Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.  20549
 
FORM 10-Q
 
ý            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2015
 
OR
 
o               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from            to
 
Commission File Number 001-34176
 
ASCENT CAPITAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
 
State of Delaware
 
26-2735737
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
5251 DTC Parkway, Suite 1000
 
 
Greenwood Village, Colorado
 
80111
(Address of principal executive offices)
 
(Zip Code)
 Registrant’s telephone number, including area code: (303) 628-5600

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 Exchange 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 ý   No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ý   No  o
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
 
Accelerated filer  o
Non-accelerated filer  o
 
Smaller reporting company  o
(Do not check if a smaller reporting company)
 
 
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o No  ý

The number of outstanding shares of Ascent Capital Group, Inc.’s common stock as of October 23, 2015 was:

Series A common stock 12,271,088 shares; and
Series B common stock 384,086 shares.

Table of Contents

TABLE OF CONTENTS
 
 
 
Page
 
 
 
PART I — FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1
Table of Contents

Item 1.   Financial Statements.
ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
Amounts in thousands, except share amounts
(unaudited)
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 

 
 

Cash and cash equivalents
$
34,045

 
$
12,612

Restricted cash
60

 
18

Marketable securities, at fair value
94,141

 
122,593

Trade receivables, net of allowance for doubtful accounts of $2,440 in 2015 and $2,120 in 2014
14,236

 
13,796

Deferred income tax assets, net
6,346

 
6,346

Prepaid and other current assets
11,215

 
8,546

Assets held for sale
6,418

 
18,935

Total current assets
166,461

 
182,846

Property and equipment, net of accumulated depreciation of $36,765 in 2015 and $30,030 in 2014
32,706

 
36,010

Subscriber accounts, net of accumulated amortization of $915,396 in 2015 and $736,824 in 2014
1,423,573

 
1,373,630

Dealer network and other intangible assets, net of accumulated amortization of $69,044 in 2015 and $54,077 in 2014
31,189

 
44,855

Goodwill
563,549

 
527,502

Other assets, net
24,559

 
27,520

Total assets
$
2,242,037

 
$
2,192,363

Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
9,312

 
$
6,781

Accrued payroll and related liabilities
5,080

 
4,077

Other accrued liabilities
42,389

 
30,727

Deferred revenue
15,497

 
14,945

Holdback liability
18,569

 
19,046

Current portion of long-term debt
5,500

 
9,166

Liabilities of discontinued operations
3,500

 
6,401

Total current liabilities
99,847

 
91,143

Non-current liabilities:
 

 
 

Long-term debt
1,734,800

 
1,618,324

Long-term holdback liability
3,003

 
5,156

Derivative financial instruments
17,166

 
5,780

Deferred income tax liability, net
18,962

 
15,875

Other liabilities
17,514

 
16,397

Total liabilities
1,891,292

 
1,752,675

Commitments and contingencies


 


Stockholders’ equity:
 

 
 

Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued
—

 
—

Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 12,357,788 and 13,162,095 shares at September 30, 2015 and December 31, 2014, respectively
124

 
132

Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 384,086 shares both at September 30, 2015 and December 31, 2014
4

 
4

Series C common stock, $0.01 par value. Authorized 45,000,000 shares; no shares issued
—

 
—

Additional paid-in capital
1,418,356

 
1,441,291

Accumulated deficit
(1,047,505
)
 
(994,931
)
Accumulated other comprehensive loss, net
(20,234
)
 
(6,808
)
Total stockholders’ equity
350,745

 
439,688

Total liabilities and stockholders’ equity
$
2,242,037

 
$
2,192,363

 

See accompanying notes to condensed consolidated financial statements.

2
Table of Contents

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Amounts in thousands, except per share amounts
(unaudited)  
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Net revenue
$
141,846

 
136,027

 
$
421,805

 
403,587

Operating expenses:
 

 
 

 
 
 
 
Cost of services
28,245

 
24,475

 
81,015

 
69,106

Selling, general and administrative, including stock-based compensation
31,362

 
24,336

 
88,643

 
77,609

Radio conversion costs
3,570

 
360

 
4,543

 
801

Amortization of subscriber accounts, dealer network and other intangible assets
66,958

 
64,341

 
193,625

 
189,382

Depreciation
2,805

 
2,525

 
7,788

 
7,851

Restructuring charges
—

 
51

 
—

 
969

Gain on disposal of operating assets
(1
)
 
—

 
(1,155
)
 
(69
)
 
132,939

 
116,088

 
374,459

 
345,649

Operating income
8,907

 
19,939

 
47,346

 
57,938

Other income (expense), net:
 

 
 

 
 
 
 
Interest income
779

 
822

 
2,041

 
2,542

Interest expense
(31,466
)
 
(29,894
)
 
(92,140
)
 
(87,761
)
Refinancing expense
—

 
—

 
(4,468
)
 
—

Other income (expense), net
(3,555
)
 
(10
)
 
(2,278
)
 
1,607

 
(34,242
)
 
(29,082
)
 
(96,845
)
 
(83,612
)
Loss from continuing operations before income taxes
(25,335
)
 
(9,143
)
 
(49,499
)
 
(25,674
)
Income tax expense from continuing operations
(1,989
)
 
(1,849
)
 
(5,996
)
 
(5,207
)
Net loss from continuing operations
(27,324
)
 
(10,992
)
 
(55,495
)
 
(30,881
)
Discontinued operations:
 

 
 

 
 
 
 
Income (loss) from discontinued operations
2,994

 
(133
)
 
2,921

 
(254
)
Income tax expense from discontinued operations
—

 
—

 
—

 
—

Income (loss) from discontinued operations, net of income tax
2,994

 
(133
)
 
2,921

 
(254
)
Net loss
(24,330
)
 
(11,125
)
 
(52,574
)
 
(31,135
)
Other comprehensive income (loss):
 

 
 

 
 
 
 
Foreign currency translation adjustments
(220
)
 
(305
)
 
(151
)
 
(107
)
Unrealized holding losses on marketable securities, net
1,085

 
(1,646
)
 
(868
)
 
(1,500
)
Unrealized gain (loss) on derivative contracts, net
(8,946
)
 
4,355

 
(12,407
)
 
(1,784
)
Total other comprehensive income (loss), net of tax
(8,081
)
 
2,404

 
(13,426
)
 
(3,391
)
Comprehensive loss
$
(32,411
)
 
(8,721
)
 
$
(66,000
)
 
(34,526
)
 
 
 
 
 
 
 
 
Basic and diluted income (loss) per share:
 

 
 

 
 
 
 
Continuing operations
$
(2.10
)
 
(0.81
)
 
$
(4.23
)
 
(2.26
)
Discontinued operations
0.23

 
(0.01
)
 
0.22

 
(0.02
)
Net loss
$
(1.87
)
 
(0.82
)
 
$
(4.01
)
 
(2.28
)
 

See accompanying notes to condensed consolidated financial statements.

3
Table of Contents

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Amounts in thousands
(unaudited)
 
Nine Months Ended 
 September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(52,574
)
 
(31,135
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 
 

Loss (income) from discontinued operations, net of income tax
(2,921
)
 
254

Amortization of subscriber accounts, dealer network and other intangible assets
193,625

 
189,382

Depreciation
7,788

 
7,851

Stock-based compensation
5,038

 
5,141

Deferred income tax expense
3,076

 
2,597

Gain on disposal of operating assets
(1,155
)
 
(69
)
Long-term debt amortization
3,725

 
3,255

Refinancing expense
4,468

 
—

Other non-cash activity, net
17,622

 
8,679

Changes in assets and liabilities:
 

 
 

Trade receivables
(7,203
)
 
(6,657
)
Prepaid expenses and other assets
(4,235
)
 
1,612

Subscriber accounts - deferred contract costs
(1,181
)
 
—

Payables and other liabilities
7,857

 
8,294

Operating activities from discontinued operations, net
20

 
(1,036
)
Net cash provided by operating activities
173,950

 
188,168

Cash flows from investing activities:
 

 
 

Capital expenditures
(10,042
)
 
(5,035
)
Cost of subscriber accounts acquired
(205,050
)
 
(202,429
)
Cash paid for acquisition, net of cash acquired
(56,778
)
 
—

Purchases of marketable securities
(24,448
)
 
(3,535
)
Proceeds from sale of marketable securities
48,616

 
—

Increase in restricted cash
(42
)
 
(51
)
Proceeds from the disposal of operating assets
20,174

 
241

Other investing activities
—

 
(436
)
Net cash used in investing activities
(227,570
)
 
(211,245
)
Cash flows from financing activities:
 

 
 

Proceeds from long-term debt
749,550

 
139,500

Payments on long-term debt
(640,465
)
 
(88,774
)
Payments of financing costs
(6,477
)
 
—

Stock option exercises
—

 
719

Purchases and retirement of common stock
(27,555
)
 
(22,475
)
Net cash provided by financing activities
75,053

 
28,970

Net increase in cash and cash equivalents
21,433

 
5,893

Cash and cash equivalents at beginning of period
12,612

 
44,701

Cash and cash equivalents at end of period
$
34,045

 
50,594

Supplemental cash flow information:
 

 
 

State taxes paid, net
$
3,491

 
2,644

Interest paid
71,180

 
67,314


See accompanying notes to condensed consolidated financial statements.

4
Table of Contents

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
Amounts in thousands
(unaudited)
 


 
 
 
 
 
 
 
 
Additional Paid-in Capital
 
 
 
Accumulated Other Comprehensive Loss
 
Total Stockholders' Equity
 
Preferred Stock
 
Common Stock
 
 
Accumulated Deficit
 
 
 
 
Series A
 
Series B
 
Series C
 
 
 
 
Balance at December 31, 2014
$
—

 
132

 
4

 
—

 
1,441,291

 
(994,931
)
 
(6,808
)
 
439,688

Net loss
—

 
—

 
—

 
—

 
—

 
(52,574
)
 
—

 
(52,574
)
Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
—

 
(13,426
)
 
(13,426
)
Stock-based compensation
—

 
—

 
—

 
—

 
5,304

 
—

 
—

 
5,304

Stock awards
—

 
1

 
—

 
—

 
(1
)
 
—

 
—

 
—

Value of shares withheld for minimum tax liability
—

 


 
—

 
—

 
(692
)
 
—

 
—

 
(692
)
Purchases and retirement of common stock
—

 
(9
)
 
—

 
—

 
(27,546
)
 
—

 
—

 
(27,555
)
Balance at September 30, 2015
$
—

 
124

 
4

 
—

 
1,418,356

 
(1,047,505
)
 
(20,234
)
 
350,745

 
See accompanying notes to condensed consolidated financial statements.

5
Table of Contents

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
 
(1)      Basis of Presentation
 
The accompanying Ascent Capital Group, Inc. (“Ascent Capital” or the “Company”) condensed consolidated financial statements represent the financial position and results of operations of Ascent Capital and its consolidated subsidiaries.  Monitronics International, Inc. (“Monitronics”) is the primary, wholly owned, operating subsidiary of the Company.  On February 23, 2015, Monitronics acquired LiveWatch Security, LLC ("LiveWatch"), a Do-It-Yourself home security firm, offering professionally monitored security services through a direct-to-consumer sales channel (the "LiveWatch Acquisition"). On August 16, 2013, Monitronics acquired all of the equity interest of Security Networks LLC ("Security Networks") and certain affiliated entities (the "Security Networks Acquisition").

The unaudited interim financial information of the Company has been prepared in accordance with Article 10 of the Securities and Exchange Commission’s (the “SEC”) Regulation S-X. Accordingly, it does not include all of the information required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements. The Company’s unaudited condensed consolidated financial statements as of September 30, 2015 , and for the three and nine months ended September 30, 2015 and 2014 , include Ascent Capital and all of its direct and indirect subsidiaries.  The accompanying interim condensed consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results for such periods.  The results of operations for any interim period are not necessarily indicative of results for the full year.  These condensed consolidated financial statements should be read in conjunction with the Ascent Capital Annual Report on Form 10-K for the year ended December 31, 2014 , filed with the SEC on February 27, 2015 (the “2014 Form 10-K”).
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses for each reporting period.  The significant estimates made in preparation of the Company’s condensed consolidated financial statements primarily relate to valuation of goodwill, other intangible assets, long-lived assets, deferred tax assets, derivative financial instruments, and the amount of the allowance for doubtful accounts. These estimates are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts them when facts and circumstances change. As the effects of future events cannot be determined with any certainty, actual results could differ from the estimates upon which the carrying values were based.

The Company has reclassified certain prior period amounts related to Radio conversion costs to conform to the current period's presentation. These costs were previously reported in Cost of services on the Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss). Radio conversion costs represent the costs incurred by Monitronics to upgrade subscribers' alarm monitoring systems in relation to Monitronics' Radio Conversion Program, which was implemented in 2014 in response to one of the nation's largest carriers announcing that it does not intend to support its 2G cellular network services beyond 2016.
 
