect that our Series B common stock will trade on the OTC Bulletin Board under the symbol “ASCMB.”.

 

Neither we nor DHC can assure you as to the trading price of either series of our common stock after the spin-off or as to whether the combined trading prices of a series of our common stock and the same series of DHC’s common stock after the spin-off will be less than, equal to or greater than the trading prices of that series of DHC’s common stock prior to the spin-off. See “Risk Factors — Factors Relating to Our Common Stock and the Securities Market.”

 

The shares of our common stock distributed to DHC’s shareholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the spin-off include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. This may include some or all of our executive officers and directors. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an

effective registration statement under the Securities Act of 1933, as amended, or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Section 4(2) of the Securities Act or Rule 144 thereunder. Our affiliates will not be permitted to sell shares of our common stock under Rule 144 until 90 days after the date on which the registration statement of which this information statement forms a part becomes effective.

 

Prior to the record date, shares of either series of DHC common stock traded on the Nasdaq Global Select Market in the regular way market with an entitlement to receive shares of the same series of our common stock distributable in the spin-off. Therefore, if you owned shares of either series of DHC common stock and sold those shares prior to the record date, you also sold the shares of our common stock that would have been distributed to you in the spin-off with respect to the shares of DHC common stock you sold. On the first trading day following the record date, shares of Series A common stock, Series B common stock and Series C common stock of New Discovery (as the successor to DHC) will begin trading regular way and without any entitlement to receive shares of our common stock. Shares of DHC Series A common stock and DHC Series B common stock trade under the symbols “DISCA” and “DISCB,” respectively. Shares of New Discovery Series A common stock, Series B common stock and Series C common stock are expected to trade under the symbols “DISCA,” “DISCB” and “DISCK,” respectively. However, for a limited time following the record date, shares of New Discovery Series A common stock and Series B common stock are expected to trade under temporary symbols “DISAD” and “DISBD,” respectively.

 

We expect that “when-issued” trading in our Series A common stock will commence on or following the record date under the symbol “ASCMV” and that “regular-way” trading in our Series A common stock and Series B common stock will begin on the first trading day following the share distribution date. As of the date hereof, there are no plans for our Series B common stock to trade on a when-issued basis; however, a when-issued trading market in our Series B common stock may commence prior to the share distribution date. Our Series A common stock is expected to be listed for trading on the Nasdaq Global Market. The when-issued trading market, if any, is a market for the shares of our common stock that will be distributed in the spin-off. If you own shares of either series of DHC common stock on the record date, then you are entitled to a number of shares of the same series of our common stock based upon the number of shares of such series of DHC common stock you held at that time. If a when-issued trading market develops, you may trade this entitlement to receive shares of our common stock, without the shares of DHC common stock you own, on the when-issued trading market. We expect any when-issued trades of our common stock to settle within two trading days after the share distribution date. On the first trading day following the share distribution date, any when-issued trading with respect to our common stock will end and regular way trading will begin. Following the share distribution date, shares of our Series A common stock are expected to be listed under the trading symbol “ASCMA” and shares of our Series B common stock are expected to trade on the OTC Bulletin Board under the symbol “ASCMB”. If the spin-off does not occur, any when-issued trading will be null and void.

 

This information statement is being furnished solely to provide information to DHC shareholders who will receive shares of our common stock in the spin-off. It is not and is not to be construed as an inducement or encouragement to buy or sell any of our securities or any securities of DHC. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and neither our company nor DHC undertakes any obligation to update the information except in the normal course of our respective public disclosure obligations and practices.

 

The following table sets forth (i) our historical capitalization as of June 30, 2008, and (ii) our adjusted capitalization assuming the spin-off was effective on June 30, 2008. The table should be read in conjunction with our historical combined financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

 

 

 

Notes:

 

 

 

The following tables present selected combined financial statement information of Ascent Media Group (“AMG”), which includes Ascent Media Group, LLC, Ascent Media CANS, LLC and cash and investment assets of DHC, collectively referred to as the “Spinco Entities” in the Reorganization Agreement filed as Exhibit 2.1 to the Form 10 registration statement of which this information statement is a part. The selected historical information relating to AMG’s combined financial condition and results of operations is presented for the six months ended June 30, 2008 and 2007 and for each of the years in the five-year period ended December 31, 2007. The financial data for the three years ended December 31, 2007 has been derived from AMG’s audited combined financial statements for the respective periods. Data for the other periods presented has been derived from unaudited information. The data should be read in conjunction with AMG’s combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.