<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ASCENT ENTERTAINMENT GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ASCENT ENTERTAINMENT GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement
Payment of filing fee (Check the appropriate box):
/ / $125 Per Exchange Act Rule 0-11(c) (1) (ii), 14a-6(i) (1), or
14a-6(j) (2)
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i) (3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Filing Fee:
------------------------------------------------------------------------
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
ONE TABOR CENTER, 1200 SEVENTEENTH STREET
DENVER, COLORADO 80202
April 24, 1997
Dear Stockholder:
The second Annual Meeting of Stockholders of Ascent Entertainment Group,
Inc. will be held at 2:00 p.m. on Tuesday, May 13, 1997, in Suite 3 of the
Denver Ballroom at the Marriott City Center Hotel, 1701 California Street,
Denver, Colorado. The matters on the meeting agenda are described on the
following pages.
If you are a stockholder of record, we urge that you send in your proxy
promptly for the Annual Meeting whether or not you plan to attend. Giving your
proxy will not affect your right to vote in person if you attend. If you wish to
give a proxy to someone other than the persons named on the enclosed proxy form,
you may cross out their names and insert the name of some other person who will
be at the meeting. The signed proxy form then should be given to that person for
his or her use at the meeting. If your shares are held in the name of a broker
and you wish to attend the meeting, you should obtain a letter of identification
from your broker and bring it to the meeting. In order to vote personally shares
held in the name of your broker, you must obtain from the broker a proxy issued
to you.
Sincerely,
<TABLE>
<S> <C>
C. J. Silas Charlie Lyons
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
YOUR PROXY IS IMPORTANT . . . PLEASE VOTE PROMPTLY
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
ONE TABOR CENTER, 1200 SEVENTEENTH STREET
DENVER, COLORADO 80202
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
To the Stockholders of
ASCENT ENTERTAINMENT GROUP, INC.:
The 1997 Annual Meeting of Stockholders of Ascent Entertainment Group, Inc.
(the "Company") will be held in Suite 3 of the Denver Ballroom at the Marriott
City Center Hotel in Denver, Colorado, on Tuesday, May 13, 1997, at 2:00 p.m.,
Mountain Daylight Time, for the following purposes:
1. election of 2 Class II directors, 1 Class I director and 1 Class III
director;
2. appointment of independent public accountants; and
3. action on such other matters as may properly come before the meeting or
any reconvened session thereof.
The Board of Directors has fixed the close of business on April 7, 1997, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any reconvened session thereof.
YOUR PROXY IS IMPORTANT. EVEN IF YOU HOLD ONLY A FEW SHARES, AND WHETHER OR
NOT YOU EXPECT TO BE PRESENT, YOU ARE URGENTLY REQUESTED TO DATE, SIGN AND MAIL
THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE THAT IS PROVIDED. THE PROXY MAY
BE REVOKED BY YOU AT ANY TIME, AND THE GIVING OF YOUR PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
This notice is given pursuant to direction of the Board of Directors.
Arthur M. Aaron
VICE PRESIDENT, BUSINESS AND LEGAL
AFFAIRS
AND SECRETARY
Denver, Colorado
April 24, 1997
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
ONE TABOR CENTER, 1200 SEVENTEENTH STREET
DENVER, COLORADO 80202
TELEPHONE: (303) 626-7000
------------------------
PROXY STATEMENT
---------------------
This Proxy Statement is provided by the Board of Directors of Ascent
Entertainment Group, Inc. (the "Company" or "Ascent") in connection with its
solicitation of proxies for the 1997 Annual Meeting of Stockholders. Shares of
the Company's Common Stock have been publicly traded since its initial public
offering (the "Offering") on December 18, 1995. This Proxy Statement is first
being mailed on or about April 18, 1997.
Stockholders of record of the Company's Common Stock at the close of
business on April 7, 1997, are entitled to vote at the meeting in person or by
proxy. Each share is entitled to one vote. If a proxy in the accompanying form
is properly executed and returned, the shares represented by the proxy will be
voted as the stockholder specifies. A stockholder may revoke a proxy at any time
before it is exercised by submitting a written revocation, submitting a
later-dated proxy, or voting in person at the meeting.
Abstentions and broker non-votes will not be counted for purposes of
determining whether any given proposal has been approved by the stockholders.
Accordingly, abstentions and broker non-votes will not affect the votes on any
of the proposals, all of which require for approval the affirmative vote of a
majority of the shares represented and entitled to vote at the meeting.
OWNERSHIP OF COMMON STOCK
As of April 7, 1997, the record date, 29,754,000 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
person was the only beneficial owner of more than five percent of the Company's
Common Stock as of December 31, 1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------------------------- --------------------------------- ------------
<S> <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 1. ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Company's Board of Directors consists of seven directors divided into
three classes, of which one class is elected annually by the stockholders for
terms of three years or until their successors have been elected and qualified.
Pursuant to the Company's Certificate of Incorporation and the Corporate
Agreement between the Company and COMSAT Corporation ("COMSAT"), for so long as
COMSAT directly
1
<PAGE>
or indirectly owns at least 50% of the outstanding Common Stock, the Board of
Directors will consist of a majority of members designated by COMSAT and two
independent directors who are neither employees nor directors of the Company or
COMSAT. In addition, for so long as COMSAT or any direct transferee of COMSAT
directly or indirectly owns at least 50% of the outstanding Common Stock, COMSAT
or such transferee may remove any directors with or without cause. See "Certain
Relationships and Related Party Transactions." In accordance with the Delaware
General Corporation Law, at such time as neither COMSAT nor any such transferee
owns at least 50% of the outstanding Common Stock, directors will be removable
by a majority vote of the Company's stockholders only for cause. The Board met
10 times in 1996, the Compensation Committee met 9 times in 1996 and the Audit
Committee met 3 times in 1996. All incumbent directors who were directors in
1996 attended all such Board and Committee meetings during their tenure, except
Bruce L. Crockett who missed one Board meeting, Robert M. Kavner who missed two
Committee meetings and Charles M. Neinas who missed two Committee meetings. Mr.
Crockett resigned from the Board effective July 19, 1996.