(2)       Recent Accounting Pronouncements

In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16, Business Combinations (Topic 805) . Under the update, an acquirer in a business combination is no longer required to account for measurement-period adjustments retrospectively, and, instead, will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment. The effective date of the standard is for fiscal years beginning after December 15, 2015, and interim periods within those years. The Company does not expect the impact of adopting this ASU to be material to the Company's financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . Under the update, revenue will be recognized based on a five-step model. The core principle of the model is that revenue will be recognized when the transfer of promised goods or services to customers is made in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In the third quarter of 2015, the FASB deferred the effective date of the standard to annual and interim periods beginning after December 15, 2017. Early adoption will be permitted for annual and interim periods beginning after December 15, 2016. The Company is currently evaluating the impact that adopting this ASU will have on its financial position, results of operations and cash flows.
 

6

(3)    LiveWatch Acquisition
 
On February 23, 2015 (the "Closing Date"), Monitronics acquired LiveWatch for a purchase price of approximately $61,550,000 (the "LiveWatch Purchase Price").  The LiveWatch Purchase Price includes approximately $3,988,000 of cash transferred directly to LiveWatch to fund transaction bonuses payable to LiveWatch employees as of the Closing Date. This cash is not included in the fair value of consideration transferred for the LiveWatch Acquisition. The LiveWatch Purchase Price also includes post-closing adjustments of $435,000 which were paid in the third quarter of 2015. The LiveWatch Acquisition was funded by borrowings from Monitronics' revolving credit facility, as well as cash contributions from Ascent Capital.

In connection with the LiveWatch Acquisition, Monitronics entered into employment agreements with certain key members of the LiveWatch management team which provide for retention bonuses of $6,000,000 (the "LiveWatch Retention Bonuses") to be paid on the second anniversary of the Closing Date, and performance based bonus arrangements payable on the fourth anniversary of the Closing Date, assuming certain performance metrics are met by LiveWatch during the first four years following the Closing Date (the "LiveWatch Performance Bonuses"). The LiveWatch Performance Bonuses are estimated to yield an aggregate payout of approximately $8,500,000 . The LiveWatch Retention Bonuses and LiveWatch Performance Bonuses (together, the "LiveWatch Acquisition Contingent Bonuses") are contingent upon the continued employment of the key members of the LiveWatch management team. As such, the LiveWatch Acquisition Contingent Bonuses are expensed ratably over the service period based on the estimated value of the payouts. For the three and nine months ended September 30, 2015 , the Company recognized $1,291,000 and $3,086,000 , respectively, related to the LiveWatch Acquisition Contingent Bonuses, which are included in Selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive income (loss).
 
The LiveWatch Acquisition was accounted for as a business combination utilizing the acquisition method in accordance with FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations .  Under the acquisition method of accounting, the fair value of the consideration transferred has been allocated to LiveWatch's tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary estimates of fair value as follows (amounts in thousands):
Cash
$
784

Trade receivables
273

Other current assets
706

Property and equipment
362

Subscriber accounts
24,900

Other intangible asset
1,300

Goodwill
36,047

Current liabilities
(6,810
)
Fair value of consideration transferred
$
57,562


The Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (File No. 001-34176), filed with the SEC on August 10, 2015 (the "June 2015 10-Q"), included a preliminary allocation of the purchase price. Subsequent to filing the Company's June 2015 10-Q, an adjustment was made to increase goodwill by $81,000 . The increase to goodwill is primarily related to adjustments related to the current liabilities acquired and other working capital adjustments.

The preliminary estimates of the fair value of assets acquired and liabilities assumed are based on available information as of the date of this report and may be revised as additional information becomes available, which primarily includes the finalization of the valuation of assets and liabilities acquired.

Goodwill in the amount of $36,047,000 was recognized in connection with the LiveWatch Acquisition and was calculated as the excess of the consideration transferred over the net assets recognized and represents the value to Monitronics for LiveWatch's recurring revenue and cash flow streams and its diversified business model and marketing channel. All of the goodwill acquired in the LiveWatch Acquisition is estimated to be deductible for tax purposes.

The subscriber accounts acquired in the LiveWatch Acquisition are amortized using the 14 -year 235% declining balance method. The other intangible asset acquired, which represents LiveWatch's trademark asset, is amortized on a straight-line basis over its estimated useful life of 10 years .


7

The Company incurred $946,000 of legal and professional services expense and other costs related to the LiveWatch Acquisition, which are included in Selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive income (loss).

Ascent Capital's results of operations for the three and nine months ended September 30, 2015 include the operations of LiveWatch from the Closing Date. The effect of the LiveWatch Acquisition was not material to the Company's consolidated results for the periods presented and, accordingly, proforma financial disclosures have not been presented.
 
(4)    Investments in Marketable Securities
 
Ascent Capital owns marketable securities primarily consisting of diversified corporate bond funds. The following table presents the activity of these investments, which have all been classified as available-for-sale securities (amounts in thousands):
 
Nine Months Ended 
 September 30,
 
2015
 
2014
Beginning balance
$
122,593

 
129,496

Purchases
24,448

 
3,535

Sales at cost basis (a)
(48,267
)
 
—

Realized and unrealized losses, net
(4,633
)
 
(1,500
)
Ending balance
$
94,141

 
131,531

 
(a)          For the nine months ended September 30, 2015 , total proceeds from the sale of marketable securities were $48,616,000 , resulting in a pre-tax gain of $349,000 .
 
The following table presents the changes in Accumulated other comprehensive loss on the condensed consolidated balance sheets for unrealized and realized gains and losses of the investments in marketable securities (amounts in thousands): 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Accumulated other comprehensive loss
 

 
 

 
 
 
 
Beginning balance
$
(3,741
)
 
1,644

 
$
(1,788
)
 
1,498

Unrealized losses, net of income tax of $0
(2,754
)
 
(1,646
)
 
(4,283
)
 
(1,500
)
Realized and unrealized losses recognized into earnings, net of income tax of $0 (a)
3,839

 
—

 
3,415

 
—

Ending balance
$
(2,656
)
 
(2
)
 
$
(2,656
)
 
(2
)
 
(a)          Realized and unrealized losses recognized into earnings for the three and nine months ended September 30, 2015 is included in Other income (expense), net on the consolidated statements of operations and comprehensive income (loss). For the three and nine months ended September 30, 2015 , realized and unrealized losses recognized into earnings include other-than-temporary impairment losses of $3,764,000 related to certain securities that the Company believes would more-likely-than-not be required to sell prior to recovery of the amortized cost basis. For the three months ended September 30, 2015 , the Company also recognized into earnings net losses on the sale of marketable securities of $75,000 and, for the nine months ended September 30, 2015 , net gains on the sale of marketable securities of $349,000 .

(5)      Assets Held for Sale

In the first and second quarters of 2015, the Company completed sales of assets held for sale with a total net book value of $18,935,000 , for gains of approximately $1,151,000 . As of September 30, 2015 , the Company has reclassified $6,418,000 of land and building, net of accumulated depreciation, to Assets held for sale on the condensed consolidated balance sheet. The Company currently expects to complete the sale of these real estate properties during the next twelve months.


8

(6)      Goodwill

The following table provides the activity and balances of goodwill (amounts in thousands):
Balance at December 31, 2014
$
527,502

LiveWatch Acquisition
36,047

Balance at September 30, 2015
$
563,549

 
The Company accounts for its goodwill pursuant to the provisions of FASB ASC Topic 350, Intangibles - Goodwill and Other (“FASB ASC Topic 350”). In accordance with FASB ASC Topic 350, goodwill is not amortized, but rather tested for impairment annually or if an event occurs, or circumstances change, that indicate the fair value of the entity may be below its carrying amount (a "triggering event"). Our annual impairment testing of goodwill is performed in the fourth quarter of each fiscal year.

As of September 30, 2015, the Company determined that a triggering event had occurred due to a sustained decrease in the Company's market capitalization. In response to the triggering event, the Company performed Step 1 of the goodwill impairment test in accordance with FASB ASC Topic 350 and determined that there was no impairment.

(7)      Other Accrued Liabilities
 
Other accrued liabilities consisted of the following (amounts in thousands):
 
September 30,
2015
 
December 31,
2014
Interest payable
$
27,820

 
$
15,594

Income taxes payable
3,036

 
3,577

Legal accrual
423

 
872

Other
11,110

 
10,684

Total Other accrued liabilities
$
42,389

 
$
30,727


(8)    Long-Term Debt
 
Long-term debt consisted of the following (amounts in thousands):
 
September 30,
2015
 
December 31,
2014
Ascent Capital 4.00% Convertible Senior Notes due July 15, 2020
$
80,266

 
$
77,531

Monitronics 9.125% Senior Notes due April 1, 2020
585,224

 
585,251

Monitronics term loans, mature April 9, 2022, LIBOR plus 3.50%, subject to a LIBOR floor of 1.00% (4.50%)
544,650

 
—

Monitronics term loans, mature March 23, 2018, LIBOR plus 3.25%, subject to a LIBOR floor of 1.00% (4.25%)
400,560

 
894,208

Monitronics $315 million revolving credit facility, matures December 22, 2017, LIBOR plus 3.75%, subject to a LIBOR floor of 1.00% (4.75%)
129,600

 
70,500

 
1,740,300

 
1,627,490

Less current portion of long-term debt
(5,500
)
 
(9,166
)
Long-term debt
$
1,734,800

 
$
1,618,324


Convertible Notes
 
The convertible notes total $103,500,000 in aggregate principal amount, mature on July 15, 2020 and bear interest at 4.00% per annum (the “Convertible Notes”). Interest on the Convertible Notes is payable semi-annually on January 15 and July 15 of each year. The Convertible Notes are convertible, under certain circumstances, into cash, shares of Ascent Capital's Series A Common Stock, par value $0.01 per share (the "Series A Common Stock"), or any combination thereof at Ascent Capital’s election.
 

9

Holders of the Convertible Notes (“Noteholders”) have the right, at their option, to convert all or any portion of such Convertible Notes, subject to the satisfaction of certain conditions, at an initial conversion rate of 9.7272 shares of Series A Common Stock per $1,000 principal amount of Convertible Notes (subject to adjustment in certain situations), which represents an initial conversion price per share of Series A Common Stock of approximately $102.804 (the “Conversion Price”).  Ascent Capital is entitled to settle any such conversion by delivery of cash, shares of Series A Common Stock or any combination thereof at Ascent Capital's election. In addition, Noteholders have the right to submit Convertible Notes for conversion, subject to the satisfaction of certain conditions, in the event of certain corporate transactions.
 
In the event of a fundamental change (as such term is defined in the indenture governing the Convertible Notes) at any time prior to the maturity date, each Noteholder shall have the right, at such Noteholder’s option, to require Ascent Capital to repurchase for cash any or all of such Noteholder’s Convertible Notes on the repurchase date specified by Ascent Capital at a repurchase price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, including unpaid additional interest, if any, unless the repurchase date occurs after an interest record date and on or prior to the related interest payment date, as specified in the indenture.
 
The Convertible Notes are within the scope of FASB ASC Subtopic 470-20, Debt with Conversion and Other Options , and as such are required to be separated into a liability and equity component. The carrying amount of the liability component is calculated by measuring the fair value of a similar liability (including any embedded features other than the conversion option) that does not have an associated conversion option. The carrying amount of the equity component is determined by deducting the fair value of the liability component from the initial proceeds ascribed to the Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, treated as a debt discount, is amortized to interest cost over the expected life of a similar liability that does not have an associated conversion option using the effective interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification as prescribed in FASB ASC Subtopic 815-40, Contracts in an Entity’s Own Equity . 

The Convertible Notes are presented on the consolidated balance sheet as follows (amounts in thousands):
 
As of
September 30,
2015
 
As of
December 31,
2014
Principal
$
103,500

 
$
103,500

Unamortized discount
(23,234
)
 
(25,969
)
Carrying value
$
80,266

 
$
77,531

 
The Company is using an effective interest rate of 10.0% to calculate the accretion of the debt discount, which is being recorded as interest expense over the expected remaining term to maturity of the Convertible Notes.  The Company recognized contractual interest expense of $1,035,000 and $3,105,000 on the Convertible Notes for the three and nine months ended September 30, 2015 and September 30, 2014 , respectively. The Company amortized $934,000 and $ 2,735,000 of the Convertible Notes debt discount into interest expense for the three and nine months ended September 30, 2015 , respectively, compared to $845,000 and $2,475,000 for three and nine months ended September 30, 2014 , respectively.
 
Hedging Transactions Relating to the Offering of the Convertible Notes
 
In connection with the issuance of the Convertible Notes, Ascent Capital entered into separate privately negotiated purchased call options (the “Bond Hedge Transactions”).  The Bond Hedge Transactions require the counterparties to offset Series A Common Stock deliverable or cash payments made by Ascent Capital upon conversion of the Convertible Notes in the event that the volume-weighted average price of the Series A Common Stock on each trading day of the relevant valuation period is greater than the strike price of $102.804 , which corresponds to the Conversion Price of the Convertible Notes.  The Bond Hedge Transactions cover, subject to anti-dilution adjustments, approximately 1,007,000 shares of Series A Common Stock, which is equivalent to the number of shares initially issuable upon conversion of the Convertible Notes, and are expected to reduce the potential dilution with respect to the Series A Common Stock, and/or offset potential cash payments Ascent Capital is required to make in excess of the principal amount of the Convertible Notes upon conversion.
 
