<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
ON
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
FOR THE FISCAL YEAR ENDED: COMMISSION FILE NUMBER:
DECEMBER 31, 1995 0-27192
</TABLE>
------------------------
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1930707
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
ONE TABOR CENTER
1200 SEVENTEENTH STREET, SUITE 1000
DENVER, COLORADO 80202
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (303) 572-0381
------------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- ------------------------------------ ---------------------------------------
<S> <C>
Common Stock, par value $.01 NASDAQ National Market
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None.
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ____ No _X_
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of the
Registrant was $85.3 million based on a price of $14 7/8 per share, which was
the average of the bid and asked prices of such stock on March 1, 1996, as
reported on the NASDAQ National Market reporting system.
29,752,000 shares of Common Stock were outstanding on March 25, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
ROBERT M. KAVNER, 52, is a principal in Kavner & Associates, a consulting
firm for media and communications companies. From June 1994 through September
1995, Mr. Kavner was an Executive Vice President of Creative Artists Agency,
Inc. Prior to joining Creative Artists Agency, Mr. Kavner was Executive Vice
President of AT&T Corp. ("AT&T") and Chief Executive Officer of AT&T's
Multimedia Products and Services Group. He was also a member of AT&T's
Management Executive Committee. From 1992 to 1994, Mr. Kavner was Group
Executive for Communications Products Group of AT&T. From 1988 to 1991, Mr.
Kavner was President of AT&T's Data Systems Group. Mr. Kavner is also a director
of The Fleet Financial Corp.
C. J. SILAS, 63, is a director of various business organizations. He was
Chairman and Chief Executive Officer of Phillips Petroleum Company, an
integrated petroleum and chemical company, from May 1985 to April 1994. He also
is a director of COMSAT Corporation, The Reader's Digest Association, Inc. and
Halliburton Company.
CLASS I DIRECTORS
TERM CONTINUES UNTIL THE 1998 ANNUAL MEETING
EDWIN I. COLODNY, 69, has been counsel to the Washington, D.C., law firm of
Paul, Hastings, Janofsky and Walker since September 1991. He was Chairman of
USAir Group, Inc. and of its subsidiary, USAir, Inc., a commercial airline
company, from 1978 until July 1992 and remains a director of both corporations.
He was Chief Executive Officer of USAir Group from 1983 to June 1991 and of its
subsidiary from 1975 to June 1991. He also is a director of COMSAT Corporation,
Lockheed Martin Corporation and Esterline Technologies Corporation and a member
of the Board of Trustees of the University of Rochester.
BRUCE L. CROCKETT, 52, has been President and Chief Executive Officer and a
director of COMSAT since February 1992. He was President and Chief Operating
Officer of COMSAT from April 1991 to February 1992. He has been an employee of
COMSAT since 1980 and has held various operational and financial positions. He
also is a director of ACE Limited and Augat, Inc. and a director or trustee of
funds of the AIM Management Group, Inc. He also is a member of the Board of
Trustees of the University of Rochester.
CHARLES LYONS, 41, has been President, Chief Executive Officer and a
director of Ascent Entertainment Group, Inc. since October 1995, and prior to
that he was President and a director of Ascent's predecessors since February
1992. He was Vice President and General Manager, COMSAT Video Enterprises, now
Ascent Network Services, Inc., from October 1990 to January 1992. Prior to
joining COMSAT, Mr. Lyons was with Marriott Corporation from 1982 to October
1990 in various executive positions.
CLASS II DIRECTORS
TERM CONTINUES UNTIL THE 1997 ANNUAL MEETING
CHARLES M. NEINAS, 64, has been Executive Director of the College Football
Association since April 1, 1980 and prior to that time was commissioner of the
Big Eight Conference. He also serves as consultant to intercollegiate
conferences and other athletic associations, primarily in the area of television
programming and negotiations and organization. Mr. Neinas was chairman of the
Olympic Basketball Committee from 1976 to 1980, served on the United States
Olympic Committee Board of Directors from 1963 to 1972 and was a member of the
Board of Directors of the National Association of Collegiate Directors of
Athletics from 1990 to 1993.
1
<PAGE>
ROBERT G. SCHWARTZ, 68, is a director or trustee of various business
organizations. He was Chairman of the Board, President and Chief Executive
Officer of Metropolitan Life Insurance Co. (MetLife) from September 1989 to
March 1993 and remains a director of MetLife. He was Chairman of the Board of
MetLife from February 1983 to September 1989. He also is a trustee of
Consolidated Edison Company of New York, Inc. and a director of COMSAT
Corporation, Lone Star Industries, Inc., Lowe's Companies, Inc., Mobil Oil
Corporation, Potlatch Corporation, The Reader's Digest Association, Inc. and CS
First Boston, Inc.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages at March 15, 1996 and titles
of the executive officers of the Company, and biographical information with
respect to such officers.
<TABLE>
<S> <C> <C>
Charles Lyons 41 President and Chief Executive Officer
Robert Snyder 59 President and Chief Executive Officer, On Command Video
Corporation
Arthur M. Aaron 38 Vice President, Business and Legal Affairs and Secretary
Wesley D. Minami 39 Vice President, Chief Financial Officer and Treasurer
Steven E. Story 51 Vice President and General Manager, Live Entertainment
</TABLE>
Mr. Lyons has been President and a director of the Company since February
1992. He was Vice President and General Manager of the Company from October 1990
to January 1992. Prior to joining COMSAT, Mr. Lyons was with Marriott
Corporation from 1982 to October 1990 in various executive positions.