VOTING FOR DIRECTORS
At the meeting, two Class II directors will be elected to serve until the
2000 Annual Meeting, one Class III director will be elected to serve until the
1999 Annual Meeting and one Class I director will be elected to serve until the
1998 Annual Meeting and, in each case, until their successors are elected and
qualified. Each stockholder may vote the number of shares held by such
stockholder for each of the four nominees. The Board of Directors has authorized
the management to solicit proxies in favor of the election of the four nominees
whose biographical information begins on the following page. Each of the
nominees currently serves in the class to which he is nominated. Biographical
information for each of the nominees and the other directors is set forth
beginning on the next page.
Shares represented by proxies in the accompanying form will be voted for the
stated nominees unless the proxy is otherwise marked. If any of these nominees
becomes unavailable for election, which is not currently anticipated, shares
represented by proxies in the accompanying form will be voted for a substitute
nominee designated by the Board of Directors.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
(Term Continues until the 2000 Annual Meeting)
CHARLES M. NEINAS, 63, 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.
ROBERT G. SCHWARTZ, 69, 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 has been a COMSAT director
since May 1986. He also is a trustee of Consolidated Edison Company of New York,
Inc. and a director of Lone Star Industries, Inc., Lowe's Companies, Inc., Mobil
Oil Corporation, Potlatch Corporation and The Reader's Digest Association, Inc.
2
<PAGE>
NOMINEE FOR ELECTION AS CLASS I DIRECTOR
(Term Continues until the 1998 Annual Meeting)
ALLEN E. FLOWER, 53, has been Vice President and Chief Financial Officer of
COMSAT since November 1995. He was Controller and Acting Chief Financial Officer
of COMSAT from April 1995 through November 1995, Controller from June 1992 to
May 1995 and Vice President, Finance and Administration, COMSAT Video
Enterprises from May 1990 to June 1992.
NOMINEE FOR ELECTION AS CLASS III DIRECTOR
(Term Continues until the 1999 Annual Meeting)
CHARLES M. LILLIS, 54, has been President and Chief Executive Officer of US
WEST Media Group since April 1995, and prior to that time was President of US
WEST Diversified Group from 1991 to 1994 and was Executive Vice President and
Chief Planning Officer of US WEST, Inc. from 1987 to 1991. Mr. Lillis joined US
WEST in 1985 as Vice President of Strategic Marketing. Mr. Lillis is a member of
the boards of directors of SuperValu, Inc. and TeleWest Communications PLC.
The following members of the Board of Directors are not being elected at
this meeting, but will continue to serve their terms.
CLASS I DIRECTORS
Term Continues until the 1998 Annual Meeting
EDWIN I. COLODNY, 70, has been counsel to the Washington, D.C., law firm of
Paul, Hastings, Janofsky & 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 has been a COMSAT director since May 1992.
He also is a director of Esterline Technologies Corporation and a member of the
Board of Trustees of the University of Rochester.
CHARLES LYONS, 42, has been President, Chief Executive Officer and a
director of Ascent 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 of COMSAT Video Enterprises 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. Lyons is a director of On
Command Corporation.
CLASS III DIRECTOR
Term Continues until the 1999 Annual Meeting
C. J. SILAS, 64, 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 until his retirement in
April 1994. He has been a COMSAT director since May 1993. He also is a director
of The Reader's Digest Association, Inc. and Halliburton Company.
3
<PAGE>
OTHER INFORMATION CONCERNING DIRECTORS
COMMITTEES
As of March 1997, the Board has two standing committees, described below.
The Audit Committee consists of Messrs. Flower, Schwartz (Chairman), Lillis
(who replaced Mr. Kavner), Neinas and Silas. The Audit Committee makes
recommendations to the Board concerning the selection of independent public
accountants; reviews with the independent accountants the scope of their audit;
reviews the financial statements with the independent accountants; reviews with
the independent accountants and the Company's management the Company's
accounting and audit practices and procedures, its internal controls and its
compliance with laws and regulations; and reviews the Company's policies
regarding community and governmental relations, conflicts of interest, business
conduct, ethics and other social, political and public matters, and the
administration of such policies. In addition, the Audit Committee considers and
makes recommendations to the Board with respect to the financial affairs of the
Company, including matters relating to capital structure and requirements,
financial performance, dividend policy, capital and expense budgets and
significant capital commitments, and such other matters as may be referred to it
by the Board, the Chairman of the Board or the Chief Executive Officer. The
Audit Committee met three times in 1996. All members of the Audit Committee were
present at all meetings, except that Mr. Kavner did not attend one meeting.
The Compensation Committee consists of Messrs. Colodny (Chairman), Neinas,
Lillis (who replaced Mr. Kavner) and Silas. The Compensation Committee approves
long-term compensation for senior executives; considers and makes
recommendations to the Board with respect to: programs for human resources
development and management organization and succession; salary and bonus for
senior executives; and compensation matters and policies and employee benefit
and incentive plans; and exercises authority granted to it to administer such
plans. In addition, the Compensation Committee recommends to the Board qualified
candidates for election as directors and as Chairman of the Board, and
considers, acts upon or makes recommendations to the Board with respect to such
other matters as may be referred to it by the Board, the Chairman of the Board
or the Chief Executive Officer. The Compensation Committee will consider
candidates recommended by stockholders, if the recommendations are submitted in
writing to the Secretary of the Company. The Compensation Committee met nine
times during 1996. All members of the Compensation Committee attended all
meetings, except that Mr. Kavner did not attend one meeting and Mr. Neinas did
not attend two meetings.
4
<PAGE>
DIRECTORS COMPENSATION
With the exception of Mr. Silas, the Chairman of the Board, the Company pays
directors who are not employees of the Company, its subsidiaries or, so long as
COMSAT owns at least 50% of the Common Stock, COMSAT or COMSAT's subsidiaries, a
$500 fee for each attended meeting of the Board of Directors or committee
thereof and each meeting held pursuant to a special assignment. With the
exception of Mr. Silas, the Chairman of the Board, the Company also pays each
such director who serves as chairman of a committee of the Board of Directors an
annual fee of $2,000, payable quarterly. In addition, with the exception of Mr.