Concurrently with the Bond Hedge Transactions, Ascent Capital also entered into separate privately negotiated warrant transactions with each of the call option counterparties (the “Warrant Transactions”).  The warrants are European options, and are exercisable in tranches on consecutive trading days starting after the maturity of the Convertible Notes.  The warrants cover the same initial number of shares of Series A Common Stock, subject to anti-dilution adjustments, as the Bond Hedge Transactions.  The Warrant Transactions require Ascent Capital to deliver Series A Common Stock or make cash payments to the counterparties on each expiration date with a value equal to the number of warrants exercisable on that date times the

10

excess of the volume-weighted average price of the Series A Common Stock over the strike price of $118.62 , which effectively reflects a 50% conversion premium on the Convertible Notes.  As such, the Warrant Transactions may have a dilutive effect with respect to the Common Stock to the extent the Warrant Transactions are settled with shares of Series A Common Stock. Ascent Capital may elect to settle its delivery obligation under the Warrant Transactions in cash.
 
The Bond Hedge Transactions and Warrant Transactions are separate transactions entered into by Ascent Capital, are not part of the terms of the Convertible Notes and will not affect the Noteholders’ rights under the Convertible Notes.  The Noteholders will not have any rights with respect to the Bond Hedge Transactions or the Warrant Transactions.
 
Senior Notes
  
The senior notes total $585,000,000 in principal, mature on April 1, 2020 and bear interest at 9.125% per annum (the "Senior Notes").  Interest payments are due semi-annually on April 1 and October 1 of each year. The Senior Notes are guaranteed by all of Monitronics’ existing domestic subsidiaries.  Ascent Capital has not guaranteed any of Monitronics’ obligations under the Senior Notes.

Credit Facility

On February 17, 2015, Monitronics entered into an amendment (“Amendment No. 4”) with the lenders of its existing senior secured credit agreement dated March 23, 2012, and as amended and restated on August 16, 2013, March 25, 2013 and November 7, 2012 (the “Existing Credit Agreement”).  Amendment No. 4 provided for, among other things, an increase in the commitments under the revolving credit facility in a principal amount of $90,000,000 .

On April 9, 2015, Monitronics entered into Amendment No. 5 (“Amendment No. 5”) to its Existing Credit Agreement. Pursuant to Amendment No. 5, Monitronics completed the issuance of an incremental $550,000,000 senior secured Term Loan B offering at a 0.5% discount with a maturity date of April 9, 2022 (the "2022 Term Loans"). Monitronics used the net proceeds to retire approximately $492,000,000 of its existing term loans due March 2018 (the "2018 Term Loans") and repaid $49,900,000 of its revolving credit facility. Amendment No. 5 (the Existing Credit Agreement together with Amendment No. 4 and Amendment No. 5, the "Credit Facility") also incorporates certain covenant changes, including the removal of the third quarter 2015 step downs of the senior secured and total leverage ratios, both as defined in the Credit Facility.
 
The 2018 Term Loans bear interest at LIBOR plus 3.25% , subject to a LIBOR floor of 1.00% , and mature on March 23, 2018. Interest payments on the 2018 Term Loans are due quarterly with the principal due at maturity. The 2022 Term Loans bear interest at LIBOR plus 3.50% , subject to a LIBOR floor of 1.00% . Principal payments of approximately $1,375,000 and interest on the term loans are due quarterly on the 2022 Term Loans.  The Credit Facility revolver bears interest at LIBOR plus 3.75% , subject to a LIBOR floor of 1.00% , and matures on December 22, 2017.  There is an annual commitment fee of 0.50% on unused portions of the Credit Facility revolver.  As of September 30, 2015 , $185,400,000 is available for borrowing under the revolving credit facility.
 
At any time after the occurrence of an event of default under the Credit Facility, the lenders may, among other options, declare any amounts outstanding under the Credit Facility immediately due and payable and terminate any commitment to make further loans under the Credit Facility.  In addition, failure to comply with restrictions contained in the Senior Notes could lead to an event of default under the Credit Facility.

On September 30, 2015 , Monitronics borrowed $27,000,000 on the Credit Facility revolver to fund its October 1, 2015 interest payment due under the Senior Notes of $26,691,000 .

The Credit Facility is secured by a pledge of all of the outstanding stock of Monitronics and all of its existing subsidiaries and is guaranteed by all of Monitronics’ existing domestic subsidiaries.  Ascent Capital has not guaranteed any of Monitronics’ obligations under the Credit Facility.
 
As of September 30, 2015 , the Company has deferred financing costs, net of accumulated amortization, of $20,724,000 related to the Convertible Notes, the Senior Notes and the Credit Facility. These costs are included in Other assets, net on the accompanying consolidated balance sheet and will be amortized over the remaining term of the respective debt instruments using the effective-interest method.

As a result of Amendment No. 5 to Monitronics Credit Facility, the Company incurred Refinancing expense of $4,468,000 for the nine months ended September 30, 2015 , which were primarily related to bank arrangement fees and other professional fees incurred to complete the amendment.

11

 
In order to reduce the financial risk related to changes in interest rates associated with the floating rate term loans under the Credit Facility term loans, Monitronics has entered into interest rate swap agreements with terms similar to the Credit Facility term loans (all outstanding interest rate swap agreements are collectively referred to as the “Swaps”). The Swaps have been designated as effective hedges of the Company’s variable rate debt and qualify for hedge accounting.  As a result of these interest rate swaps, Monitronics' current effective weighted average interest rate on the borrowings under the Credit Facility term loans is 5.15% . See note 9, Derivatives, for further disclosures related to these derivative instruments. 
 
The terms of the Convertible Notes, the Senior Notes and the Credit Facility provide for certain financial and nonfinancial covenants.  As of September 30, 2015 , the Company was in compliance with all required covenants.

As of September 30, 2015 , principal payments scheduled to be made on the Company’s debt obligations are as follows (amounts in thousands):
Remainder of 2015
$
1,375

2016
5,500

2017
135,100

2018
409,284

2019
5,500

2020
694,000

Thereafter
518,375

Total principal payments
$
1,769,134

Less:


Unamortized discounts and premium, net
28,834

Total debt on condensed consolidated balance sheet
$
1,740,300

 
(9)    Derivatives
 
The Company utilizes interest rate swap agreements to reduce the interest rate risk inherent in Monitronics’ variable rate Credit Facility term loans.  The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatility. The Company incorporates credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements.  See note 10, Fair Value Measurements, for additional information about the credit valuation adjustments.

As of September 30, 2015 , the Swaps’ outstanding notional balances, effective dates, maturity dates and interest rates paid and received are noted below:
Notional
 
Effective Date
 
Maturity Date
 
Fixed
Rate Paid
 
Variable Rate Received
$
530,750,000

 
March 28, 2013
 
March 23, 2018
 
1.884%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
140,650,000

 
March 28, 2013
 
March 23, 2018
 
1.384%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
109,956,030

 
September 30, 2013
 
March 23, 2018
 
1.959%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
109,956,030

 
September 30, 2013
 
March 23, 2018
 
1.850%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
191,475,002

 
March 23, 2018
 
April 9, 2022
 
2.924%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
250,000,000

 
March 23, 2018
 
April 9, 2022
 
2.810%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
 
(a)  
On March 25, 2013, Monitronics negotiated amendments to the terms of these interest rate swap agreements, which were entered into in March 2012 (the "Existing Swap Agreements," as amended, the “Amended Swaps”). 

12

The Amended Swaps are held with the same counterparties as the Existing Swap Agreements.  Upon entering into the Amended Swaps, Monitronics simultaneously dedesignated the Existing Swap Agreements and redesignated the Amended Swaps as cash flow hedges for the underlying change in the swap terms.  The amounts previously recognized in Accumulated other comprehensive loss relating to the dedesignation are recognized in Interest expense over the remaining life of the Amended Swaps.
 
All of the Swaps are designated and qualify as cash flow hedging instruments, with the effective portion of the Swaps' change in fair value recorded in Accumulated other comprehensive loss.  Any ineffective portions of the Swaps' change in fair value are recognized in current earnings in Interest expense.  Changes in the fair value of the Swaps recognized in Accumulated other comprehensive loss are reclassified to Interest expense when the hedged interest payments on the underlying debt are recognized.  Amounts in Accumulated other comprehensive loss expected to be recognized in Interest expense in the coming 12 months total approximately $7,282,000 .

The impact of the derivatives designated as cash flow hedges on the condensed consolidated financial statements is depicted below (amounts in thousands):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Effective portion of gain (loss) recognized in Accumulated other comprehensive loss
$
(10,784
)
 
1,988

 
$
(17,872
)
 
(7,617
)
Effective portion of loss reclassified from Accumulated other comprehensive loss into Net loss (a)
$
(1,838
)
 
(2,367
)
 
$
(5,465
)
 
(5,833
)
Ineffective portion of amount of gain (loss) recognized into Net loss on interest rate swaps (a)
$
(142
)
 
59

 
$
(143
)
 
56

 
(a)          Amounts are included in Interest expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss).

(10)    Fair Value Measurements
 
According to the FASB ASC Topic 820, Fair Value Measurement , fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:
 
•
Level 1 - Quoted prices for identical instruments in active markets.
•
Level 2 - Quoted prices for similar instruments in active or inactive markets and valuations derived from models where all significant inputs are observable in active markets.
•
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable in any market.


13

The following summarizes the fair value level of assets and liabilities that are measured on a recurring basis at September 30, 2015 and December 31, 2014 (amounts in thousands): 
 
Level 1
 
Level 2
 
Level 3
 
Total
September 30, 2015
 

 
 

 
 

 
 

Money market funds (a)
$
899

 
—

 
—

 
$
899

Investments in marketable securities (b)
94,141

 
—

 
—

 
94,141

Derivative financial instruments - assets (c)
—

 
—

 
—

 
—

Derivative financial instruments - liabilities
—

 
(17,166
)
 
—

 
(17,166
)
Total
$
95,040

 
(17,166
)
 
—

 
$
77,874

December 31, 2014
 

 
 

 
 

 
 

Money market funds (a)
$
8,492

 
—

 
—

 
$
8,492

Investments in marketable securities (b)
117,765

 
4,828

 
—

 
122,593

Derivative financial instruments - assets (c)
—

 
1,123

 
—

 
1,123

Derivative financial instruments - liabilities
—

 
(5,780
)
 
—

 
(5,780
)
Total
$
126,257

 
171

 
—

 
$
126,428

 
(a)  
Included in cash and cash equivalents on the condensed consolidated balance sheets.
(b)
Level 1 investments primarily consist of diversified corporate bond funds.  The Level 2 security represents one investment in a corporate bond which was sold in the second quarter of 2015.  All investments are classified as available-for-sale securities.
(c)
  Included in Other assets, net on the condensed consolidated balance sheets.
 
The Company has determined that the significant inputs used to value the Swaps fall within Level 2 of the fair value hierarchy.  As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.
 
Carrying values and fair values of financial instruments that are not carried at fair value are as follows (amounts in thousands):
 
September 30, 2015
 
December 31, 2014
Long term debt, including current portion:
 

 
 

Carrying value
$
1,740,300

 
$
1,627,490

Fair value (a)
1,677,780

 
1,590,809

 
(a)  
The fair value is based on market quotations from third party financial institutions and is classified as Level 2 in the hierarchy.
 
Ascent Capital’s other financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates their fair value because of their short-term maturity.
 
(11)    Restructuring Charges
 
In connection with the Security Networks Acquisition, management approved a restructuring plan to transition Security Networks’ operations in West Palm Beach and Kissimmee, Florida to Dallas, Texas (the “2013 Restructuring Plan”).  The 2013 Restructuring Plan provided certain Security Networks' employees with a severance package that entitled them to receive benefits upon completion of the transition in 2014.  Severance costs related to the 2013 Restructuring Plan were recognized ratably over the future service period.  No restructuring charges were recognized during the three and nine months ended September 30, 2015 . During the three and nine months ended September 30, 2014 , the Company recognized $51,000 and $969,000 , respectively, of restructuring charges related to employee termination benefits under the 2013 Restructuring Plan. The transition of Security Networks' operations to Dallas was completed in the second quarter of 2014.
 