Mr. Snyder has been President of OCV since 1987 and Chief Executive Officer
of OCV since July 1995.
Mr. Aaron has been Vice President, Business and Legal Affairs of the Company
since April 1995. Prior thereto, he was a General Attorney in the Office of the
General Counsel of COMSAT since July 1993. From October 1987 to July 1993, Mr.
Aaron was an attorney at the law firm of Skadden, Arps, Slate, Meagher & Flom in
Boston, Massachusetts.
Mr. Minami has been Vice President and Chief Financial Officer and Treasurer
of the Company since October 1995. Prior thereto, he was Vice President,
Business Development of the Company since April 1995 and Treasurer of COMSAT
from May 1993 to November 1995. Prior to joining COMSAT, Mr. Minami was with
Oxford Realty Services Corp., a privately held investment/property management
company, serving as Senior Vice President, Finance and Administration and Chief
Financial Officer from December 1989 to April 1993.
Mr. Story has been Vice President and General Manager, Live Entertainment of
the Company since October 1995. From April 1993 to September 1995, Mr. Story
served as the Company's Vice President, Finance and Administration. Prior
thereto, Mr. Story was self-employed as a financial, real estate and business
consultant from February 1988 to March 1993.
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is composed of independent outside
directors, two of whom are also directors of COMSAT, is responsible for
establishing and administering the Company's
2
<PAGE>
executive compensation philosophy. Set forth below is the Committee's report on
the 1995 compensation of the executive officers of the Company, including Mr.
Lyons, the Chief Executive Officer, and the other four most highly compensated
executive officers of the Company (the Named Executive Officers).
ANNUAL COMPENSATION
Each of the Named Executive Officer's annual compensation for 1995 was based
on COMSAT's executive compensation philosophy which emphasizes risk based
performance incentives as a key component of both annual and long term
compensation. Early in 1995, COMSAT's Committee on Compensation and Management
Development (the "COMSAT Compensation Committee") approved a compensation
package for Mr. Lyons which covered his compensation arrangement as President of
COMSAT's wholly-owned entertainment subsidiary, COMSAT Entertainment Group
("CEG"). However, when it became apparent that the initial public offering of
Ascent's Common Stock on December 18, 1995 (the "Offering") would occur, an
employment agreement was deemed appropriate (which is described under the
caption "Executive Compensation -- Employment Agreements") which changed Mr.
Lyons' compensation package. During 1995, Mr. Lyons' annual base salary rate as
President of CEG was $350,000 and his annual base salary rate subsequent to the
Offering as President and CEO of Ascent, pursuant to his employment agreement,
is $500,000. An outside consultant specializing in the entertainment and media
industry provided the Committee with an analysis of competitive compensation
levels for Mr. Lyons in both capacities; as President of CEG, a wholly-owned
subsidiary of COMSAT and as President and CEO of Ascent, a publicly traded
company after the Offering. The Committee and the Ascent Board of Directors used
this information as the basis for determining Mr. Lyons compensation under his
new employment agreement.
The other Named Executive Officers annual base salary rates were consistent
with competitive salary ranges developed by COMSAT for its positions. These
salary ranges are based on market data for companies of comparable revenue in
the telecommunications and entertainment industries.
The bonus opportunities for the Named Executive Officers for 1995 were based
on target award percentages of base salary for each position determined by the
Committee. Mr. Lyons bonus was based on three factors: the achievement of one or
more financial measures as compared to planned performance for COMSAT, the
achievement of one or more financial measures as compared to planned performance
for CEG, and Mr. Lyons individual performance. Under Mr. Lyons' leadership in
1995, Ascent successfully completed the initial public offering of almost 20% of
Ascent's Common Stock for approximately $85 million; completed the transition to
On Command Video Corporation's on-demand video services from the scheduled
satellite delivered video previously provided by the Company's Satellite Cinema
division; and acquired a National Hockey League franchise from the Quebec
Nordiques and relocated the franchise to Denver, Colorado where it is currently
playing as the Colorado Avalanche and provides a complementary asset to the
Company's Denver Nuggets National Basketball Association franchise. The
Committee considered these significant strategic accomplishments, as well as
COMSAT and CEG's financial performance in 1995 which fell short of the
objectives set for the year, and recommended a bonus award of $150,000 for Mr.
Lyons for 1995. The Board approved the Committee's recommendation.
Bonuses for Mr. Aaron, Mr. Minami and Mr. Story were based on the
achievement of one or more financial measures as compared to planned performance
for CEG, as well as Mr. Lyons' evaluation of each individual executive officer's
achievement of his performance objectives for the year. The Committee reviewed
and approved Mr. Lyons' bonus recommendations for each of the Named Executive
Officers. Mr. Snyder's bonus was approved by the OCV Board of Directors based on
the achievement of several financial measures as compared to planned performance
for OCV, as well as Mr. Lyons' evaluation of his individual performance.
3
<PAGE>
LONG TERM COMPENSATION
Each of the Named Executive Officers received long term stock awards from
COMSAT Corporation in January 1995. COMSAT's long term compensation strategy
includes a blend of stock compensation. For 1995, awards by the COMSAT
Compensation Committee consisted of non-qualified stock options, restricted
stock awards (RSAs), restricted stock units (RSUs) and phantom stock units
(PSUs). The amount and type of award that each Named Executive Officer was
eligible to receive was based on guidelines developed by an independent
consulting firm which benchmarked competitive long term compensation for
comparable positions in telecommunications and entertainment companies similar
in revenue with COMSAT. Mr. Crockett, as President and CEO of COMSAT,
recommended long term awards for Mr. Lyons based on these guidelines, as well as
his evaluation of Mr. Lyons performance for 1994. The COMSAT Compensation
Committee accepted his recommendations. Long term awards for the other Named
Executive Officers were made by the COMSAT senior executives to whom the
individuals reported in 1994 based on the guidelines for the position each
individual held at that time and each individual's performance. These
recommendations were reviewed by Mr. Crockett and approved by the COMSAT
Compensation Committee.