Silas, the Chairman of the Board, the Company pays each such director an annual
retainer of $6,000, payable quarterly, and 400 shares of Common Stock, the
initial award of which was made upon consummation of the Offering and each
subsequent award is made at each Annual Meeting of Stockholders thereafter at
which such person serves as a director. Mr. Silas' only cash compensation is as
Chairman of the Board for which he receives $44,000 annually.
Furthermore, each director 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, will annually be granted options to purchase up to
4,000 shares of Common Stock, the initial grant of which was made at the time of
the Offering at the Offering price of $15.00 per share. An additional grant of
4,000 shares is made each year thereafter at each Annual Meeting of Stockholders
at which such person serves as a director at the market price on such date. For
so long as COMSAT retains 80% of the outstanding Common Stock and the Company
continues to be a member of COMSAT's consolidated tax group for federal income
tax purposes, 100% of such options will vest three years after being granted.
Otherwise, such options will vest 25% on the first anniversary of grant, and 25%
and 50%, respectively, on the second and third anniversaries.
Executive compensation is described beginning on page 10.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Robert M. Kavner, currently President and Chief Executive Officer of On
Command Corporation, the approximately 57% owned subsidiary of the Company ("On
Command" or "OCC"), was a member of the Ascent Compensation Committee through
March 1997. Mr. Charles Lyons has been a member of the On Command Compensation
Committee beginning in October 1996.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock, the Common Stock of COMSAT and the
Common Stock of On Command, as of March 31, 1997, by all directors and nominees,
by each of the executive officers named in the Summary Compensation Table on
page 10, and by all directors and executive officers as a group. Under rules of
the SEC, beneficial ownership includes any shares over which an individual has
sole or shared voting power or
5
<PAGE>
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>
ON COMMAND
ASCENT SHARES SHARES*
AMOUNT AND AMOUNT AND COMSAT SHARES**
NATURE OF NATURE OF AMOUNT AND NATURE
BENEFICIAL BENEFICIAL OF BENEFICIAL
NAME(1) OWNERSHIP(2) OWNERSHIP(3) OWNERSHIP(4)
- ---------------------------------------------------------------- ------------- ------------- ------------------
<S> <C> <C> <C>
Arthur M. Aaron................................................. 1,000 -- 3,070(5)
Edwin I. Colodny................................................ 1,800 -- 15,000
James A. Cronin III............................................. -- -- --
Allen E. Flower................................................. -- -- 70,726(6)
Robert M. Kavner................................................ 7,800 -- --
Charles M. Lillis............................................... -- -- --
Charles Lyons................................................... 2,500 -- (7) 243,663(7)
Charles M. Neinas............................................... 4,800 -- --
Robert G. Schwartz.............................................. 2,800 -- 26,600
C.J. Silas...................................................... 4,800 -- 11,600
Robert Snyder................................................... 3,100 262,994 34,325(8)
Ellen Robinson.................................................. -- -- --
All directors and executive officers as a group (13 persons).... 28,600 262,994 404,984(9)
</TABLE>
- ------------------------
* On Command is a subsidiary of the Company, based on the Company's beneficial
ownership of approximately 60% of the issued and outstanding shares of On
Command, including shares which may be purchased on the exercise of
warrants.
** COMSAT is the controlling stockholder of the Company, based on COMSAT's
beneficial ownership of 80.67% of the Company's outstanding common stock.
(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 Company, On
Command or COMSAT.
(2) This column does not include any shares that could be acquired within 60
days after March 31, 1997, through the exercise of options because even
though certain persons own options which would otherwise have become
exercisable on December 18, 1996, such options are not exercisable prior to
December 18, 1998 so long as COMSAT beneficially owns more than 80% of the
Company's outstanding common stock.
(3) Each number in this column has been rounded down to the nearest whole share.
Beneficial ownership of On Command Common Stock includes 106,794 shares that
may be acquired by Mr. Snyder within 60 days after March 31, 1997, through
the exercise of options or warrants.
(4) Each number in this column has been rounded down to the nearest whole share.
Beneficial ownership of COMSAT Common Stock includes shares that may be
acquired within 60 days after March 31, 1996, through the exercise of
options as follows: Mr. Aaron, 1,250 shares; Mr. Colodny, 10,000 shares; Mr.
Flower, 41,450 shares; Mr. Lyons, 191,500 shares; Mr. Schwartz, 20,000
shares; Mr. Silas, 6,000 shares; Mr. Snyder, 12,500 shares; and all
directors and executive officers as a group, 282,700 shares.
6
<PAGE>
(5) Includes 760 shares which were held in COMSAT's Savings and Profit-Sharing
Plan as of December 31, 1996.
(6) Includes 14,200 shares which are restricted against transfer and 664 shares
which were held in COMSAT's Savings and Profit-Sharing Plan as of December
31, 1996.
(7) Includes 40,900 shares which are restricted against transfer and 862 shares
which were held in COMSAT's Savings and Profit-Sharing Plan as of December
31, 1996. In addition, Mr. Lyons' ownership of On Command Common Stock does
not reflect ownership of the shares owned by Ascent, even though Mr. Lyons
holds the proxy to vote those shares on behalf of Ascent.
(8) Includes 16,000 shares which are restricted against transfer.
(9) Also includes an aggregate of 73,386 shares which are restricted against
transfer or which were held in COMSAT's Savings and Profit-Sharing Plan as
of December 31, 1996. All directors and executive officers as a group
beneficially owned less than 1% of the outstanding Common Stock of Ascent,
COMSAT or On Command as of March 31, 1997.
7
<PAGE>
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for establishing and administering
the Company's executive compensation philosophy. Through September 1996, the
Compensation Committee was composed entirely of independent outside directors,
two of whom are also directors of COMSAT. In September 1996, Robert M. Kavner
became President and Chief Executive Officer of the Company's subsidiary, On
Command Corporation. In March 1997, Mr. Kavner resigned as a director of the
Company and a member of the Compensation Committee, and was replaced on the
Compensation Committee by Charles M. Lillis. Set forth below is the Committee's
report on the 1996 compensation of the executive officers of the Company,
including Mr. Lyons, the Chief Executive Officer, the other current and former
executive officers of the Company whose compensation is discussed below under
"Executive Compensation"(collectively, the "Named Executive Officers").