14

The following tables provide the activity and balances of the 2013 Restructuring Plan (amounts in thousands):
 
December 31, 2014
 
Additions
 
Payments
 
September 30, 2015
2013 Restructuring Plan
 

 
 

 
 

 
 

Severance and retention
$
134

 
—

 
(134
)
 
$
—


 
December 31, 2013
 
Additions
 
Payments
 
September 30, 2014
2013 Restructuring Plan
 
 
 
 
 
 
 
Severance and retention
$
1,570

 
969

 
(2,271
)
 
$
268


(12)      Stockholders’ Equity
 
Common Stock
 
The following table presents the activity in Ascent Capital’s Series A Common Stock and Series B common stock, par value $0.01 per share (the "Series B Common Stock"), for the nine months ended September 30, 2015 :
 
Series A
Common Stock
 
Series B
Common Stock
Balance at December 31, 2014
13,162,095

 
384,086

Issuance of restricted stock awards
80,203

 
—

Restricted stock forfeitures and tax withholding
(30,481
)
 
—

Repurchases and retirements of Series A shares
(854,029
)
 
—

Balance at September 30, 2015
12,357,788

 
384,086

 
Accumulated Other Comprehensive Income (Loss)
 
The following table provides a summary of the changes in Accumulated other comprehensive income (loss) for the period presented (amounts in thousands):
 
Foreign
currency
translation
adjustments
 
Unrealized
  holding
  gains
  and losses on
marketable
securities, net (a)
 
Unrealized
  gains and
losses on
  derivative
instruments,
net (b)
 
Accumulated
other
comprehensive
income (loss)
As of December 31, 2014
$
(215
)
 
(1,788
)
 
(4,805
)
 
$
(6,808
)
Loss through Accumulated other comprehensive loss
(151
)
 
(4,283
)
 
(17,872
)
 
(22,306
)
Reclassifications of loss (gain) into Net loss
—

 
3,415

 
5,465

 
8,880

As of September 30, 2015
$
(366
)
 
(2,656
)
 
(17,212
)
 
$
(20,234
)
 
(a)  
Amounts reclassified into net loss are included in Other income, net on the condensed consolidated statement of operations.  See note 4, Investments in Marketable Securities, for further information.
(b)
Amounts reclassified into net loss are included in Interest expense on the condensed consolidated statement of operations.  See note 9, Derivatives, for further information.
 

15

(13)    Basic and Diluted Earnings (Loss) Per Common Share—Series A and Series B
 
Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) by the weighted average number of shares of Ascent Capital Series A and Series B Common Stock outstanding for the period.  Diluted EPS is computed by dividing net earnings (loss) by the sum of the weighted average number of shares of Ascent Capital Series A and Series B Common Stock outstanding and the effect of dilutive securities such as outstanding stock options and unvested restricted stock.
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Weighted average Series A and Series B shares — basic and diluted
12,993,183

 
13,543,444

 
13,122,552

 
13,660,335

 
For all periods presented, diluted EPS is computed the same as basic EPS because the Company recorded a loss from continuing operations, which would make potentially dilutive securities anti-dilutive. For both the three and nine months ended September 30, 2015 , diluted shares outstanding excluded the effect of 766,059 potentially dilutive stock options and unvested restricted stock awards because their inclusion would have been anti-dilutive.  For both the three and nine months ended September 30, 2014 , diluted shares outstanding excluded the effect of 1,496,708 potentially dilutive stock options and unvested restricted stock awards because their inclusion would have been anti-dilutive.

(14)       Commitments, Contingencies and Other Liabilities
 
The Company is involved in litigation and similar claims incidental to the conduct of its business. Matters that are probable of unfavorable outcome to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, management’s estimate of the outcomes of such matters and experience in contesting, litigating and settling similar matters.  In management’s opinion, none of the pending actions is likely to have a material adverse impact on the Company’s financial position or results of operations.


16

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, marketing and operating strategies, integration of acquired assets and businesses, new service offerings, financial prospects, and anticipated sources and uses of capital. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:
 
•
general business conditions and industry trends;
•
macroeconomic conditions and their effect on the general economy and on the U.S. housing market, in particular single family homes which represent Monitronics’ largest demographic;
•
uncertainties in the development of our business strategies, including market acceptance of new products and services;
•
the competitive environment in which we operate, in particular increasing competition in the alarm monitoring industry from larger existing competitors and new market entrants, including telecommunications and cable companies;
•
the development of new services or service innovations by competitors;
•
Monitronics’ ability to acquire and integrate additional accounts, including competition for dealers with other alarm monitoring companies which could cause an increase in expected subscriber acquisition costs;
•
integration of acquired assets and businesses;
•
the regulatory environment in which we operate, including the multiplicity of jurisdictions and licensing requirements to which Monitronics is subject and the risk of new regulations, such as the increasing adoption of “false alarm” ordinances;
•
technological changes which could result in the obsolescence of currently utilized technology and the need for significant upgrade expenditures, including the phase-out of 2G networks by cellular carriers;
•
the trend away from the use of public switched telephone network lines and resultant increase in servicing costs associated with alternative methods of communication;
•
the operating performance of Monitronics’ network, including the potential for service disruptions at both the main monitoring facility and back-up monitoring facility due to acts of nature or technology deficiencies;
•
the outcome of any pending, threatened, or future litigation, including potential liability for failure to respond adequately to alarm activations;
•
the ability to continue to obtain insurance coverage sufficient to hedge our risk exposures, including as a result of acts of third parties and/or alleged regulatory violations;
•
changes in the nature of strategic relationships with original equipment manufacturers, dealers and other Monitronics business partners;
•
the reliability and creditworthiness of Monitronics’ independent alarm systems dealers and subscribers;
•
changes in Monitronics’ expected rate of subscriber attrition;
•
the availability and terms of capital, including the ability of Monitronics to obtain additional funds to grow its business;
•
Monitronics’ high degree of leverage and the restrictive covenants governing its indebtedness; and
•
availability of qualified personnel.
 
For additional risk factors, please see Part I, Item 1A, Risk Factors, in the 2014 Form 10-K.  These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.
 
The following discussion and analysis provides information concerning our results of operations and financial condition.  This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto included elsewhere herein and the 2014 Form 10-K.


17
Table of Contents

Overview
 
Ascent Capital Group, Inc. is a holding company and its assets primarily consist of its wholly-owned subsidiary, Monitronics International, Inc.
 
The Monitronics business provides security alarm monitoring and related services to residential and business subscribers throughout the United States and parts of Canada.  On February 23, 2015 (the "Closing Date"), Monitronics acquired LiveWatch Security, LLC ("LiveWatch"), a Do-It-Yourself home security firm, offering professionally monitored security services through a direct-to-consumer sales channel (the "LiveWatch Acquisition"). On August 16, 2013, Monitronics acquired all of the equity interest of Security Networks LLC ("Security Networks") and certain affiliated entities (the "Security Networks Acquisition"). Monitronics monitors signals arising from burglaries, fires, medical alerts and other events through security systems at subscribers’ premises, as well as provides customer service and technical support.  Nearly all of its revenues are derived from monthly recurring revenues under security alarm monitoring contracts purchased from independent dealers in its exclusive nationwide network.
 
Ascent Capital’s attrition analysis and results of operations for the three and nine months ended September 30, 2015 include the operations of the LiveWatch business from the Closing Date.
 
Attrition
 
Account cancellation, otherwise referred to as subscriber attrition, has a direct impact on the number of subscribers that Monitronics services and on its financial results, including revenues, operating income and cash flow.  A portion of the subscriber base can be expected to cancel its service every year. Subscribers may choose not to renew or terminate their contract for a variety of reasons, including relocation, cost and switching to a competitor’s service.  The largest category of canceled accounts relate to subscriber relocation or the inability to contact the subscriber.  Monitronics defines its attrition rate as the number of canceled accounts in a given period divided by the weighted average of number of subscribers for that period.  Monitronics considers an account canceled if payment from the subscriber is deemed uncollectible or if the subscriber cancels for various reasons.  If a subscriber relocates but continues its service, this is not a cancellation.  If the subscriber relocates, discontinues its service and a new subscriber takes over the original subscriber’s service continuing the revenue stream, this is also not a cancellation.  Monitronics adjusts the number of canceled accounts by excluding those that are contractually guaranteed by its dealers.  The typical dealer contract provides that if a subscriber cancels in the first year of its contract, the dealer must either replace the canceled account with a new one or refund to Monitronics the cost paid to acquire the contract. To help ensure the dealer’s obligation to Monitronics, Monitronics typically maintains a dealer funded holdback reserve ranging from 5-10% of subscriber accounts in the guarantee period.  In some cases, the amount of the holdback liability may be less than actual attrition experience.


18
Table of Contents

The table below presents subscriber data for the twelve months ended September 30, 2015 and 2014 :
 
 
Twelve Months Ended
September 30,
 
 
 
2015
 
2014
 
Beginning balance of accounts
 
1,056,734

 
1,041,740

 
Accounts acquired
 
189,590

 
155,568

 
Accounts canceled
 
(145,181
)
 
(132,158
)
 
Canceled accounts guaranteed by dealer and acquisition adjustments (a)
 
(9,516
)
 
(8,416
)
(b)
Ending balance of accounts
 
1,091,627

 
1,056,734

 
Monthly weighted average accounts
 
1,078,367

 
1,049,267

 
Attrition rate - Unit
 
(13.5
)%
 
(12.6
)%
 
Attrition rate - RMR (c)
 
(13.6
)%
 
(12.4
)%
 
 
(a)
Includes canceled accounts that are contractually guaranteed to be refunded from holdback.
(b)
Includes a net increase of 983 subscriber accounts related to the Security Networks Acquisition. The increase was driven by a favorable adjustment of 1,101 accounts associated with multi-site subscribers that were considered single accounts prior to the completion of the Security Networks integration in April 2014. The impact of this adjustment was offset by 118 subscriber accounts that were proactively canceled following the acquisition of Security Networks in August 2013 because they were active with both Monitronics and Security Networks.
(c)
The recurring monthly revenue ("RMR") of canceled accounts follows the same definition as subscriber unit attrition as noted above. RMR attrition is defined as the RMR of canceled accounts in a given period, adjusted for the impact of price increases or decreases in that period, divided by the weighted average of RMR for that period.
 
Monitronics analyzes its attrition by classifying accounts into annual pools based on the year of acquisition.  Monitronics then tracks the number of accounts that cancel as a percentage of the initial number of accounts acquired for each pool for each year subsequent to its acquisition.  Based on the average cancellation rate across the pools, in recent years Monitronics has averaged less than 1% attrition within the initial 12-month period after considering the accounts which were replaced or refunded by the dealers at no additional cost to Monitronics.  Over the next few years of the subscriber account life, the number of subscribers that cancel as a percentage of the initial number of subscribers in that pool gradually increases and historically has peaked following the end of the initial contract term, which is typically three to five years.  The peak following the end of the initial contract term is primarily a result of the buildup of subscribers that moved or no longer had need for the service but did not cancel their service until the end of their initial contract term.  Subsequent to the peak following the end of the initial contract term, the number of subscribers that cancel as a percentage of the initial number of subscribers in that pool declines.

Accounts Acquired
 
During the three months ended September 30, 2015 and 2014 , Monitronics acquired 44,776 and 43,602 subscriber accounts, respectively. During the nine months ended September 30, 2015 and 2014 , Monitronics acquired 151,592 and 118,227 subscriber accounts, respectively. Accounts acquired for the three months ended September 30, 2015 reflect bulk buys of approximately 600 accounts. Accounts acquired for the nine months ended September 30, 2015 includes 31,919 accounts from the LiveWatch Acquisition in February 2015 and reflect bulk buys of approximately 1,800 accounts. Accounts acquired for the three and nine months ended September 30, 2014 reflect bulk buys of approximately 2,500 and 5,400 accounts, respectively.

RMR acquired during the three months ended September 30, 2015 and 2014 was $2,094,000 and $2,007,000, respectively. RMR acquired during the nine months ended September 30, 2015 and 2014 was approximately $6,468,000 and $5,406,000, respectively. RMR acquired for the nine months ended September 30, 2015 includes approximately $909,000 of RMR from the LiveWatch Acquisition in February 2015.

Adjusted EBITDA
 
We evaluate the performance of our operations based on financial measures such as revenue and “Adjusted EBITDA.”  Adjusted EBITDA is defined as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization (including the amortization of subscriber accounts, dealer network and other intangible assets), restructuring charges, stock-based compensation, and other non-cash or nonrecurring charges.   Ascent Capital believes that Adjusted EBITDA is an important indicator of the operational strength and performance of its business, including the business’ ability to fund its ongoing acquisition of subscriber accounts, to fund its capital expenditures and to service its debt.  In addition, this

19
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measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance.   Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate the financial performance of companies in the security alarm monitoring industry and is one of the financial measures, subject to certain adjustments, by which Monitronics’ covenants are calculated under the agreements governing their debt obligations.  Adjusted EBITDA does not represent cash flow from operations as defined by generally accepted accounting principles (“GAAP”), should not be construed as an alternative to net income or loss and is indicative neither of our results of operations nor of cash flows available to fund all of our cash needs.  It is, however, a measurement that Ascent Capital believes is useful to investors in analyzing its operating performance.  Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP.  Adjusted EBITDA is a non-GAAP financial measure.  As companies often define non-GAAP financial measures differently, Adjusted EBITDA as calculated by Ascent Capital should not be compared to any similarly titled measures reported by other companies.