Based on the foregoing, in January 1995, Mr. Lyons was awarded 55,000
non-qualified stock options to purchase COMSAT Common Stock granted at fair
market value. Stock option awards for the other Named Executive Officers ranged
from 1,500 options to 25,000 options. RSAs are restricted shares of COMSAT stock
which are granted to executive officers and selected key employees as a
retention device based on a vesting schedule established by the COMSAT
Compensation Committee for each grant. The vesting of RSAs is subject to both a
length of service requirement and the achievement of objective performance-based
criteria which have been approved by the COMSAT Compensation Committee. The
percent of the award earned is based on the level of achievement of the
performance objectives over the performance period established by the COMSAT
Compensation Committee. The RSAs earned then become subject to vesting over an
additional 1, 2 and 3 years at the rate of 20%, 40%, and 40% respectively. In
January 1995, Mr. Lyons received 7,500 RSAs, Mr. Story received 5,000 RSAs and
Mr. Minami received 1,000 RSAs. The performance-based criteria applicable to
RSAs are intended to ensure the Federal tax deductibility under Section 162(m)
of the Internal Revenue Code of compensation paid to COMSAT's executive officers
pursuant to RSAs.
RSUs are equivalent in value to shares of COMSAT stock and are granted to
selected key employees as a retention device based on a vesting schedule
established by the COMSAT Compensation Committee. RSUs granted in 1995 vest
after 3 years and are payable 60% in COMSAT stock and 40% in cash in an amount
equal to the aggregate fair market value of COMSAT stock on the date of vesting.
In January 1995, Mr. Aaron received 1,000 RSUs.
PSUs are equivalent in value to shares of COMSAT stock and vest at the end
of a period of years determined by the Committee. In January 1995, the COMSAT
Compensation Committee awarded Mr. Lyons 1,590 PSUs in lieu of $25,000 of the
cash bonus that otherwise would have been paid to him for 1994 under the Annual
Incentive Plan. These PSUs vest after 3 years. In keeping with COMSAT's
executive compensation philosophy, the PSUs serve as a retention device and also
put more of Mr. Lyons total compensation at risk since the amount ultimately
realized is dependent on COMSAT's stock price at the end of the 3-year vesting
period.
Mr. Lyons was also awarded additional compensation to position his total
compensation package competitively with the compensation of comparable positions
in entertainment and media companies. Mr. Lyons received 10,000 PSUs in February
1995 which have the same valuation and vesting features discussed above. Mr.
Lyons was also awarded $249,576 by COMSAT for his services to CEG in 1995 prior
to entering into his employment agreement with CEG. This amount was based on
CEG's financial performance for 1995 and has been credited to a deferred
compensation account that will earn interest annually and be paid to Mr. Lyons
at the end of five years if he remains employed for the full five year term.
4
<PAGE>
Mr. Lyons and each of the other Named Executive Officers were awarded
non-qualified Ascent stock options immediately prior to the consummation of the
Offering at an exercise price equal to the initial public offering price. The
Committee wanted to establish an immediate and significant link between senior
management's compensation and the interests of Ascent's stockholders. The size
of the stock awards and the vesting schedule are based on the practices of other
companies engaging in initial public offerings. Mr. Lyons was awarded 297,500
options, equal to 1% of the Ascent Common Stock outstanding immediately
following the Offering. Mr. Aaron, Mr. Minami and Mr. Snyder were awarded
100,000 options and Mr. Story was awarded 50,000 options. The options vest 10%
after one year, an additional 15% after two years and an additional 25% each
year thereafter until fully vested, provided that so long as COMSAT owns at
least 80% of the Common Stock, the option will not be exercisable until the
third anniversary of the grant. The options will expire 10 years after grant.
COMPENSATION COMMITTEE
Edwin I. Colodny, Chairman
Robert M. Kavner
Charles M. Neinas
C. J. Silas
EXECUTIVE COMPENSATION
The following table shows the compensation received by the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company (the Named Executive Officers) for the three fiscal years ended December
31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -------------------------
------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($)(2) ($)(3) (#)(3) ($)(4)
- -------------------------- --------- --------- --------- --------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles Lyons, 1995 $ 328,461 $ 150,000 $ 1,886 $ 382,113 297,500* $ 303,275
President and Chief 55,000**
Executive Officer 1994 210,000 190,000 992 562,788 80,000** 38,803
1993 200,000 180,000 4,340 552,079 80,000** 32,136
Arthur M. Aaron (1) 1995 122,400 30,000 2,690 19,688 100,000* 20,084
Vice President, Business 1,500**
and Legal Affairs 1994 83,882 15,000 -0- 27,500 700** 11,699
1993 38,308 7,500 -0- 13,125 -0- 5,639
Wesley D. Minami (1) 1995 150,000 30,000 -0- 19,688 100,000* 30,574
Vice President, Chief 6,000**
Financial Officer and 1994 150,000 37,300 -0- 89,550 5,000** 12,714
Treasurer 1993 100,962 20,000 -0- 45,094 6,000** 15,597
Robert Snyder 1995 285,779 150,000 -0- -0- 100,000* 4,620
President and Chief 5,000**
Executive Officer, OCV 1994 199,273 100,000 -0- 137,500 10,000** 4,620
1993 168,840 50,000 -0- 508,126 -0- -0-
Steven E. Story (1) 1995 132,001 30,000 -0- 98,438 50,000* 8,134
Vice President and 25,000**
General Manager, Live 1994 120,923 47,500 -0- 143,413 5,000** 6,077
Entertainment 1993 87,231 20,000 2,969 -0- 5,000** 17,573
</TABLE>
- ------------------------------
(1) Mr. Aaron became a COMSAT employee in July 1993, Mr. Minami became an
executive officer of COMSAT in May 1993, and Mr. Story became an officer of
Ascent in April 1993. Their respective compensation for 1993 reflects
amounts paid after those respective dates.