ANNUAL COMPENSATION
Each of the Named Executive Officers' annual compensation for 1996 was based
on Ascent's executive compensation philosophy which emphasizes risk based
performance incentives as a key component of both annual and long term
compensation. In the case of Mr. Lyons, the Ascent Board of Directors approved
his employment agreement with Ascent prior to the formation of the Committee.
Mr. Lyons' annual base salary rate as President and Chief Executive Officer of
Ascent for 1996, pursuant to his employment agreement, is $500,000. This base
salary rate is based in part on the advice of an outside consultant specializing
in the entertainment and media industry provided in 1995 to the COMSAT
Compensation Committee and the Ascent Board of Directors.
The annual base salary rates for 1996 for the other Named Executive Officers
are consistent with competitive salary ranges developed by the Committee. These
salary ranges are based on market data for companies of comparable revenue in
the media and entertainment industry. In the cases of Messrs. Cronin and Kavner
and Ms. Robinson, these base salary ranges are as set forth in their employment
agreements as approved by the Committee.
The bonus opportunities for Mr. Lyons and the Named Executive Officers
(other than Messrs. Aaron and Snyder) for 1996 were based on target award
percentages of base salary as set forth in their respective employment
agreements. For 1996, Mr. Lyons' bonus was based on two factors: the achievement
of certain financial measures as compared to planned performance for the
Company; and Mr. Lyons individual performance. Ascent's financial performance in
1996 fell short of its planned performance, which weighed heavily in the
Committee's determination. On the other hand, under Mr. Lyons' leadership in
1996, Ascent achieved certain strategic accomplishments which should contribute
to the long-term success of the Company. The Committee considered Ascent's
accomplishments under Mr. Lyons' leadership and financial performance in 1996,
and recommended a bonus award of $75,000 for Mr. Lyons for 1996. The Board
approved the Committee's recommendation.
Bonuses for Messrs. Cronin and Aaron were based on similar criteria to those
applied to Mr. Lyons' bonus, as well as Mr. Lyons evaluation of each of their
achievement of their objectives for the year. The Committee reviewed and
approved Mr. Lyons' bonus recommendations for Mr. Cronin and Mr. Aaron. Ms.
Robinson will not be eligible for an annual bonus until after the conclusion of
the June 30, 1997 fiscal year for the Company's sports teams.
8
<PAGE>
Bonuses for Messrs. Kavner and Snyder were recommended by the Compensation
Committee of On Command Corporation, which includes Messrs. Lyons and Cronin,
and an outside director of On Command Corporation, and approved by the On
Command Corporation Board of Directors. Those bonuses were based on two factors:
the achievement of certain financial measures as compared to planned performance
for On Command Video Corporation ("OCV"); and the individual performance of Mr.
Kavner and Mr. Snyder. The financial performance of On Command Corporation in
1996 fell short of the planned performance for OCV.
LONG TERM COMPENSATION
In 1996, none of the Named Executive Officers who were awarded non-qualified
stock options to purchase Ascent Common Stock prior to the consummation of the
Offering, i.e., Mr. Lyons, Mr. Aaron and Mr. Snyder, received any additional
awards in 1996. In connection with his hiring in June 1996, Mr. Cronin was
awarded a stock option to purchase 297,500 shares of Ascent Common Stock, an
amount equal to Mr. Lyons 1995 stock option award to purchase Ascent Common
Stock, at an exercise price equal to the fair market value of Ascent Common
Stock on the date of grant, to provide Mr. Cronin with a long term incentive
comparable to that of Mr. Lyons. Mr. Cronin's option vests on the same terms as
Mr. Lyons' option, 10% after one year, an additional 15% after two years and an
additional 25% each year thereafter until fully vested.
In connection with her hiring in June 1996, Ms. Robinson was awarded a stock
option to purchase 50,000 shares of Ascent Common Stock, at an exercise price
equal to the fair market value of Ascent Common Stock on the date of grant,
which vests 25% after one year, an additional 25% after two years and an
additional 50% after three years. None of the foregoing options will be
exercisable so long as COMSAT owns at least 80% of the Common Stock, until
December 18, 1998, and all such options expire 10 years after the date of grant.
In connection with his hiring by OCC in September 1996, the OCC Board, with
the review and approval of the Ascent Compensation Committee and Board of
Directors, awarded Mr. Kavner a stock option to purchase 1,041,562 shares of OCC
Common Stock. These options vest 25% after one year, an additional 25% after two
years and an additional 50% after three years, and expire 10 years after grant.
Eighty percent of the shares purchasable upon exercise of the option may be
purchased at a price per share which the OCC Board and Compensation Committee
determined based upon the fair value of the combination of OCV and
SpectraVision, prior to the public trading of OCC's Common Stock and the
remaining twenty percent may be purchased at a price based upon the average of
the high and low bid prices of the OCC Common Stock for the 20 trading days
following the third trading day after OCC's public release of financial results
for the third quarter of 1996. The intent in granting the option was to create
an immediate and significant link between Mr. Kavner's compensation and the
interests of On Command Corporation's stockholders. The size of the stock option
award and the vesting schedule were effectively based on the practices of
companies engaging in initial public offerings.
COMPENSATION COMMITTEE
Edwin I. Colodny, Chairman
Charles M. Lillis
Charles M. Neinas
C.J. Silas
9
<PAGE>
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, 1996 and Robert Snyder who is no longer an executive officer of the Company,
but whose compensation for 1996 would be required to be disclosed if he were an
executive officer of the Company as of December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ------------------------
------------------------------------------------ RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
COMPENSATION AWARD(S) OPTIONS
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) BONUS ($) ($)(3) ($)(4) (#)(4)
- ------------------------------------------ --------- ----------- --------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles Lyons,............................ 1996 $ 500,000 $ 75,000 $ 62,399 $ 0 0
President and Chief Executive Officer 1995 335,961(2) 150,000 1,886 382,113 297,500*
55,000**
1994 210,000 190,000 992 562,788 80,000**
James A. Cronin, III...................... 1996 230,769 50,000 0 0 297,500*
Executive Vice President,
Finance and Chief Operating Officer
Robert M. Kavner.......................... 1996 173,034 60,000 0 0 1,041,562+
President and Chief Executive
Officer, OCC
Arthur M. Aaron........................... 1996 162,690 20,000 38,462 0 0
Vice President, 1995 122,400 30,000 2,690 19,688 100,000*
Business and Legal Affairs 1,500**
1994 83,882 15,000 0 27,500 700**
Ellen Robinson............................ 1996 144,230 0 0 0 50,000*
President
Ascent Sports, Inc.