Results of Operations
 
The following table sets forth selected data from the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the periods indicated (dollar amounts in thousands).
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Net revenue
$
141,846

 
136,027

 
$
421,805

 
403,587

Cost of services
28,245

 
24,475

 
81,015

 
69,106

Selling, general, and administrative
31,362

 
24,336

 
88,643

 
77,609

Amortization of subscriber accounts, dealer network and other intangible assets
66,958

 
64,341

 
193,625

 
189,382

Interest expense
(31,466
)
 
(29,894
)
 
(92,140
)
 
(87,761
)
Income tax expense from continuing operations
(1,989
)
 
(1,849
)
 
(5,996
)
 
(5,207
)
Net loss from continuing operations
(27,324
)
 
(10,992
)
 
(55,495
)
 
(30,881
)
Net loss
(24,330
)
 
(11,125
)
 
(52,574
)
 
(31,135
)
 
 
 
 
 
 
 
 
Adjusted EBITDA   (a)
 

 
 

 
 
 
 
Monitronics business Adjusted EBITDA
$
88,277

 
91,498

 
$
269,918

 
271,475

Corporate Adjusted EBITDA
(1,961
)
 
(2,558
)
 
(5,340
)
 
(5,604
)
Total Adjusted EBITDA
$
86,316

 
88,940

 
$
264,578

 
265,871

Adjusted EBITDA as a percentage of Net revenue
 

 
 

 
 
 
 
Monitronics business
62.2
 %

67.3
 %
 
64.0
 %
 
67.3
 %
Corporate
(1.4
)%
 
(1.9
)%
 
(1.3
)%
 
(1.4
)%
 
(a)  
See reconciliation of Adjusted EBITDA to net loss from continuing operations below.

Net revenue.   Net revenue increased $5,819,000 , or 4.3% , and $18,218,000 , or 4.5% , for the three and nine months ended September 30, 2015 , respectively, as compared to the corresponding prior year periods.  The increase in net revenue is attributable to the growth in the number of subscriber accounts and the increase in average RMR per subscriber.  The growth in subscriber accounts reflects the acquisition of over 157,000 accounts through the Monitronics and LiveWatch subscriber acquisition channels subsequent to September 30, 2014 , as well as 31,919 accounts acquired in the LiveWatch Acquisition in February 2015.  Average monthly revenue per subscriber increased from $41.38 as of September 30, 2014 to $41.63 as of September 30, 2015 . Excluding accounts acquired through the LiveWatch Acquisition, which had an average monthly revenue per subscriber of $28.46, Monitronics' average monthly revenue per subscriber was $42.03 as of September 30, 2015 .

Cost of services .  Cost of services increased $3,770,000 , or 15.4% , and $11,909,000 , or 17.2% , for the three and nine months ended September 30, 2015 , respectively, as compared to the corresponding prior year periods.  The increase is attributable to the inclusion of LiveWatch, which expensed equipment costs associated with the creation of new subscribers of $2,210,000 and $4,666,000 for three and nine months ended September 30, 2015, respectively. The increase is also attributable to the growth in the number of accounts being monitored across the cellular network, including home automation accounts, and service costs to upgrade existing subscribers' equipment.  Cost of services as a percent of net revenue increased from 18.0%

20

and 17.1% for the three and nine months ended September 30, 2014 to 19.9% and 19.2% for the three and nine months ended September 30, 2015 , respectively.
 
Selling, general and administrative.  Selling, general and administrative costs (“SG&A”) increased $7,026,000 , or 28.9% , and $11,034,000 , or 14.2% , for the three and nine months ended September 30, 2015 , respectively, as compared to the corresponding prior year periods.  The increase is attributable to SG&A incurred at LiveWatch, including marketing and sales costs of $3,269,000 and $7,089,000 for the three and nine months ended September 30, 2015, respectively, related to the creation of new subscribers. For the three and nine months ended September 30, 2015 , LiveWatch SG&A also includes $1,291,000 and $3,086,000 , respectively, in LiveWatch Acquisition Contingent Bonuses payable to LiveWatch's key members of management in accordance with the employment agreements entered into in connection with the LiveWatch Acquisition. Other increases in SG&A for the nine months ended September 30, 2015 are one-time costs incurred by Monitronics of $946,000 related to professional services rendered in connection with the LiveWatch Acquisition and $720,000 of costs incurred to relocate Monitronics' headquarters in July 2015. These increases were partially offset by decreases in Monitronics' staffing and operating costs incurred at its headquarters as a result of the Security Networks' integration being completed in April 2014. SG&A for the nine months ended September 30, 2014 also includes $2,182,000 of incremental costs incurred in connection to the Security Networks' integration. SG&A as a percent of net revenue increased from 17.9% and 19.2% for the three and nine months ended September 30, 2014 to 22.1% and 21.0% for the three and nine months ended September 30, 2015 , respectively.
 
Amortization of subscriber accounts, dealer network and other intangible assets .  Amortization of subscriber accounts, dealer network and other intangible assets increased $2,617,000 and $4,243,000 for the three and nine months ended September 30, 2015 , respectively, as compared to the corresponding prior year periods.  The increase is attributable to amortization of subscriber accounts acquired subsequent to September 30, 2014 .
 
Interest expense.   Interest expense increased $1,572,000 and $4,379,000 for the three and nine months ended September 30, 2015 , respectively, as compared to the corresponding prior year periods. The increase in interest expense is primarily attributable to increases in the Company’s consolidated debt balance related to the revolver borrowings incurred by Monitronics to fund the LiveWatch Acquisition and the subsequent amendment of its Credit Facility term loans in April 2015. 
 
Income tax expense from continuing operations.   The Company had pre-tax loss from continuing operations of $25,335,000 and $49,499,000 for the three and nine months ended September 30, 2015 , respectively, and income tax expense of $1,989,000 and $5,996,000 for the three and nine months ended September 30, 2015 , respectively.  The Company had pre-tax loss from continuing operations of $9,143,000 and $25,674,000 for the three and nine months ended September 30, 2014 , respectively, and income tax expense of $1,849,000 and $5,207,000 for the three and nine months ended September 30, 2014 , respectively.  Income tax expense for the three and nine months ended September 30, 2015 and 2014 is attributable to Monitronics’ state tax expense and the deferred tax impact from amortization of deductible goodwill related to Monitronics' recent acquisitions. 


21

Adjusted EBITDA. The following table provides a reconciliation of total Adjusted EBITDA to net loss from continuing operations for the periods indicated (amounts in thousands):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Total Adjusted EBITDA
$
86,316

 
88,940

 
$
264,578

 
265,871

Amortization of subscriber accounts, dealer network and other intangible assets
(66,958
)
 
(64,341
)
 
(193,625
)
 
(189,382
)
Depreciation
(2,805
)
 
(2,525
)
 
(7,788
)
 
(7,851
)
Stock-based compensation
(1,856
)
 
(1,734
)
 
(5,038
)
 
(5,141
)
Restructuring charges
—

 
(51
)
 
—

 
(969
)
Radio conversion costs
(3,570
)
 
(360
)
 
(4,543
)
 
(801
)
LiveWatch acquisition related costs
—

 
—

 
(946
)
 
—

LiveWatch acquisition contingent bonus charges
(1,291
)
 
—

 
(3,086
)
 
—

Monitronics headquarters relocation costs
(720
)
 
—

 
(720
)
 
—

Security Networks integration related costs
—

 
—

 
—

 
(2,182
)
Other-than-temporary impairment losses on marketable securities
(3,764
)
 
—

 
(3,764
)
 
—

Interest income
779

 
822

 
2,041

 
2,542

Interest expense
(31,466
)
 
(29,894
)
 
(92,140
)
 
(87,761
)
Refinancing expense
—

 
—

 
(4,468
)
 
—

Income tax expense from continuing operations
(1,989
)
 
(1,849
)
 
(5,996
)
 
(5,207
)
Net loss from continuing operations
$
(27,324
)
 
(10,992
)
 
$
(55,495
)
 
(30,881
)
 
Adjusted EBITDA decreased $2,624,000 , or 3.0% , and $1,293,000 , or 0.5% , for the three and nine months ended September 30, 2015 , respectively, as compared to the corresponding prior year periods.  Adjusted EBITDA is negatively impacted for the three and nine months ended September 30, 2015 due to LiveWatch's direct-to-consumer business, which requires it to recognize certain revenue and expenses associated with the creation of subscriber accounts. This is in contrast to Monitronics' dealer business, which capitalizes payments to dealers to acquire accounts and amortizes those payments to amortization expense over the life of the accounts.  LiveWatch's expensed creation costs, net of creation revenue, included in adjusted EBITDA for the three and nine months ended September 30, 2015, are $4,307,000 and $8,916,000, respectively.

Monitronics' consolidated Adjusted EBITDA was $88,277,000 and $269,918,000 for the three and nine months ended September 30, 2015 , respectively, as compared to $91,498,000 and $271,475,000 for the three and nine months ended September 30, 2014 , respectively.

Liquidity and Capital Resources
 
At September 30, 2015 , we had $34,045,000 of cash and cash equivalents, $60,000 of current restricted cash, and $94,141,000 of marketable securities on a consolidated basis.  We may use a portion of these assets to decrease debt obligations, fund stock repurchases, or fund potential strategic acquisitions or investment opportunities.
 
Additionally, our other source of funds is our cash flows from operating activities which are primarily generated from the operations of Monitronics.  During the nine months ended September 30, 2015 and 2014 , our cash flow from operating activities was $173,950,000 and $188,168,000 , respectively.  The primary driver of our cash flow from operating activities is Adjusted EBITDA.  Fluctuations in our Adjusted EBITDA and the components of that measure are discussed in “Results of Operations” above.  In addition, our cash flow from operating activities may be significantly impacted by changes in working capital.
 
During the nine months ended September 30, 2015 and 2014 , the Company used cash of $205,050,000 and $202,429,000 , respectively, to fund subscriber account acquisitions, net of holdback and guarantee obligations.  In addition, during the nine months ended September 30, 2015 and 2014 , the Company used cash of $10,042,000 and $5,035,000 , respectively, to fund its capital expenditures. 


22

In 2015, Monitronics paid cash of $56,778,000 for the acquisition of LiveWatch, net of the transfer of $3,988,000 to LiveWatch upon the Closing Date to fund LiveWatch employees' transaction bonuses and LiveWatch cash on hand of $784,000 . The LiveWatch Acquisition was funded by borrowings from Monitronics' expanded Credit Facility revolver as well as cash contributions from Ascent Capital.
  
On June 16, 2011, the Company announced that it received authorization to implement a share repurchase program, pursuant to which it could purchase up to $25,000,000 of its shares of Series A Common Stock from time to time. On November 14, 2013, November 10, 2014 and September 4, 2015, the Company’s Board of Directors authorized, at each date, the repurchase of an incremental $25,000,000 of its Series A Common Stock (the "Share Repurchase Authorizations").

During the nine months ended September 30, 2015 , the Company repurchased 854,029 shares of Series A Common Stock pursuant to the Share Repurchase Authorizations for approximately $27,555,000 .  These repurchased shares were all canceled and returned to the status of authorized and unissued. As of September 30, 2015 , the remaining availability under the Company's Share Repurchase Authorizations will enable the Company purchase up to an aggregate of approximately $12,337,000 of Series A Common Stock. The Company may also purchase shares of its Series B Common Stock under the remaining availability of the Share Repurchase Authorizations.

On April 9, 2015, Monitronics entered into Amendment No. 5 (“Amendment No. 5”) to its existing senior secured credit agreement dated March 23, 2012, and as amended and restated on February 17, 2015, August 16, 2013, March 25, 2013 and November 7, 2012 (the “Existing Credit Agreement”). Pursuant to Amendment No. 5, Monitronics completed the issuance of an incremental $550,000,000 senior secured Term Loan B offering at a 0.5% discount with a maturity date of April 9, 2022. Monitronics used the net proceeds to retire approximately $492,000,000 of its existing Term Loans, due March 2018, and repaid $49,900,000 of its revolving credit facility. Amendment No. 5 (the Existing Credit Agreement together with Amendment No. 5, the "Credit Facility") also incorporates certain covenant changes, including the removal of the third quarter 2015 step downs of the senior secured and total leverage ratios, both as defined in the Credit Facility.

On September 30, 2015 , Monitronics borrowed $27,000,000 on the Credit Facility revolver to fund its October 1, 2015 interest payment due under the Senior Notes of $26,691,000 .

The existing long-term debt of the Company at September 30, 2015 includes the principal balance of $1,769,134,000 under its Convertible Notes, Senior Notes, Credit Facility term loans, and Credit Facility revolver.  The Convertible Notes have an outstanding principal balance of $103,500,000 as of September 30, 2015 and mature July 15, 2020.  The Senior Notes have an outstanding principal balance of $585,000,000 as of September 30, 2015 and mature on April 1, 2020.  The Credit Facility term loans have an outstanding principal balance of $951,034,000 as of September 30, 2015 and require principal payments of approximately $1,375,000 per quarter with $403,784,000 becoming due on March 23, 2018 and the remaining amount becoming due on April 9, 2022.  The Credit Facility revolver has an outstanding balance of $129,600,000 as of September 30, 2015 and becomes due on December 22, 2017.