5
<PAGE>
(2) Other Annual Compensation shown for 1993, 1994 and 1995 does not include
perquisites and other personal benefits because the aggregate amount of such
compensation does not exceed the lesser of (i) $50,000 or (ii) 10 percent of
individual combined salary and bonus for the Named Executive Officer in each
year. Other Annual Compensation for Mr. Aaron in 1995 and for Mr. Story in
1993 consists of amounts reimbursed for the payment of taxes on moving
expense reimbursements.
(3) Restricted stock awards include COMSAT restricted stock awards (RSAs),
COMSAT restricted stock units (RSUs) and COMSAT phantom stock units (PSUs).
Dividends are paid on RSAs granted in 1993 and 1995. For performance-based
RSAs granted in 1994, dividend equivalents are paid with respect to the
performance period, and dividends will be paid during the subsequent vesting
period on shares earned under the applicable performance measures. Half of
the RSAs granted to Named Executive Officers in 1994 will be forfeited in
1996 based on the non-satisfaction of certain required performance measures
during 1994 and 1995. Dividend equivalents are paid on RSUs and PSUs. The
number and value of the aggregate restricted stock holdings of each of the
Named Executive Officers as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
VALUE AS
NUMBER OF OF
RSAS/RSUS/PSUS 12/31/95
----------------- ----------
<S> <C> <C>
Mr. Lyons.................................................. 76,285 $1,454,183
Mr. Aaron.................................................. 2,400 45,750
Mr. Minami................................................. 5,845 111,420
Mr. Snyder................................................. 25,000 476,563
Mr. Story.................................................. 10,215 194,723
</TABLE>
All options marked with a single asterisk (*) are options to purchase Ascent
Common Stock, and options marked with a double asterisk (**) are options to
purchase COMSAT Common Stock.
(4) All Other Compensation for 1995 includes the following elements: (i) unused
credits under the Company's cafeteria plan that were paid in cash to the
Named Executive Officers; (ii) time off buy-back under the Company's
cafeteria plan that was paid in cash to the Named Executive Officers; (iii)
supplemental bonuses; (iv) contributions by the Company to COMSAT's 401(k)
Plan on behalf of the Named Executive Officers; (v) above-market interest
accrued for the Named Executive Officers under COMSAT's Deferred
Compensation Plan; and (vi) life insurance premiums for the Named Executive
Officers. The life insurance premiums shown for the Named Executive Officers
represent split dollar premiums which include (i) the value of the premiums
paid by the Company with respect to the term life insurance portion of the
policy for each Named Executive Officer, determined under the P.S. 58 table
published by the Internal Revenue Service, and (ii) the value of the benefit
to each Named Executive Officer of the remainder of the premiums paid by the
Company, determined by calculating the present value of the cumulative
interest payments that would be made based on the assumption that the
premiums were loaned to each Named Executive Officer at an interest rate of
7.5% until the Named Executive Officer reaches the normal retirement age of
65, at which time the policy splits and the premiums are refunded to the
Company. All Other Compensation for Mr. Lyons also includes $249,576 of
additional compensation awarded to him by COMSAT in connection with his
services during 1995 as President of CEG prior to commencement of his
employment agreement with Ascent in December 1995, which is described under
the caption "Executive Compensation -- Employment Agreements." This amount,
which was determined on the basis of CEG's financial performance for 1995,
has been credited to a deferred compensation account that will earn interest
annually and be paid to Mr. Lyons at the end of his employment agreement if
he remains employed for the full five-year term. All Other Compensation for
Mr. Aaron and Mr. Story includes $64 and $478, respectively, in dividend
matching payments, and for Mr. Aaron also includes $3,617 for moving
expenses.