Robert Snyder............................. 1996 296,185 75,000 0 0 0
Vice Chairman, OCC 1995 285,779 150,000 0 0 100,000*
5,000**
1994 199,273 100,000 0 137,500 10,000**
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION(1) ($)(5)
- ------------------------------------------ -------------
<S> <C>
Charles Lyons,............................ $ 236,450
President and Chief Executive Officer 303,275
38,803
James A. Cronin, III...................... 8,417
Executive Vice President,
Finance and Chief Operating Officer
Robert M. Kavner.......................... 761
President and Chief Executive
Officer, OCC
Arthur M. Aaron........................... 93,815
Vice President, 16,404
Business and Legal Affairs
11,699
Ellen Robinson............................ 54,250
President
Ascent Sports, Inc.
Robert Snyder............................. 11,934
Vice Chairman, OCC 4,620
4,620
</TABLE>
- ------------------------------
(1) Mr. Cronin and Ms. Robinson became executive officers of Ascent in June
1996, and Mr. Kavner became President and Chief Executive Officer of On
Command in September 1996, served as a consultant to On Command from June to
September of 1996 and served as a director of Ascent during 1996. In 1996
Mr. Kavner was paid $21,000 for consulting services rendered to On Command
prior to his employment with On Command and received as a non-employee
director of Ascent (i) $12,500 in director fees; (ii) a grant of 400 shares
of Ascent Common Stock; and (iii) an option to purchase 4,000 shares of
Ascent Common Stock. (See "Other Information Concerning Directors--Directors
Compensation"). Each of Mr. Cronin, Mr. Kavner and Ms. Robinson's respective
compensation for 1996 reflects amounts paid after their respective
employment dates and Mr. Kavner's compensation as a director of Ascent is
not included in the table. Annual bonuses for Messrs. Kavner and Snyder were
determined by the OCC Compensation Committee and Board of Directors.
(2) Annual Compensation for Mr. Lyons for 1995 includes $7,500 not previously
disclosed in retroactive salary for 1995 that was paid in 1996.
(3) Other Annual Compensation shown for 1994, 1995 and 1996 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
10
<PAGE>
salary and bonus for the Named Executive Officer in each year. Other Annual
Compensation for Mr. Lyons in 1996 and Mr. Aaron in 1995 and 1996 consists
of amounts reimbursed in each case for the payment of taxes on moving
expense reimbursements.
(4) 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 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 were 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, 1996, are as follows:
<TABLE>
<CAPTION>
NUMBER OF RSAS/ VALUE AS OF
RSUS/PSUS 12/31/96
----------------- -----------
<S> <C> <C>
Mr. Lyons...................................................... 60,305 $1,436,013
Mr. Aaron...................................................... 2,000 47,625
Mr. Cronin..................................................... 0 0
Mr. Snyder..................................................... 25,000 595,313
Mr. Kavner..................................................... 0 0
Ms. Robinson................................................... 0 0
</TABLE>
All options marked with a single asterisk (*) are options to purchase Ascent
Common Stock, options marked with a double asterisk (**) are options to
purchase COMSAT Common Stock and options marked with a (+) are options to
purchase On Command Common Stock.
(5) All Other Compensation for 1996 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)
contributions by the Company to COMSAT's and OCV's 401(k) Plan on behalf of
the Named Executive Officers; (iv) above-market interest accrued for the
Named Executive Officers under COMSAT's Deferred Compensation Plan; (v) life
insurance premiums for the Named Executive Officers; and (vi) moving expense
reimbursement. 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.
<TABLE>
<CAPTION>
SUPPLE- ABOVE- LIFE
UNUSED TIME OFF MENTAL 401(K) PLAN MARKET INSURANCE
CREDITS BUY-BACK BONUSES CONTRIBUTIONS INTEREST PREMIUMS
----------- ----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Lyons........................... $ 22,491 $ 10,000 $ 0 $ 4,500 $ 34,648 $ 15,376
Mr. Aaron........................... 2,793 2,700 0 4,241 0 0
Mr. Cronin.......................... 417 8,000 0 0 0 0
Mr. Snyder.......................... 0 0 0 9,500 0 2,434
Mr. Kavner.......................... 0 0 0 0 0 240
Ms. Robinson........................ 0 2,000 50,000 2,250 0 0
<CAPTION>
MOVING EXPENSE
REIMBURSEMENT TOTAL
--------------- ---------
<S> <C> <C>
Mr. Lyons........................... $ 149,435 $ 236,450
Mr. Aaron........................... 84,081 93,815
Mr. Cronin.......................... 0 8,417
Mr. Snyder.......................... 0 11,934
Mr. Kavner.......................... 521 761
Ms. Robinson........................ 0 54,250
</TABLE>
11
<PAGE>
OPTION GRANTS
The following table sets forth information on options granted to the Named
Executive Officers in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE GRANT DATE
UNDERLYING OPTIONS TO EMPL IN PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FY(2) ($/SH) DATE VALUE(3)
- ------------------------------------------- ------------------ --------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASCENT COMMON STOCK
Charles Lyons.............................. 0 0.00% n/a n/a $ 0
Arthur M. Aaron............................ 0 0.00% n/a n/a 0
James A. Cronin, III....................... 297,500 75% $18.25 6/3/06 2,621,000
Robert Snyder.............................. 0 0.00% n/a n/a 0
Robert Kavner.............................. 0 0.00% n/a n/a 0
Ellen Robinson............................. 50,000 13% 18.25 6/3/06 397,061
ON COMMAND COMMON STOCK
Charles Lyons.............................. 0 0.00% n/a n/a 0
Arthur M. Aaron............................ 0 0.00% n/a n/a 0
James A. Cronin, III....................... 0 0.00% n/a n/a 0
Robert Snyder.............................. 0 0.00% n/a n/a 0
Robert Kavner(4)........................... 833,250 46.78% 15.33 9/11/06 5,891,078
208,312 11.70% 16.40 9/11/06 1,574,839
Ellen Robinson............................. 0 0.00% n/a n/a 0
</TABLE>
- ------------------------
1) The Ascent option grants to Mr. Cronin and Ms. Robinson were made effective
June 3, 1996. Mr. Cronin's options vest as follows: 10% on June 3, 1997; an
additional 15% on June 3, 1998; an additional 25% on June 3, 1999; an
additional 25% on June 3, 2000; and the remaining 25% on June 3, 2001; and
Ms. Robinson's options vest as follows: 25% on June 3, 1997; an additional
25% on June 3, 1998 and the remaining 50% on June 3, 1999; provided that for
both Mr. Cronin and Ms. Robinson these options will not vest to any extent
prior to June 3, 1998, if COMSAT continues to own at least 80% of the common
stock of Ascent. In addition to the above, Ascent granted options to
purchase 4,000 shares of Ascent Common Stock to Mr. Kavner on May 13, 1996
pursuant to Ascent's 1995 Non-Employee Director Stock Plan prior to Mr.