In considering our liquidity requirements for the remainder of 2015 and 2016, we evaluated our known future commitments and obligations.  We will require the availability of funds to finance the strategy of our primary operating subsidiary, Monitronics, which is to grow through the acquisition of subscriber accounts. In 2014, Monitronics implemented a Radio Conversion Program in response to one of the nation's largest carriers announcing that it does not intend to support its 2G cellular network services beyond 2016. In connection with the Radio Conversion Program, Monitronics could incur incremental costs of $5,000,000 to $6,000,000 for the remainder of 2015 and $20,000,000 to $24,000,000 in 2016. We considered the expected cash flow from Monitronics, as this business is the driver of our operating cash flows.  In addition, we considered the borrowing capacity of Monitronics’ Credit Facility revolver, under which Monitronics could borrow an additional $185,400,000 as of September 30, 2015 .  Based on this analysis, we expect that cash on hand, cash flow generated from operations and available borrowings under the Monitronics’ Credit Facility will provide sufficient liquidity, given our anticipated current and future requirements.

We may seek external equity or debt financing in the event of any new investment opportunities, additional capital expenditures or our operations requiring additional funds, but there can be no assurance that we will be able to obtain equity or debt financing on terms that would be acceptable to us or at all.  Our ability to seek additional sources of funding depends on our future financial position and results of operations, which are subject to general conditions in or affecting our industry and our customers and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.


23

Goodwill

The Company accounts for its goodwill pursuant to the provisions of FASB ASC Topic 350, Intangibles - Goodwill and Other (“FASB ASC Topic 350”). In accordance with FASB ASC Topic 350, goodwill is not amortized, but rather tested for impairment annually or if an event occurs, or circumstances change, that indicate the fair value of the entity may be below its carrying amount (a "triggering event"). Our annual impairment testing of goodwill is performed in the fourth quarter of each fiscal year.

As of September 30, 2015, we determined that a triggering event had occurred due to a sustained decrease in the Company's market capitalization. In response to the triggering event, the Company performed Step 1 of the goodwill impairment test, in accordance with FASB ASC Topic 350, and determined that there was no impairment. If there is a further sustained decrease in the Company's market capitalization in future periods, the Company may be required to perform Step 2 of the goodwill impairment test.


24

Item 3.   Quantitative and Qualitative Disclosure about Market Risk
 
Interest Rate Risk
 
Due to the terms of our debt obligations, we have exposure to changes in interest rates related to these debt obligations.  Monitronics uses derivative financial instruments to manage the exposure related to the movement in interest rates.  The derivatives are designated as hedges and were entered into with the intention of reducing the risk associated with variable interest rates on the debt obligations.  We do not use derivative financial instruments for trading purposes.
 
Tabular Presentation of Interest Rate Risk
 
The table below provides information about our outstanding debt obligations and derivative financial instruments that are sensitive to changes in interest rates.  Interest rate swaps are presented at their fair value amount and by maturity date as of September 30, 2015 .  Debt amounts represent principal payments by maturity date as of September 30, 2015 .
 
Year of Maturity
 
Fixed Rate
Derivative
Instruments, net (a)
 
Variable Rate
Debt
 
Fixed Rate
Debt
 
Total
 
 
 
 
 
 
 
 
 
 
 
(Amounts in thousands)
Remainder of 2015
 
$
—

 
$
1,375

 
$
—

 
$
1,375

2016
 
—

 
5,500

 
—

 
5,500

2017
 
—

 
135,100

 
—

 
135,100

2018
 
11,519

 
409,284

 
—

 
420,803

2019
 
—

 
5,500

 
—

 
5,500

2020
 
—

 
5,500

 
688,500

 
694,000

Thereafter
 
5,647

 
518,375

 
—

 
524,022

Total
 
$
17,166

 
$
1,080,634

 
$
688,500

 
$
1,786,300

 
(a)  
The derivative financial instruments reflected in this column include four interest rate swaps with a maturity date of March 23, 2018 and two interest rate swaps with a maturity date of April 9, 2022.  As a result of these interest rate swaps, Monitronics' current effective weighted average interest rate on the borrowings under the Credit Facility term loans is 5.15% .  See notes 8, 9 and 10 to our condensed consolidated financial statements included in this quarterly report for further information.
 
Item 4.   Controls and Procedures
 
In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and chief financial officer (the “Executives”), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, the Executives concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2015 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
 
There has been no change in the Company’s internal controls over financial reporting that occurred during the three months ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, its internal controls over financial reporting.


25
Table of Contents

ASCENT CAPITAL GROUP, INC. AND SUBSIDIARIES
 
PART II - OTHER INFORMATION

Item 2 .  Unregistered Sales of Equity Securities and Use of Proceeds.
 
(c) Purchases of Equity Securities by the Issuer
 
The following table sets forth information concerning shares (i) repurchased by our company (all of which consisted of shares of our Series A Common Stock) and (ii) withheld in payment of withholding taxes, in each case, during the three months ended September 30, 2015 .
Period
 
Total number of
shares
purchased
(surrendered) (1)
 
 
 
Average price
paid per share
 
Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs
 
Maximum Number (or
Approximate Dollar
Value) or Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
 
 
7/1/2015 - 7/31/2015
 
—

 
 
 
$
—

 
—

 
 
 
 
8/1/2015 - 8/31/2015
 
191,070

 
 
 
28.39

 
—

 
 
 
 
9/1/2015 - 9/30/2015
 
438,543

 
(2)
 
30.81

 
—

 
 
 
 
Total
 
629,613

 
 
 
$
30.07

 
—

 
 
 
 
 
(1)
   On June 16, 2011, the Company announced that it received authorization to implement a share repurchase program, pursuant to which it could purchase up to $25,000,000 of its shares of Series A Common Stock, par value $0.01, from time to time.  On November 14, 2013, November 10, 2014 and September 4, 2015, the Company’s Board of Directors authorized, at each date, the repurchase of an incremental $25,000,000 of its Series A Common Stock. As of September 30, 2015 , 1,915,725 shares of Series A Common Stock had been purchased, at an average price paid of $45.76 per share, pursuant to these authorizations.  As of September 30, 2015 , the remaining availability under the Company's existing share repurchase program will enable the Company to purchase up to an aggregate of approximately $12,337,000 of Series A Common Stock. The Company may also purchase shares of its Series B Common Stock, par value $0.01 per share, under the remaining availability of the program.
 
(2)
Includes 4,752 shares withheld in payment of withholding taxes upon vesting of employees' restricted share awards.
 

26
Table of Contents

Item 6 .  Exhibits
 
Listed below are the exhibits which are included as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):
 


10.1
 
Amendment to Employment Agreement, dated July 20, 2015, by and between Ascent Capital Group, Inc. ("Ascent Capital") and Michael R. Meyers.*
10.2
 
Amendment to Employment Agreement, dated July 20, 2015, by and between Ascent Capital and William E. Niles.*
10.3
 
Amendment to Employment Agreement, dated August 25, 2015, by and between Ascent Capital and Michael R. Haislip.*
10.4
 
Employment Agreement, dated August 25, 2015, by and between Ascent Capital and Jeffrey R. Gardner.*
10.5
 
Performance-Based Restricted Stock Unit Award Agreement under the Ascent Capital 2015 Omnibus Incentive Plan (the "Omnibus Incentive Plan"), effective as of June 22, 2015, by and between Ascent Capital and William E. Niles.*
10.6
 
Performance-Based Restricted Stock Unit Award Agreement under the Omnibus Incentive Plan, effective as of March 24, 2015, by and between Ascent Capital and Michael R. Meyers.*
31.1
 
Rule 13a-14(a)/15d-14(a) Certification. *
31.2
 
Rule 13a-14(a)/15d-14(a) Certification. *
32
 
Section 1350 Certification. **
101.INS
 
XBRL Instance Document. *
101.SCH
 
XBRL Taxonomy Extension Schema Document. *
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. *
101.LAB
 
XBRL Taxonomy Extension Labels Linkbase Document. *
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document. *

 
*
Filed herewith.
**
Furnished herewith.





27
Table of Contents

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
 
 
 
 
 
 
 
Date:
November 9, 2015
 
By:
/s/ William R. Fitzgerald
 
 
 
 
William R. Fitzgerald
 
 
 
 
Chairman of the Board, Director and Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
Date:
November 9, 2015
 
By:
/s/ Michael R. Meyers
 
 
 
 
Michael R. Meyers
 
 
 
 
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


28
Table of Contents

EXHIBIT INDEX
 
Listed below are the exhibits which are included as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):
 
10.1
 
Amendment to Employment Agreement, dated July 20, 2015, by and between Ascent Capital Group, Inc. ("Ascent Capital") and Michael R. Meyers.*
10.2
 
Amendment to Employment Agreement, dated July 20, 2015, by and between Ascent Capital and William E. Niles.*
10.3
 
Amendment to Employment Agreement, dated August 25, 2015, by and between Ascent Capital and Michael R. Haislip.*
10.4
 
Employment Agreement, dated August 25, 2015, by and between Ascent Capital and Jeffrey R. Gardner.*
10.5
 
Performance-Based Restricted Stock Unit Award Agreement under the Ascent Capital 2015 Omnibus Incentive Plan (the "Omnibus Incentive Plan"), effective as of June 22, 2015, by and between Ascent Capital and William E. Niles.*
10.6
 
Performance-Based Restricted Stock Unit Award Agreement under the Omnibus Incentive Plan, effective as of March 24, 2015, by and between Ascent Capital and Michael R. Meyers.*
31.1
 
Rule 13a-14(a)/15d-14(a) Certification. *
31.2
 
Rule 13a-14(a)/15d-14(a) Certification. *
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Section 1350 Certification. **
101.INS
 
XBRL Instance Document. *
101.SCH
 
XBRL Taxonomy Extension Schema Document. *
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document. *
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document. *
101.LAB
 
XBRL Taxonomy Extension Labels Linkbase Document. *
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document. *
 
*
Filed herewith.
**
Furnished herewith.



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Exhibit 10.1





Amendment to EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this “Amendment”), effective as of July 20, 2015, is entered into by and between Ascent Capital Group, Inc., a Delaware corporation (the “Company”), and Michael R. Meyers (“Executive”).

INTRODUCTION
The Executive and the Company entered into an Employment Agreement dated as of September 30, 2011 (the “Original Agreement”). The Company and Executive desire to amend the Original Agreement as set forth herein.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT
1. Employment . Section 1.1 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“Upon the terms and conditions hereinafter set forth, the Company hereby employs Executive, and Executive hereby accepts employment, as Senior Vice President and Chief Financial Officer of the Company and Executive Vice President and Chief Financial Officer of Monitronics International, Inc., a Texas corporation and a wholly-owned operating subsidiary of the Company (“Monitronics”).”

2. Term . Section 1.2 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“Subject to Article IV below, Executive’s employment hereunder shall terminate at the close of business on January 30, 2019 or such earlier date as provided for herein (the “Term”).”

3. Location . Section 1.5 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“Except for services rendered during business trips as may be reasonably necessary, Executive shall render his services under this Agreement primarily from the offices of Monitronics in the Dallas, Texas area and periodically from the offices of the Company in the Greater Denver, Colorado metropolitan area.”

4. Base Salary . Section 2.2 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“The base salary shall be an annual salary of $410,000 (the “Base Salary”), payable by the Company in accordance with the Company’s normal payroll practices. The Base Salary shall be reviewed on an annual basis during the Term for increase in the sole discretion of the compensation committee (the “Committee”) of the Board of Directors of the Company.”




5.     Bonus . Section 2.3 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“For each fiscal year during the Term, commencing with the 2015 fiscal year, in addition to the Base Salary, Executive shall be eligible for an annual bonus (the “Bonus”) of 60% of Executive’s annual Base Salary (the “Target Bonus”). Such bonus opportunity may exceed the 60% Target Bonus but will not exceed 75% of Executive’s annual Base Salary. Executive’s entitlement to any Bonus will be determined by the Committee in its good faith discretion, based upon the achievement of key performance indicators to be established by the Committee in its good faith discretion with respect to each fiscal year of the Term. Nothing in this Agreement shall be construed to guarantee the payment of any Bonus to Executive.”

6. Equity Grant . The Original Agreement is hereby amended by adding a new Section 3.5 as follows:

“3.5 Equity Grant .
a. As part of the consideration for Executive’s services to the Company during the Term, the Company has made a grant to Executive pursuant to the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan (the “Plan”) of 30,000 performance-based restricted stock units (the “PRSUs”) of the Company’s Series A Common Stock, par value $0.01 per share, pursuant to the Performance-Based Restricted Stock Units Award Agreement dated as of March 27, 2015, by and between the Company and Executive (the “PRSU Agreement”);

b. The PRSUs shall be subject in all respects to the terms and conditions of the Plan and the PRSU Agreement.”