<TABLE>
<CAPTION>
ABOVE- LIFE
UNUSED TIME OFF SUPPLEMENTAL 401(K) PLAN MARKET INSURANCE
CREDITS BUY-BACK BONUSES CONTRIBUTIONS INTEREST PREMIUMS
--------- ----------- ------------ --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Lyons.............. $ 12,341 $ 7,030 $ 249,576 $ 5,700 $ 13,058 $ 15,570
Mr. Aaron.............. 0 1,800 10,000 4,604 0 0
Mr. Minami............. 1,645 2,850 20,000 5,199 960 0
Mr. Snyder............. 0 0 0 0 0 0
Mr. Story.............. 0 2,640 0 5,016 0 0
</TABLE>
6
<PAGE>
OPTION GRANTS
The following table sets forth information on options granted to the Named
Executive Officers in 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED EXERCISE GRANT DATE
GRANTED TO EMPL PRICE EXPIRATION PRESENT
NAME (#)(1) IN FY (2) ($/SH) DATE VALUE (3)
- --------------------------------------------------- ----------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ASCENT COMMON STOCK
Charles Lyons...................................... 297,500 32.23% $ 15.0000 12/18/05 $ 2,115,225
Arthur M. Aaron.................................... 100,000 10.83 15.0000 12/18/05 711,000
Wesley D. Minami................................... 100,000 10.83 15.0000 12/18/05 711,000
Robert Snyder...................................... 100,000 10.83 15.0000 12/18/05 711,000
Steven E. Story.................................... 50,000 5.42 15.0000 12/18/05 355,500
COMSAT COMMON STOCK
Charles Lyons...................................... 55,000 6.27% $ 19.3125 01/20/05 $ 293,700
Arthur M. Aaron.................................... 1,500 0.17 19.3125 01/20/05 8,010
Wesley D. Minami................................... 6,000 0.68 19.3125 01/20/05 32,040
Robert Snyder...................................... 5,000 0.57 19.3125 01/20/05 26,700
Steven E. Story.................................... 25,000 2.85 19.3125 01/20/05 133,500
</TABLE>
- ------------------------
(1) The Ascent option grants were made effective December 18, 1995 and vest as
follows: 10% on December 18, 1996; 15% on December 18, 1997; 25% on December
18, 1998; another 25% on December 18, 1999; and the remaining 25% on
December 18, 2000; provided that these options will not vest to any extent
prior to December 18, 1998, if COMSAT continues to own at least 80% of
Ascent. The COMSAT options shown were granted on January 20, 1995, to
acquire COMSAT's Common Stock and vest as follows: 25% on January 20, 1996;
another 25% on January 20, 1997; and the remaining 50% on January 20, 1998.
(2) The total number of Ascent options granted to Ascent employees in 1995 was
923,000; the total number of COMSAT options granted to key employees in 1995
was 877,650.
(3) Ascent and COMSAT used the Black-Scholes option pricing model to determine
grant date present values using the following assumptions: a dividend yield
of 0.0% for Ascent and 3.38% for COMSAT; stock price volatility of 0.28; a
10-year option term; a risk-free rate of return of 5.71% for Ascent and
5.84% for COMSAT; a retention discount of 3.0%; and the vesting schedule
described in footnote 1 above for Ascent and COMSAT. The use of this model
is in accordance with SEC rules; however, the actual value of an option
realized will be measured by the difference between the stock price and the
exercise price on the date the option is exercised.
7
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information on (1) options exercised by the
Named Executive Officers in 1995, and (2) the number and value of their
unexercised options as of December 31, 1995.
AGGREGATED OPTION EXERCISES IN 1995, AND 12/31/95 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
UNDERLYING OPTIONS AT 12/31/95 OPTIONS AT 12/31/95
OPTIONS VALUE -------------------------- --------------------------
EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- -------------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASCENT OPTIONS
Charles Lyons......................... -0- -0- -0- 297,500 -0- $ 74,375
Arthur M. Aaron....................... -0- -0- -0- 100,000 -0- 25,000
Wesley D. Minami...................... -0- -0- -0- 100,000 -0- 25,000
Robert Snyder*........................ -0- -0- -0- 100,000 -0- 25,000
Steven E. Story....................... -0- -0- -0- 50,000 -0- 12,500
COMSAT OPTIONS
Charles Lyons......................... -0- -0- 64,000 155,000 $ 52,375 -0-
Arthur M. Aaron....................... -0- -0- 175 2,025 -0- -0-
Wesley D. Minami...................... -0- -0- 4,250 12,750 -0- -0-
Robert Snyder*........................ -0- -0- 2,500 12,500 -0- -0-
Steven E. Story....................... -0- -0- 3,750 31,250 -0- -0-
</TABLE>
- ------------------------
* Mr. Snyder also holds options to purchase 40,000 shares of the Common Stock of
OCV, of which 14,000 were exercisable at December 31, 1995. The value of these
options is not reported because OCV Common Stock is not publicly traded and
the fair market value at December 31, 1995 is not readily determinable.
EMPLOYMENT AGREEMENTS
Ascent and Mr. Lyons have entered into a five-year employment agreement that
became effective upon completion of the Offering on December 18, 1995. Pursuant
to the agreement, Mr. Lyons' base salary is $500,000 per year, subject to
increases at the discretion of Ascent's Board of Directors. Mr. Lyons is also
eligible for an annual bonus based on performance measures determined by
Ascent's Compensation Committee with a target bonus equal to 70% of Mr. Lyons'
base salary. Pursuant to the agreement, Mr. Lyons was granted an option to
purchase 297,500 shares of Ascent's Common Stock, which represented 1% of
Ascent's outstanding stock upon completion of the Offering, at the Offering
price of $15 per share. The option vests 10% after one year, an additional 15%
after two years and an additional 25% each year thereafter until fully vested.
Until the third anniversary of the grant, Mr. Lyons (i) may not exercise the
option so long as COMSAT owns at least 80% of Ascent's common stock and (ii) is
not eligible for any further option grants. Pursuant to the agreement, Mr.
Lyons' participation in COMSAT's executive compensation plans ceased and Mr.
Lyons will participate in benefit plans offered to executives of Ascent.
However, existing COMSAT stock and option awards granted to Mr. Lyons will
continue to vest according to their respective vesting schedules.