Kavner's employment by On Command, which options vest as follows: 25% on May
13, 1997; an additional 25% on May 13, 1998; and the remaining 50% on May
13, 1999; provided that these options will not vest to any extent prior to
May 13, 1998, if COMSAT continues to own at least 80% of the Common Stock of
Ascent.
(2) The total number of Ascent options granted to Ascent employees in 1996 was
397,500; the total number of On Command options granted to On Command
employees in 1996 was 1,781,074. The foregoing number of On Command options
does not include options to purchase 157,651 shares of Common Stock of OCV
previously granted employees of OCV which were converted to options to
purchase 447,728 shares of On Command Common Stock on a 2.84 to 1 ratio in
the merger between
12
<PAGE>
OCV and a wholly owned subsidiary of On Command, in connection with the
acquisition of the assets of Spectravision, Inc. by Ascent and On Command.
(3) Ascent and On Command 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 On Command; stock price volatility of
57.6% for Ascent and 42.8% for On Command; a five to six year option term
for Ascent and On Command; and a risk-free rate of return of 5.9% for Ascent
and 6% for On Command. 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.
(4) The options to purchase On Command Common Stock granted to Mr. Kavner were
granted pursuant to an employment agreement with On Command dated September
11, 1996 which is described under the caption "Executive
Compensation--Employment Agreements."
13
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information on (1) options exercised by the
Named Executive Officers in 1996, and (2) the number and value of their
unexercised options as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996, AND 12/31/96 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/96 OPTIONS AT 12/31/96
SHARES UNDERLYING -------------------------- --------------------------
OPTIONS EXERCISED VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ----------------------------------- ----------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASCENT OPTIONS
Charles Lyons...................... 0 0 0 297,500 0 0
Arthur M. Aaron.................... 0 0 0 100,000 0 0
James A. Cronin, III............... 0 0 0 297,500 0 0
Robert Snyder...................... 0 0 0 100,000 0 0
Robert Kavner...................... 0 0 0 8,000 0 0
Ellen Robinson..................... 0 0 0 50,000 0 0
COMSAT OPTIONS
Charles Lyons...................... 0 0 137,750 81,250 $ 133,250 $ 185,625
Arthur M. Aaron.................... 0 0 875 1,625 1,906 5,282
James A. Cronin, III............... 0 0 0 0 0 0
Robert Snyder...................... 0 0 6,250 8,750 5,625 16,875
Robert Kavner...................... 0 0 0 0 0 0
Ellen Robinson..................... 0 0 0 0 0 0
ON COMMAND OPTIONS
Charles Lyons...................... 0 0 0 0 0 0
Arthur M. Aaron.................... 0 0 0 0 0 0
James A. Cronin, III............... 0 0 0 0 0 0
Robert Snyder (1).................. 0 0 90,880 22,720 $ 758,848 $ 160,744
Robert Kavner...................... 0 0 0 1,041,562 0 454,121
Ellen Robinson..................... 0 0 0 0 0 0
</TABLE>
- ------------------------
(1) Robert Snyder was granted (i) an incentive stock option on November 20, 1991
to purchase 10,000 shares of OCV Common Stock for $13.41 per share and (ii)
a non-qualified stock option on April 30, 1993 to purchase 30,000 shares of
OCV common stock for $25.00 per share. Both options vest 20% one year after
date of grant and ratably per month for four years thereafter. Both options
were converted on a 2.84 to 1 ratio to options to purchase On Command Common
Stock effective October 7, 1996. Additionally, in connection with the merger
described in footnote 2 on page 13, Mr. Snyder, as a former stockholder of
OCV, received Series A Warrants to purchase on a cashless basis at any time
prior to October 7, 2003, 10,234 shares of On Command Common Stock for
$15.27 per share. The Series A Warrants are not included in this table.
14
<PAGE>
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
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 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.
On November 18, 1996, the Compensation Committee of the Company approved an
amendment and restatement of Mr. Lyons' employment agreement. The material
changes were (i) Mr. Lyons' stock options to purchase 297,500 shares of common
stock of the Company will vest immediately upon a "change of control", as
defined above, or if Ascent is no longer publicly traded; (ii) the Company
agreed to use its best efforts to cause 100% of Mr. Lyons COMSAT stock awards to
vest upon a "change of control"; (iii) if Mr. Lyons' employment with the Company
is not renewed at the end of his term of employment, he will be retained as a
consultant to the Company for 18 months with full pay and benefits; and (iv)
upon a termination of the agreement upon which Mr. Lyons receives continued
benefits, such benefits shall continue for the longer of the remainder of the
term or one year after termination.
The Company and Mr. Cronin entered into a five year employment agreement on
June 3, 1996, on substantially the same terms as Mr. Lyons' amended and restated
employment agreement, except that Mr. Cronin's initial yearly cash compensation
is $400,000, his annual target bonus is 75% of his base salary and his options
are exercisable at a price per share of $18.25.
15
<PAGE>
OCV and Mr. Snyder have entered into an employment agreement that expires in
1999. Pursuant to the agreement, Mr. Snyder's salary for 1996 was set by the
board of directors of OCV at $300,000, 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.