7. Termination of Employment Without Cause . Section 4.2(b) of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“subject to Sections 4.6, 4.7, 4.8, 4.9, 5.3 and 5.4 below, an amount (the “Severance Payment”) equal to the sum of:
(i) if the termination of Executives employment occurs prior to a Change of Control (as defined in Section 4.4, the product of (i) the sum Executive’s Annual Base Salary plus the Target Bonus, both as in effect immediately prior to such Termination Without Cause multiplied by (ii) 1; or
(ii) if the termination of Executives employment occurs concurrently with or following a Change of Control, the product of (i) the sum Executive’s Annual Base Salary plus the Target Bonus, both as in effect immediately prior to such Termination Without Cause multiplied by (ii) 2:

8. Non-Competition / Non-Solicitation. Section 5.3 and 5.4 of the Original Agreement are hereby amended and restated in its entirety as follow:

5.3         Non-Competition . In consideration of the Company disclosing and providing access to Confidential Information after the date hereof, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company, intending to be legally bound, hereby agree as follows. Executive shall not, while employed by the Company or during any Consideration Period, directly: (a) compete with the Company; or (b) have an interest in, be employed by, be engaged in or participate in the ownership, management, operation or control of, or act in any advisory or other capacity for, any Competing Entity which conducts its business within the Territory (as such terms are hereinafter defined); provided , however , that notwithstanding the foregoing, Executive may make solely passive investments in any Competing Entity the common stock of which is “publicly held,” and of which Executive shall not own or control, directly or indirectly, in the aggregate securities which constitute more than one (1%) percent of the voting rights or equity ownership of such Competing Entity; or (c) solicit or divert any business or any customer from the Company or assist any person, firm or corporation in doing so or attempting

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to do so; or (d) cause or seek to cause any person, firm or corporation to refrain from dealing or doing business with the Company or assist any person, firm or corporation in doing so or attempting to do so.
    
For purposes of this Section 5.3, (i) the term “Competing Entity” shall mean any entity which presently or during the period referred to above engages in any business activity in which the Company is then engaged; and (ii) the term “Territory” shall mean any geographic area in which the Company conducts business during such period.

5.4         Non-Solicitation .

5.4.1.1.1    Executive shall not, for a period of twenty four (24) months from the date of any termination or expiration of his employment hereunder, directly or indirectly: (a) acquire any financial interest in or perform any services for himself or any other entity in connection with a business in which Executive’s interest, duties or activities would inherently require Executive to reveal any Confidential Information; or (b) solicit or cause to be solicited the disclosure of or disclose any Confidential Information for any purpose whatsoever or for any other party.

5.4.1.1.2
In consideration of the Company disclosing and providing access to Confidential Information, after the date hereof, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company, intending to be legally bound, hereby agree as follows. Executive shall not, for a period of twenty four (24) months from the date of any termination or expiration of his employment hereunder, solicit, directly or indirectly, or cause or permit others to solicit, directly or indirectly, (a) any person employed by the Company (a “Current Employee”) to leave employment with the Company or (b) any Monitronics dealer (a “Dealer”) to leave the Monitronics dealer network (the “Dealer Network”) or sell alarm monitoring contracts to another alarm monitoring company. The term “solicit” includes, but is not limited to the following (regardless of whether done directly or indirectly): (i) requesting that a Current Employee change employment or that a Dealer leave the Dealer Network, (ii) informing a Current Employee that an opening exists elsewhere or inform a Dealer that alternative dealer arrangements are available, (iii) assisting a Current Employee in finding employment elsewhere or a Dealer in finding alternative distribution opportunities elsewhere, (iv) inquiring if a Current Employee “knows of anyone who might be interested” in a position elsewhere or if a Dealer “knows of anyone who might be interested” in joining an alternative dealer network, (v) inquiring if a Current Employee might have an interest in employment elsewhere or if a Dealer might have an interest in joining an alternative dealer network, (vi) informing others of the name or status of, or other information about, a Current Employee or Dealer, or (vii) any other similar conduct, the effect of which is that a Current Employee leaves the employment of the Company or that a Dealer leaves the Dealer Network.

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9. Change of Control . Section 4.4 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“Change in Control” means any of the following that otherwise meets the definition of a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company within the meaning of Code Section 409A (as defined below):

i. the acquisition by any person or group (excluding John C. Malone and/or any family member(s) of John C. Malone and/or any company, partnership, trust or other entity or investment vehicle controlled by such persons or the holdings of which are for the primary benefit of any of such persons (collectively, the “Permitted Holders”)) of ownership of stock of the Company that, together with stock already held by such person or group, constitutes more than 50% of the total fair market value or more than 50% of the total voting power of the stock of the Company;

ii. the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the 12-month period ending on the date of the most recent acquisition by such person or group, assets from the Company that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or

iii. the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock of the Company possessing 30% or more of the total voting power of the stock of Company or the replacement of a majority of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of appointment or election.

For purposes of this Section 4.4, “person” and “group” have the meanings given to them for purposes of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provisions, and the term “group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision.”

10. Except as amended by the preceding provisions of this Amendment, the Original Agreement shall remain in full force and effect according to its terms.

11. This Amendment will be governed by, and construed in accordance with, the substantive laws of the State of Texas without giving effect to principles relating to conflicts of law.

12. This Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of July 20, 2015.
 
 
 
 
"COMPANY"
 
 
 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
By:
/s/ William E. Niles
 
 
 
 
William E. Niles
 
 
 
 
Executive Vice President and General Counsel
 
 
 
 
 
 
 
 
 
"EXECUTIVE"
 
 
 
By:
/s/ Michael R. Meyers
 
 
 
 
Michael R. Meyers
 
 
 
 
 




5


Exhibit 10.2




Amendment to EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this “Amendment”), effective as of July 20, 2015, is entered into by and between Ascent Capital Group, Inc., a Delaware corporation (the “Company”), and William E. Niles (“Executive”).
INTRODUCTION
The Executive and the Company entered into an Employment Agreement dated as of May 31, 2011 (the “Original Agreement”). The Company and Executive desire to amend the Original Agreement as set forth herein and, in consideration and in connection thereof, make an award of Restricted Stock Units to Executive under the Terms of the Company’s 2015 Omnibus Plan.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Term . Section 1.2 of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“Subject to Article IV below, Executive’s employment hereunder shall terminate at the close of business on March 1, 2020 or such earlier date as provided for herein (the “Term”).”
2. Termination of Employment Without Cause . (a) Section 4.2(b) of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“subject to Sections 4.6 and 4.8 below, an amount (the “Severance Payment”) equal to the sum of:
(i) if the termination of Executive’s employment occurs prior to a Change of Control (as defined in Section 4.9), the product of (i) the sum of Executive’s annual Base Salary plus the Target Award, both as in effect immediately prior to such Termination Without Cause multiplied by (ii) 1; or
(ii) if the termination of Executive’s employment occurs concurrently with or following a Change of Control, the product of (i) the sum of Executive’s annual Base Salary plus the Target Award, both as in effect immediately prior to such Termination Without Cause multiplied by (ii) 2;”
(b) Section 4.2(c) of the Original Agreement is hereby amended and restated to read in its entirety as follows: “[ Intentionally Omitted.]. ”
3. Change of Control . The Original Agreement is hereby amended by adding a new Section 4.9 as follows:

“Change in Control” means any of the following that otherwise meets the definition of a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company within the meaning of Code Section 409A (as defined below):
(i) the acquisition by any person or group (excluding John C. Malone and/or any family member(s) of John C. Malone and/or any company, partnership, trust or other entity or investment vehicle



controlled by such persons or the holdings of which are for the primary benefit of any of such persons (collectively, the “Permitted Holders”)) of ownership of stock of the Company that, together with stock already held by such person or group, constitutes more than 50% of the total fair market value or more than 50% of the total voting power of the stock of the Company;

(ii) the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the 12-month period ending on the date of the most recent acquisition by such person or group, assets from the Company that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or

(iii) the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock of the Company possessing 30% or more of the total voting power of the stock of Company or the replacement of a majority of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of appointment or election.

For purposes of this Section 4.9, “person” and “group” have the meanings given to them for purposes of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provisions, and the term “group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision.”
4. Except as amended by the preceding provisions of this Amendment, the Original Agreement shall remain in full force and effect according to its terms.

5. This Amendment will be governed by, and construed in accordance with, the substantive laws of the State of Colorado without giving effect to principles relating to conflicts of law.

6. This Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of June 20, 2015.


 
 
 
 
"COMPANY"
 
 
 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
By:
/s/ William R. Fitzgerald
 
 
 
 
William R. Fitzgerald
 
 
 
 
Chairman
 
 
 
 
 
 
 
 
 
"EXECUTIVE"
 
 
 
By:
/s/ William E. Niles
 
 
 
 
William E. Niles
 
 
 
 
 


3



Exhibit 10.3


Amendment to EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this “Amendment”), dated as of August 25, 2015 and effective as of the Effective Date (as defined below), is entered into by and between Ascent Capital Group, Inc., a Delaware corporation (the “Company”), and Michael R. Haislip (“Executive”).
INTRODUCTION
The Executive and the Company entered into an Employment Agreement dated as of September 30, 2011 (the “Original Agreement”). The Company and Executive desire to amend the Original Agreement as set forth herein.
The Executive has previously informed the Company of his intention to retire from his current roles as Executive Vice President of the Company and Chief Executive Officer of the Company’s wholly-owned subsidiary Monitronics International, Inc. (“Monitronics”), and the parties desire to arrange for an orderly transition of the Executive’s duties.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Employment.

Section 1.1 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Upon the terms and conditions hereinafter set forth, the Company hereby employs Executive, and Executive hereby accepts employment, as Senior Executive Advisor of the Company, effective as of September 10, 2015 (the “Effective Date”).”
2. Term.

Section 1.2 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Subject to Article IV below, Executive’s employment hereunder shall terminate at the close of business on March 31, 2017 (the “Term”). Upon such termination date the Company’s sole obligations shall be to:
(a) pay any Base Salary that is accrued but unpaid as March 31, 2017; and
(b) pay Executive for any reimbursement of expenses incurred in accordance with Section 3.2.
(c) any outstanding equity awards held by Executive shall be treated as provided in the applicable award agreement and plan award agreement and for the sole and exclusive



purpose of determining Executive’s rights under the applicable equity award agreement, the expiration of the Term shall be deemed a Termination Without Cause .

3. Duties.

Section 1.3 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“During the Term, Executive shall provide advice and guidance to, and consult with, the Chief Executive Officer of the Company and the Chief Executive Officer of Monitronics from time to time. Executive shall abide by all rules, regulations and policies of the Company and its Affiliates, as may be in effect from time to time. Subject to the restrictions set forth in Section 5.3 of this Agreement, Executive may be engaged in other business endeavors so long as the time allocated to such activities does not interfere with or conflict with the discharge of Executives duties as set forth in this Agreement.
4. Location.

Section 1.5 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Except for services rendered during business trips as may be reasonably necessary, Executive may render his services under this Agreement primarily from his residence and shall not be required to render such services from the offices of Monitronics in the Dallas, Texas area or the offices of the Company in Englewood, Colorado.”
5. Base Salary.

Section 2.2 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Commencing on the Effective Date, the Executive’s rate of pay shall be an annual base salary of $361,680 per year (the “Base Salary”), payable by the Company in accordance with the Company’s normal payroll practices.”
6. Bonus.

Section 2.3 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Executive shall not be eligible for an annual bonus with respect to the 2015 fiscal year, and commencing with the 2016 fiscal year, Executive shall no longer be eligible to receive an annual bonus.”
7. Vacation.

Section 3.3 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“Any vacation time accrued but unused as of the Effective Date will be paid to Executive in a lump sum cash payment.”
8. Termination of Employment for Cause.

The second and third paragraphs of Section 4.1 of the Original Agreement are hereby amended and restated to read in its entirety as follows:

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“Commencing on the Effective Date, for purposes of this Agreement, “Cause” shall mean: (a) (i) any material act or omission that constitutes a breach by Executive of any of his material obligations or duties under this Agreement (ii) the violation by Executive of any material policy, rule or regulation of the Company or any of its Affiliates or (iii) the violation of any material law or regulation applicable to the business of the Company or any of its Affiliates; (b) Executive’s intentional act or intentional omission constituting fraud, or an intentional material misrepresentation, occurring subsequent to the commencement of his employment with the Company; or (c) any other intentional misconduct by Executive that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its Affiliates.
Notwithstanding the foregoing, no purported Termination For Cause pursuant to (a), (b), or (c) of the preceding paragraph of this Section 4.1 shall be effective unless all of the following provisions shall have been complied with: (i) Executive shall be given written notice by the Company of its intention to effect a Termination For Cause, such notice to state in detail the particular circumstances that constitute the grounds on which the proposed Termination For Cause is based; and (ii) Executive shall have fifteen (15) business days after receiving such notice in which to cure such grounds, to the extent such cure is possible, as determined in the sole discretion of the Company.”
9. Termination of Employment Without Cause.