If Mr. Lyons' employment is terminated without "cause" (as defined in the
agreement), or if Mr. Lyons elects to terminate his employment as a result of
certain events defined in the agreement which have the effect of a constructive
termination, Mr. Lyons will be entitled, for the remainder of the term of the
agreement as if the agreement had not been terminated, to receive: (i) his then
current base salary; (ii) an annual bonus equal to 70% of his then current base
salary; and (iii) all other benefits provided for pursuant to the agreement;
provided that if Mr. Lyons becomes employed during such period, any compensation
from such employment will offset up to 50% of the amounts owed by Ascent
pursuant to the agreement. In addition, Mr. Lyons' employment agreement provides
that upon a "Change of Control Event", Mr. Lyons will be entitled to elect to
terminate his employment with
8
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Ascent and receive the same benefits described in the preceding sentence. A
"Change of Control Event" is defined as an affirmative determination, either
jointly by Mr. Lyons and the Board of Directors of Ascent or pursuant to an
arbitration which Mr. Lyons has the right to invoke, that any "change of
control" of Ascent (defined as an event as a result of which a person or entity
other than COMSAT owns 50% or more of the voting stock of Ascent) or prospective
change of control would be reasonably likely to have a materially detrimental
effect on either the day-to-day circumstances of Mr. Lyons' employment or the
compensation payable to Mr. Lyons under such agreement.
The Company and Mr. Snyder have entered into an employment agreement that
expires in 1999. Pursuant to the agreement, Mr. Snyder's salary for 1995 is set
by the board of directors of OCV at $225,000, and Mr. Snyder is eligible for
incentive bonus compensation to be established by mutual consent of Mr. Snyder
and the board of directors of OCV. The agreement also provides that, upon
termination of his employment with OCV, Mr. Snyder will provide exclusive
consulting services to OCV for a period of seven years, for which OCV will pay
Mr. Snyder $20,000 per year.
STOCK INCENTIVE PLANS
1995 KEY EMPLOYEE STOCK PLAN
Contemporaneous with the Offering, the Company adopted the 1995 Key Employee
Stock Plan (the "Key Employee Plan"). The Key Employee Plan is intended to
assist the Company in attracting and retaining management employees of
outstanding ability and to promote the identification of their interests with
those of the stockholders of the Company. The Key Employee Plan permits the
grant of non-qualified stock options and incentive stock options to purchase
shares of Common Stock, stock appreciation rights (in connection with option
grants and alone), awards of shares of restricted stock and other stock and
stock-based awards covering up to 1,500,000 authorized but unissued or
reacquired shares of Common Stock, subject to adjustment to reflect events such
as stock dividends, stock splits, recapitalizations, mergers or reorganizations
of or by the Company.
Unless sooner terminated by the Board of Directors, the Key Employee Plan
expires ten years after consummation of the Offering. Such termination will not
affect the validity of any option or other award outstanding under the Key
Employee Plan on the date of termination.
The Key Employee Plan is administered by the Compensation Committee and is
intended to satisfy the requirements of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Subject to the terms and
conditions of the Key Employee Plan, the Compensation Committee has the
authority to select the persons to whom grants are to be made, to designate the
number of shares of Common Stock to be covered by such grants, to determine the
exercise price of options, to establish the period of exercisability of awards,
and to make all other determinations and to take all other actions necessary or
advisable for the administration of the Key Employee Plan.
Without limiting the Compensation Committee's authority to establish another
exercise price, awards granted under the Key Employee Plan will generally be
granted at an exercise price equal to the then fair market value per share of
Common Stock. Grants under the Key Employee Plan may provide, in the Committee's
discretion, for their expiration or acceleration upon a variety of corporate
events as provided in the Key Employee Plan.
The Key Employee Plan may be amended by the Compensation Committee, subject
to stockholder approval if such approval is then required by applicable law or
in order for the Key Employee Plan to continue to satisfy the requirements of
Rule 16b-3 under the Exchange Act or Section 162(m) of the Code.
The Company made grants of non-qualified stock options to purchase Common
Stock ("Options") contemporaneously with the Offering at an exercise price of
$15.00 per share, the offering price per share of Common Stock in the Offering.
These grants are described above under "Executive Compensation -- Option Grants
in Last Fiscal Year."
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<PAGE>
The Key Employee Plan permits the payment of the Option exercise price to be
made in cash or by delivery of shares of Common Stock valued at their fair
market value on the date of exercise, or by a recourse promissory note payable
to the Company, or by a combination of the foregoing.
Options granted under the Key Employee Plan shall not be transferable
otherwise than by will, by the laws of descent and distribution or pursuant to a
qualified domestic relations order (as defined in the Code), and may be
exercised during the optionee's lifetime only by the optionee or, in the event
of the optionee's legal disability, by the optionee's legal representative.
1995 NON-EMPLOYEE DIRECTORS STOCK PLAN
Contemporaneous with the Offering, the Company adopted the 1995 Non-Employee
Directors Stock Plan (the "Directors Plan"). The Directors Plan is intended to
assist the Company in attracting and retaining directors of outstanding ability
and to promote the identification of their interests with those of the
stockholders of the Company. The Directors Plan provides for automatic grants of
options, and stock awards covering up to 110,000 authorized but unissued or
reacquired shares of Common Stock, subject to adjustment to reflect events such
as stock dividends, stock splits, recapitalizations, mergers or reorganizations
of or by the Company.
Unless sooner terminated by the Board of Directors, the Directors Plan will
expire ten years after the consummation of the Offering. Such termination will
not affect the validity of any option or other award outstanding on the date of
termination.
The Directors Plan is administered by the Board of Directors of the Company
and is intended to satisfy the requirements of Rule 16b-3 under the Exchange
Act.