The Company and Ms. Robinson entered into an employment agreement on June 3,
1996, that expires on June 3, 1999. Pursuant to the agreement, Ms. Robinson's
salary for 1996 is $250,000, subject to increases at the discretion of Ascent's
Board of Directors. Ms. Robinson is also eligible for an annual bonus based on
performance measures determined by Ascent's Compensation Committee with a target
bonus equal to 30% of Ms. Robinson's base salary. In connection with the
employment agreement Ms. Robinson received options to purchase 50,000 shares of
Ascent common stock (as described in footnote 1 on page 12).
If Ms. Robinson's employment is terminated without "cause" (as defined in
her employment agreement), or if Ms. Robinson elects to terminate her employment
as a result of certain events defined in the agreement which have the effect of
a constructive termination, Ms. Robinson will be entitled, for the remainder of
the term of the agreement as if the agreement had not been terminated, to
receive: (i) her then current base salary; (ii) an annual bonus equal to 30% of
her then current base salary; and (iii) all other benefits provided for pursuant
to the agreement; provided that if Ms. Robinson 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.
On September 11, 1996, On Command and Mr. Kavner entered into an employment
agreement that expires on September 11, 2000. Pursuant to the agreement, Mr.
Kavner's base salary will be $500,000 per year, subject to increases at the
discretion of the board of directors of On Command. Mr. Kavner will also be
eligible for annual bonuses based on performance measures determined by the
Compensation Committee of the board of directors of On Command with a target
bonus equal to 70% of Mr. Kavner's base salary for achieving 100% of the target
level for the performance measures. In addition, Mr. Kavner has been granted
options to purchase 1,041,562 shares of On Command common stock, exercisable at
the following per share prices: (i) 80% of such options shall be exercisable at
a per-share price equal to $15.33, and (ii) 20% of such options shall be
exercisable at a per-share price equal to $16.40. The options will vest 25% on
September 11, 1997, an additional 25% on September 11, 1998 and the remaining
50% on September 11, 1999. The options will expire at the earlier of (i) three
months after the date upon which Mr. Kavner is terminated for "cause" (as
defined in Mr. Kavner's employment agreement); (ii) one year after Mr. Kavner's
employment agreement is terminated as a result of Mr. Kavner's death or (iii) on
September 11, 2006. Mr. Kavner will also be entitled to participate in group
health, dental and disability insurance programs and any group profit sharing,
deferred compensation, life insurance or other benefit plans as are generally
made available by On Command to its senior executive officers on a favored
nations basis.
In addition, the employment agreement for Mr. Kavner provides that upon a
"Change of Control Event" (as defined in such agreement), Mr. Kavner will be
entitled to elect to terminate his employment with On Command and, for the
longer of (a) the remainder of the term of Mr. Kavner's employment agreement as
if such agreement had not been terminated and (b) one year following the date of
such termination (such period being the "Duration Period"), receive: (i) his
then current base salary; (ii) an annual bonus equal to 70% of his then current
base salary for each year during the Duration Period; and
16
<PAGE>
(iii) all other benefits provided pursuant to such employment agreement. A
"Change of Control Event" is defined in the employment agreement as an
affirmative determination, either jointly by Mr. Kavner and the On Command board
of directors or pursuant to an arbitration which Mr. Kavner has the right to
invoke, that any "change of control" of On Command (defined as an event as
result of which (i) a single person or entity other than Ascent or its
affiliates owns 50% or more of the voting stock of On Command or (ii) a single
person or entity other than COMSAT or its affiliates owns directly or indirectly
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. Kavner's employment, or the compensation payable
to Mr. Kavner, under his employment agreement.
In November 1996, the Company adopted a change of control severance plan for
the employees of Ascent's corporate office (the "Severance Plan"), including Mr.
Aaron but no other Named Executive Officers. Under the Severance Plan, such
employees are eligible for certain payments and benefits if, within one year of
a Change of Control, such employee's employment is either terminated by the
Company for any reason other than death, disability or cause, or is terminated
by the employee for good reason. "Change of Control" is defined as any event as
a result of which COMSAT no longer owns more than fifty percent (50%) of the
voting stock of Ascent, provided that any Ascent voting stock which is publicly
held shall be considered as owned by COMSAT for this purpose.
Under the Severance Plan eligible employees would be entitled to salary
continuation of from two months to eighteen months depending upon the employee's
position and length of service, an annual bonus prorated to the effective date
of termination, and during the relevant period of salary continuation, continued
participation in Ascent's benefit plans. In addition, stock options held by an
eligible employee would become 100% vested immediately and remain exercisable
for one year, and certain employees would be eligible to receive reimbursement
of relocation costs similar in nature to those for which the employee was
previously eligible, in the event that the employee elects to relocate back to
the Washington, D.C. metropolitan area.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
RELATIONSHIP WITH COMSAT
COMSAT currently 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 Certificate of
Incorporation (the "Charter") 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 entered into a Services Agreement December 18, 1995
pursuant to which COMSAT leased office space and provided certain administrative
and other services to the Company and made available certain of its employee
benefit plans to the Company's employees. Pursuant to the Services Agreement,
during 1996 the Company paid to COMSAT an annual fee of $2 million and
reimbursed COMSAT for the actual cost to COMSAT of the benefits provided to the
Company's
17
<PAGE>
employees and certain of COMSAT's actual out-of-pocket expenses in connection
with the Services Agreement. Further, pursuant to the agreement (i) the Company
agreed to 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
in fulfilling their obligations under the agreement and (ii) COMSAT agreed to
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 was amended as of December 18, 1996. Under the
Services Agreement, as amended, COMSAT will continue to provide to the Company
limited administrative and support services and the Company will pay to COMSAT
$15,000 per month.
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 Charter 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 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. COMSAT
consented to the Company's requests for an increase in the Company's
indebtedness two times in 1996. In September 1996 COMSAT consented to an
increase in the Company's indebtedness to $216 million; provided that: (i) no
more than $50 million of such indebtedness constituted long-term debt; and (ii)
indebtedness in excess of $175 million could only be incurred to satisfy funding
requirements for 1996. In November 1996 COMSAT consented to an increase in the
Company's indebtedness to $236 million; provided that: (i) no more than $50
million of such indebtedness constituted long-term debt; and (ii) indebtedness
in excess of Ascent's indebtedness existing at December 31, 1996 could only be
used to satisfy Ascent's consolidated funding requirements through June 30,
1997, as approved by the Board of Directors.