Contemporaneous with the Offering, each director who was not an employee of
the Company or COMSAT then serving or nominated to the Board of Directors was
granted 400 shares of Common Stock and an option to purchase 4,000 shares of
Common Stock at an exercise price of $15.00 per share, the initial public
offering price in the Offering. As of the close of each subsequent annual
stockholder's meeting at which directors are elected, each director then serving
who is not an employee of the Company, its subsidiaries or, so long as COMSAT
owns at least 50% of the Common Stock, COMSAT or COMSAT's subsidiaries, shall be
granted 400 shares of Common Stock and an option to purchase 4,000 shares of
Common Stock. The exercise price of the options shall be the fair market value
of a share of Common Stock on the date of grant. See "Directors' Compensation"
above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock and of the Common Stock of COMSAT
Corporation as of March 1, 1996, by all directors and nominees, by each of the
executive officers named in the Summary Compensation Table on page 9, and by all
directors and executive officers as a group. Under rules of the SEC, beneficial
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<PAGE>
ownership includes any shares over which an individual has sole or shared voting
power or investment power, and also any shares that the individual has the right
to acquire within 60 days through the exercise of any stock option or other
right.
<TABLE>
<CAPTION>
ASCENT SHARES COMSAT SHARES*
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
NAME (1) BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP (2)
- ------------------------------------------------------------------- -------------------- ------------------------
<S> <C> <C>
Arthur M. Aaron.................................................... 1,000 1,254(3)
Edwin I. Colodny................................................... 1,400 11,000
Bruce L. Crockett.................................................. 1,000 470,640(4)
Robert M. Kavner................................................... 7,400 --
Charles Lyons...................................................... 2,500 196,931(5)
Wesley D. Minami................................................... 1,000 13,516(6)
Charles M. Neinas.................................................. 4,400 --
Robert G. Schwartz................................................. 2,400 22,000
C. J. Silas........................................................ 4,400 7,000
Robert Snyder...................................................... 3,100 26,250(7)
Steven E. Story.................................................... -- 23,043(8)
All directors and executive officers as a group (11 persons)....... 28,600 771,634(9)
</TABLE>
- ------------------------
* COMSAT Corporation is the controlling stockholder of the Company.
(1) Unless otherwise indicated, each person has sole voting and investment
powers over the shares listed, and no director or executive officer
beneficially owns more than 1.0% of the Common Stock of the Corporation or
COMSAT Corporation.
(2) Each number in this column has been rounded down to the nearest whole share.
Beneficial ownership of COMSAT Corporation Common Stock includes shares that
may be acquired within 60 days after March 1, 1996, through the exercise of
options as follows: Mr. Aaron, 625 shares; Mr. Colodny, 10,000 shares; Mr.
Crockett, 343,900 shares; Mr. Lyons, 137,750 shares; Mr. Minami, 10,000
shares; Mr. Schwartz, 20,000 shares; Mr. Silas, 6,000 shares; Mr. Snyder,
6,250 shares; Mr. Story, 13,750 shares; and all directors and executive
officers as a group, 548,275 shares.
(3) Includes 478 shares which are held in COMSAT Corporation's Savings and
Profit-Sharing Plan as of December 31, 1995.
(4) Includes 2,400 shares held by Mrs. Crockett with respect to which Mr.
Crockett disclaims beneficial ownership. Also includes 103,500 shares which
are restricted against transfer and 8 shares which are held in COMSAT
Corporation's Savings and Profit-Sharing Plan as of December 31, 1995. Mr.
Crockett beneficially owned 1% of COMSAT Corporation's outstanding Common
Stock as of March 1, 1996.
(5) Includes 56,750 shares which are restricted against transfer and 548 shares
which are held in COMSAT Corporation's Savings and Profit-Sharing Plan as of
December 31, 1995.
(6) Includes 100 shares held by Mr. Minami's son with respect to which Mr.
Minami disclaims beneficial ownership. Also includes 2,500 shares which are
restricted against transfer and 916 shares which are held in COMSAT
Corporation's Savings and Profit-Sharing Plan as of December 31, 1995.
(7) Includes 20,000 shares which are restricted against transfer.
(8) Includes 7,500 shares which are restricted against transfer and 459 shares
which are held in COMSAT Corporation's Savings and Profit-Sharing Plan as of
December 31, 1995.
(9) Includes 2,500 shares with respect to which beneficial ownership is
disclaimed. Also includes an aggregate of 192,661 shares which are
restricted against transfer or which are held in COMSAT Corporation's
Savings and Profit-Sharing Plan as of December 31, 1995. All directors and
executive officers as a group beneficially owned 1.6% of COMSAT
Corporation's outstanding Common Stock as of March 1, 1996.
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<PAGE>
As of March 25, 1996, 29,752,000 shares of Common Stock were outstanding. To
the knowledge of the Company, based upon Schedules 13G or 13D filed with the
Securities and Exchange Commission (the SEC), the following entity was the only
beneficial owner of more than five percent of the Company's Common Stock as of
December 31, 1995.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------------------- ---------------------------------------------- ------------
<S> <C> <C> <C>
COMSAT Corporation Total Shares: 24,000,000 80.7%
6560 Rock Spring Drive Shared Voting Power: 0
Bethesda, Maryland Shared Investment Power: 0
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
RELATIONSHIP WITH COMSAT
COMSAT owns approximately 80.7% of the Company's outstanding Common Stock.
For so long as COMSAT continues to own more than 50% of the outstanding voting
stock of the Company, COMSAT will be able, among other things, to approve any
corporate action requiring majority shareholder approval, including the election
of directors, effect amendments to the Company's Certificate of Incorporation
and Bylaws and approve any other matter submitted to a vote of the stockholders
without the consent of the other stockholders of the Company. In addition,
through its control of the Board of Directors, COMSAT is able to control certain
decisions, including decisions with respect to the Company's dividend policy,
the Company's access to capital (including the decision to incur additional
indebtedness or issue additional shares of Common Stock), mergers or other
business combinations involving the Company, the acquisition or disposition of
assets by the Company and any change in control of the Company.
The Company and COMSAT have entered into a Services Agreement pursuant to
which COMSAT leases office space, provides certain administrative, financial,
treasury, legal, insurance and other services to the Company and makes available
certain of its employee benefit plans to the Company's employees. Pursuant to
the Services Agreement, the Company pays to COMSAT (i) an annual fee of $2
million, (ii) the actual cost to COMSAT of the benefits provided to the
Company's employees and (iii) certain of COMSAT's actual out-of-pocket expenses
in connection with the Services Agreement (not including overhead and the cost
of its personnel). Further, the Company will indemnify COMSAT from all damages
from COMSAT's performance of services under the Services Agreement unless such
damages are caused by willful breach by COMSAT or willful misconduct or gross
negligence by COMSAT's employees and from the Company's failure to fulfill its
obligations under the agreement. COMSAT will indemnify the Company from damages
arising from willful breach by COMSAT or gross negligence or willful misconduct
by COMSAT's employees in the performance of the Services Agreement. The Services
Agreement is for an initial term of one year, renewable for one additional
one-year term, subject to the termination by either party of the provision of
the various corporate services upon 60 days prior notice if COMSAT owns less
than 50% of the Company's outstanding securities.
The Company and COMSAT have also entered into a Corporate Agreement that
governs certain other relationships and arrangements between the Company and
COMSAT. Pursuant to the Corporate Agreement, for so long as COMSAT owns at least
50% of the outstanding Common Stock, (i) the Board of Directors will consist of
at least a majority of members designated by COMSAT and two independent
directors who are neither employees nor directors of the Company or COMSAT, (ii)
the Company will not incur any indebtedness, other than that under its existing
Credit Facility (and refinancings thereof) and indebtedness incurred in the
ordinary course of business which together shall not exceed $175 million in the
aggregate, or issue any equity securities or any securities convertible into
equity securities without COMSAT's prior consent, (iii) the Company may not
amend its Certificate of Incorporation or Bylaws without COMSAT's prior consent,
and (iv) the Company will utilize reasonable cash management procedures and use
its reasonable best efforts to minimize the
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<PAGE>
Company's excess cash holdings. Pursuant to the Corporate Agreement, the Company
has also granted an option to COMSAT to allow COMSAT to purchase equity
securities in any offering of such securities to enable COMSAT to retain a 20%
ownership interest in the Company.
The Corporate Agreement also provides that, upon the request of COMSAT, the
Company will register under applicable federal and state securities laws any of
the shares of Common Stock held by COMSAT, subject to certain limited
exceptions. In addition, COMSAT has the right to include shares owned by it in
certain other registrations of common equity securities of the Company, subject
to certain limited exceptions. The Company has also agreed that it will not take
any action which will contravene or result in an event of default by COMSAT of
any provision of applicable law or regulation, including COMSAT's then current
capitalization plan approved by the Federal Communications Commission, any
credit agreements and other material instruments. Further, the Corporate
Agreement provides that the company will indemnify COMSAT, its officers,
directors and employees from violations under the securities laws with respect
to the documents associated with the Offering.
The Company is and, for so long as COMSAT continues to own 80% of the Common
Stock of the Company, will continue to be included in COMSAT's consolidated tax
group and the Company's tax liability will be included in the consolidated
federal income tax liability of COMSAT and its subsidiaries. The Company and
COMSAT have entered into a Tax Sharing Agreement, pursuant to which the Company
and COMSAT will make payments between them such that with respect to any period,
the amount of taxes to be paid by the Company or any refund payable to the
Company will be determined as though the Company were to file separate federal,
state and local income tax returns (including any amounts determined to be due
as a result of a redetermination of the tax liability of COMSAT arising from an
audit or otherwise) as the common parent of an affiliated group of corporations
filing a consolidated return rather than a consolidated subsidiary of COMSAT.
In determining the amount of tax sharing payments, COMSAT will prepare a pro
forma consolidated return for the Company that reflects the same positions and
elections used by COMSAT in preparing the returns for the COMSAT consolidated
group. COMSAT will continue to have all the rights of a common parent of a
consolidated group, will be the sole and exclusive agent for the Company in any
and all matters relating to the income tax liability of the Company, will have
sole and exclusive responsibility for the preparation and filing of consolidated
federal and consolidated or combined state income tax returns (or amended
returns), and will have the power, in its sole discretion, to contest or
compromise any asserted tax adjustment or deficiency and to file, litigate or
compromise any claim for refund on behalf of the Company.
Pursuant to the Tax Agreement, the Company and COMSAT have also agreed to
indemnify each other against certain tax liabilities, if any, accruing prior to
the consummation of the Offering.
DIRECTOR LOAN
Between April and July 1995, a subsidiary of the Company loaned a total of
$2 million to Bruce L. Crockett, a director of the Company. The loan, plus
interest thereon at the prime rate plus one percent, was repaid in full in
November 1995.
13