On March 21, 1997, COMSAT consented to an increase in the Company's
indebtedness to $270 million; provided that (i) no more than $50 million of such
indebtedness may constitute long term debt; and (ii) indebtedness subordinated
to indebtedness under Ascent's existing credit facility could only be incurred
on terms which did not adversely affect COMSAT's proposed tax-free distribution
of its interest in the Company to COMSAT's shareholders.
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
18
<PAGE>
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 Sharing 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.
19
<PAGE>
COMPARATIVE STOCK PRICE PERFORMANCE
STOCKHOLDER RETURN PERFORMANCE GRAPH
ASCENT ENTERTAINMENT GROUP, INC. PERFORMANCE
The following graph and chart compare the cumulative total stockholder return on
the Company's common stock, including the reinvestment of dividends, with the
return on the Standard & Poor's 500 Composite Stock Index and the Standard &
Poor's Entertainment Stock Index. On December 18, 1995, the Company's common
stock began publicly trading. The performance graph sets forth the return on
$100 invested in Ascent Entertainment Group, Inc. common stock and the S&P
indices from December 18, 1995, to December 31, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN(A) AMONG
ASCENT ENTERTAINMENT GROUP, INC., THE S&P 500 INDEX AND THE S&P ENTERTAINMENT
INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ASCENT ENTERTAINMENT GROUP S&P 500 INDEX S&P ENTERTAINMENT INDEX
<S> <C> <C> <C>
18-Dec-95 $100 $100 $100
31-Dec-95 104 102 102
31-Dec-96 107 125 103
Value of $100.00 Invested
12/18/95
</TABLE>
Assumes $100 invested on December 18, 1995, in the common stock of Ascent
Entertainment Group, Inc., the S&P 500 Index, and the S&P Entertainment Index.
The stock price performance shown in this graph is not necessarily
indicative of future stock price performance.
Note: (a) Total return assumes the reinvestment of dividends.
20
<PAGE>
ITEM 2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The stockholders will vote at the meeting to appoint independent public
accountants to audit and certify to the stockholders the financial statements of
the Company for the fiscal year ending December 31, 1997. The Board of Directors
has recommended the appointment of Deloitte & Touche as such independent public
accountants; they acted in such capacity for fiscal year 1996. Representatives
of Deloitte & Touche will be present at the meeting to respond to appropriate
questions and to make a statement if they desire to do so.
THE DIRECTORS RECOMMEND A VOTE FOR THE APPOINTMENT OF DELOITTE & TOUCHE AS
INDEPENDENT PUBLIC ACCOUNTANTS. PROXIES SOLICITED BY THE MANAGEMENT WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY CHOICE IN THEIR PROXIES. FOR
APPROVAL, THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
REPRESENTED AND ENTITLED TO VOTE AT THE MEETING.
OTHER MATTERS
At April 24, 1997, the management of the Company knew of no other matters to
be presented for action at the meeting. If any other matter is properly
introduced, the persons named in the accompanying form of proxy will vote the
shares represented by the proxies according to their judgment.
The Company will bear all costs of the proxy solicitation. In addition to
the solicitation by mail, the Company's directors, officers and employees,
without additional compensation, may solicit proxies by telephone, personal
contact or other means. The Company also has retained D.F. King to assist in the
solicitation, at a cost of $1,500. The Company will reimburse brokers and other
persons holding shares in their names, or in the names of nominees, for their
expenses in forwarding proxy materials to the beneficial owners.
Stockholders wishing to submit proposals for consideration at the 1998
Annual Meeting should submit them in writing to the Secretary, Ascent
Entertainment Group, Inc., One Tabor Center, 1200 Seventeenth Street, Denver,
Colorado 80202, to be received no later than December 18, 1997.
This proxy statement is provided by direction of the Board of Directors.
Arthur M. Aaron
VICE PRESIDENT, BUSINESS AND LEGAL
AFFAIRS
AND SECRETARY
April 24, 1997
21
<PAGE>
PROXY CARD - FRONT
ASCENT ENTERTAINMENT GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 13, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Charles Lyons and C.J. Silas, and each
or any of them (with power of substitution), proxies for the undersigned to
represent and to vote, as designated on the reverse side hereof, all shares
of Common Stock of Ascent Entertainment Group, Inc. which the undersigned
would be entitled to vote if personally present at the Annual Meeting of its
stockholders to be held on May 13, 1997, and at any reconvened session
thereof, subject to any directions indicated on the reverse side of this
card. If no directions are given, this proxy will be voted FOR Proposals 1
and 2.
This proxy is continued on the reverse side. Please sign and return
promptly in the envelope provided. No postage is required if mailed in the
United States. If you attend the Meeting and vote in person, the proxy will
not be used.
Continued and to be signed and dated on reverse side.
- --------------------------------------------------------------------------
<PAGE>
PROXY CARD - BACK
Directors recommend a vote FOR Proposals 1 and 2.
- ----------------------------------------
1. Election of two Class III directors,
the Class I director and the Class
Class II director
For all nominees listed below [ ]
Withhold Authority to vote for all nominees listed below [ ]
Exceptions* [ ]
Nominees: Class II Directors: Charles M. Neinas and Robert G. Schwartz
Class I Director: Allen E. Flower
Class III Director: Charles M. Lillis
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below)
*Exceptions
---------------------------------
2. Appointment of independent accountants. Change of address AND
or comments mark here
For [ ] Against [ ] Abstain [ ]
----------------------
In their discretion the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any reconvened session
thereof.
Please sign exactly as name or names appear on this proxy. If stock is held
jointly, each holder should sign. If signing as attorney, trustee, executor,
administrator, custodian, guardian or corporate officer, please give full
title.
DATED , 1997
--------------------------------------------
SIGNED
-------------------------------------------
SIGNATURE IF HELD JOINTLY
------------------------
Please sign, date and return this Votes must be indicated
card promptly in the enclosed [X] in Black or Blue ink.
envelope.