Section 4.2 of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“4.2     Termination of Employment Without Cause . During the Term, the Company may at any time, in its sole discretion, terminate the employment of Executive hereunder for any reason (other than those set forth in Section 4.1 above) upon written notice to Executive. In such event, the Company shall pay Executive an amount in cash equal to the sum of the following:
(a) any Base Salary that is accrued but unpaid as of the date of termination, plus the balance of any Base Salary payments that would have been paid to Executive for the remainder of the Term; and
(b) any reimbursement for expenses incurred in accordance with Section 3.2.
(c) any equity awards held by Executive shall be treated as provided in the applicable award agreement and plan award agreement (e.g., acceleration of vesting per plan agreement)
Subject to Section 4.9, any payment to which Executive becomes entitled under this Section 4.2 or Section 4.3 shall be payable in a lump sum on the sixtieth (60th) day following the date of termination of Executive’s employment (or, if such day is not a business day, on the first business day thereafter).
In addition, subject to Sections 4.6, 4.7, 4.8, 4.9, 5.3 and 5.4 below, to the extent such coverage is available and is elected by Executive under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall contribute to the health insurance plan maintained by the Company and covering the Executive and his dependents as of the date of termination, or any successor plan maintained by the Company, that amount that reflects the proportionate part of the premium for such coverage that is paid by the Company as of the date of termination (the “Benefits Payments”), such Benefits Payments to be made monthly in accordance with the Company’s normal procedures for the payment of health insurance premiums, throughout the period beginning on the date of termination and ending on March 31, 2017 (the “Reimbursement Period”) (i.e., Executive shall bear responsibility for that portion of the health

3


insurance premiums in excess of the Benefits Payments), or, alternately, in the Company’s sole discretion, the Company shall reimburse Executive the amount of the Benefits Payment on a monthly basis during the Reimbursement Period, upon Executive’s submission to the Company of adequate proof of payment of the full COBRA premium by Executive; provided, however, that if Executive becomes employed with another employer during the Reimbursement Period and is eligible to receive health and/or medical benefits that are substantially comparable to those offered by the Company under such other employer’s plans, the Company’s payment obligation under this paragraph shall end. Notwithstanding the foregoing, in the event that the Company’s group health plan is insured and under applicable guidance the reimbursement of COBRA premiums causes the Company’s group health plan to violate any applicable nondiscrimination rule, the Company and Executive agree to negotiate in good faith a mutually agreeable alternative arrangement. For the avoidance of doubt, Executive shall be responsible for paying any U.S. federal or state income taxes associated with the Benefits Payments.
Executive acknowledges that the payments and benefits referred to in this Section 4.2, together with any rights or benefits under any written plan or agreement which have vested on or prior to the termination date of Executive’s employment under this Section 4.2, constitute the only payments which Executive shall be entitled to receive from the Company or any of its Affiliates hereunder in the event of any termination of his employment pursuant to this Section 4.2, and the Company and its Affiliates shall have no further liability or obligation to him hereunder or otherwise in respect of his employment.”
10. Incentive Equity Award .
Article II of the Original Agreement shall be amended by the addition of the following provision:
“2.6 Incentive Equity Award
. Subject to approval by the Compensation Committee of the Board of Directors of Ascent Capital Group Inc., as part of the consideration for Executive’s services to the Company during the Term, the Company shall grant to Executive, pursuant to the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan or such successor incentive plan as may be in place from time to time (the “Plan”):
(i) 5000 restricted shares of ASCMA Class A Common Stock (the “Restricted S    hares”), subject to the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan Restricted Stock Award Agreement; and (b) Subject to compliance with the terms of this Amended and Restated Employment Agreement, the Restricted Shares shall vest as follows: (i) 20% as of June 14, 2016; (ii) 30% as of December 31, 2016 and (iii) 50% as of March 31, 2017.

11. Death; Disability . (a) Section 4.5(a) of the Original Agreement is hereby amended and restated to read in its entirety as follows:

“(a) any Base Salary that is accrued but unpaid as of the date of death or termination for Disability, plus the balance of any Base Salary payments that would have been paid to Executive for the remainder of the Term; and”
(b) Section 4.5(b) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“(b) any reimbursement for expenses incurred in accordance with Section 3.2. and any equity awards held by Executive shall be treated as provided in the applicable award agreement and plan award agreement (e.g., acceleration of vesting per plan agreement)”

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(c) Section 4.5(c) of the Original Agreement is hereby deleted in its entirety.
12. Severance Agreement and Release.

Section 4.7 of the Original Agreement is hereby amended and restated to read in its entirety as follows: “[ Intentionally omitted. ].”
13. Continued Compliance .

Section 4.8 of the Original Agreement is hereby amended and restated to read in its entirety as follows: “[ Intentionally omitted. ].”
14. Except as amended by the preceding provisions of this Amendment, the Original Agreement shall remain in full force and effect according to its terms.

15. This Amendment will be governed by, and construed in accordance with, the substantive laws of the State of Texas without giving effect to principles relating to conflicts of law.

16. This Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

[Remainder of this page intentionally left blank]

5



IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of August 25, 2015.

 
 
 
 
"COMPANY"
 
 
 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
By:
/s/ William E. Niles
 
 
 
 
William E. Niles
 
 
 
 
Executive Vice President and General Counsel
 
 
 
 
 
 
 
 
 
"EXECUTIVE"
 
 
 
By:
/s/ Michael R. Haislip
 
 
 
 
Michael R. Haislip
 
 
 
 
 


6


Exhibit 10.4



EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”), made on August 25, 2015, to be effective as of September 10, 2015 (“Effective Date”), is entered into by and between Ascent Capital Group, Inc., a Delaware corporation (the “Company”), and Jeffery R. Gardner (“Executive”).
INTRODUCTION
The Company, through its subsidiaries (“Affiliates”), is engaged primarily in the business of providing security alarm monitoring and related services to residential and business subscribers throughout the United States and parts of Canada. The Company desires to employ Executive, and Executive desires to accept such continued employment, under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
EMPLOYMENT; TERM; DUTIES
1.1 Employment. Upon the terms and conditions hereinafter set forth, the Company hereby employs Executive, and Executive hereby accepts employment, as Executive Vice President of the Company and Chief Executive Officer and President of Monitronics International, Inc., a Texas corporation and a wholly-owned operating subsidiary of the Company (“Monitronics”).
1.2 Term. Subject to Article IV below, Executive’s employment hereunder shall be for a term of five (5) years commencing effective as of September 10, 2015 (the “Commencement Date”), and terminating at the close of business on September 9, 2020 or such earlier date as provided for herein (the “Term”).
1.3 Duties. During the Term, Executive shall perform such executive duties for the Company and/or its subsidiaries or affiliates (together, “Affiliates”), consistent with his position hereunder, as may be assigned to him from time to time by the Chief Executive Officer of the Company. Executive shall devote his entire productive business time, attention and energies to the performance of his duties hereunder. Executive shall use his best efforts to advance the interests and business of the Company and its Affiliates. Executive shall abide by all rules, regulations and policies of the Company, as may be in effect from time to time. Notwithstanding the foregoing, Executive may act for his own account in passive-type investments as provided in Section 5.3, or as a member of boards of directors of other companies, where the time allocated for those activities does not materially interfere with or create a conflict of interest with the discharge of his duties for the Company.
1.4 Reporting. Executive shall report directly to the Chief Executive Officer of the Company.
1.5 Location. Except for services rendered during business trips as may be reasonably necessary, Executive shall render his services under this Agreement primarily from the offices of Monitronics in the Dallas, Texas area and periodically from the offices of the Company in the Greater Denver, Colorado metropolitan area.




1.6 Exclusive Agreement. Executive represents and warrants to the Company that there are no agreements or arrangements, whether written or oral, in effect which would prevent Executive from rendering his exclusive services to the Company during the Term.
ARTICLE II
COMPENSATION
2.1 Compensation. For all services rendered by Executive hereunder and all covenants and conditions undertaken by him pursuant to this Agreement, the Company shall pay, and Executive shall accept, as full compensation, the amounts set forth in this Article II.
2.2 Base Salary. Executive’s base salary (“Base Salary”) shall initially be payable at the rate of $525,000 per year. The Base Salary is payable by the Company in accordance with the Company’s normal payroll practices. Beginning in September 2016, the Base Salary shall be reviewed on an annual basis during the Term for increase in the sole discretion of the compensation committee (the “Committee”) of the Board of Directors of the Company.
2.3 Bonus. For each fiscal year during the Term, commencing with the 2015 fiscal year, in addition to the Base Salary, Executive shall be eligible for a discretionary bonus award, or in the alternative shall be eligible to participate in any incentive bonus plan the Company may have in effect from time to time, in each case on substantially the same basis as the other senior executive employees of the Company, except as otherwise provided in this Section 2.3 (such discretionary bonus or any effective Company bonus plan, as applicable, the “Bonus Plan”). The Executive’s annual “Bonus Range” for the Bonus Plan shall be 75% up to 175% of Executive’s Base Salary. Subject to Sections 4.2, 4.3 and 4.8 below, Executive's entitlement to any bonus pursuant to the Bonus Plan will be determined by the Committee in its sole discretion, with 20% of the Bonus Range based upon Executive’s performance against key qualitative performance indicators determined by the Committee, in its sole discretion, and 80% of the Bonus Range subject to the achievement of such quantitative performance metrics as the Committee may establish in its sole discretion, including, without limitation, account growth, adjusted EBITDA, free cash flow, revenue and attrition. The Committee shall have authority to grant partial bonuses under the Bonus Plan. Executive shall receive a pro-rated bonus for the period of September 10, 2015 through December 31, 2015 based on an imputed bonus award of 100% of Base Salary. Except as set forth in the preceding sentence and as set forth in Sections 4.2, 4.3 and 4.8 below, nothing in this Agreement shall be construed to guarantee the payment of any amount to Executive pursuant to the Bonus Plan. Except as otherwise provided in this Agreement, any amount payable to Executive pursuant to the Bonus Plan shall be payable in cash or shares of the Company’s Series A Common Stock, $0.01 par value (the “ASCMA Stock”), on such date or dates, and otherwise in such manner and subject to such conditions, as shall be provided for in the Bonus Plan, or as otherwise determined by the Committee, in each case in the Committee’s sole discretion. Shares issued to Executive in satisfaction of any annual bonus awarded pursuant to this Section 2.3 shall be fully vested when issued.
2.4 Deductions. The Company shall deduct from the compensation described in Sections 2.2 and 2.3 any federal, state or local withholding taxes, social security contributions and any other amounts which may be required to be deducted or withheld by the Company pursuant to any federal, state or local laws, rules or regulations.
2.5 Disability Adjustment. Any compensation otherwise payable to Executive pursuant to Sections 2.2 and 2.3 in respect of any period during which Executive is disabled (as contemplated in Section 4.4) shall be reduced by any amounts payable to Executive for loss of earnings or the like under any insurance plan or policy sponsored by the Company.




ARTICLE III
BENEFITS; EXPENSES
3.1 Benefits. During the Term, Executive shall be entitled to participate in such group life, health, accident, disability or hospitalization insurance plans, pension plans and retirement plans as the Company may make available to its other senior executive employees as a group, subject to the terms and conditions of any such plans. Executive’s participation in all such plans shall be at a level, and on terms and conditions, that are commensurate with his positions and responsibilities at the Company.
3.2 Expenses. The Company agrees that Executive is authorized to incur reasonable and appropriate expenses in the performance of his duties hereunder and in promoting the business of the Company in accordance with the terms of the Company’s Travel & Entertainment Policy (as the same may be modified or amended by the Company from time to time in its sole discretion).
3.3 Vacation. Executive shall accrue a total of one hundred sixty (160) hours of vacation per year following the date of this Agreement.  If, at any time during the Term, Executive accumulates two hundred forty (240) hours of earned but unused vacation time (the “Accrual Cap”), Executive will not accrue additional vacation time until he has taken a portion of the previously earned vacation.  Executive will again accrue paid vacation time when his accumulated amount of earned but unused vacation time falls below the Accrual Cap.  Upon termination of Executive’s employment, any accrued but unused vacation time will be paid to Executive.
3.4 Key Man Insurance. The Company may secure in its own name or otherwise, and at its own expense, life, health, accident and other insurance covering Executive alone or with others, and Executive shall not have any right, title or interest in or to such insurance other than as expressly provided herein. Executive agrees to assist the Company in procuring such insurance by submitting to the usual and customary medical and other examinations to be conducted by such physicians as the Company or such insurance company may designate and by signing such applications and other written instruments as may be required by the insurance companies to which application is made for such insurance. Executive’s failure to submit to such usual and customary medical and other examinations shall be deemed a material breach of this Agreement.
3.5 Relocation.
(a) The Company shall reimburse Executive for all “Qualified Expenses” incurred in connection with Executive’s relocation to Dallas, Texas, including any applicable tax gross up directly related thereto up to a maximum of one hundred thousand dollars ($100,000). As used in this Section 3.5, the following term shall have the corresponding meanings:
(i) “Qualified Expenses” shall mean all reasonable and customary expenses incurred by Executive and his immediate family in connection with their relocation to the Dallas, Texas area, including, but not limited to, (1) packing, moving, unpacking, travel, and insurance expenses for Executive, his family, and their personal possessions, including cars; (2) storage costs for Executive and his family’s personal effects for up to 180 days; (3) temporary housing costs for up to 180 days, or until Executive purchases and closes on a home within 50 miles of Dallas, Texas, whichever event occurs first; (4) travel, lodging, and meal expenses for Executive and his wife on house-hunting trips conducted prior to relocation; (5) expenses of packing, moving, unpacking, and insurance charges from temporary housing to permanent housing occurring within 180 days of the Effective Date; For the avoidance of




doubt, Qualified Expenses do not include any costs associated with purchasing a new residence, such as the purchase price, financing costs, or buying “points” on a mortgage.
(b) The Company will reimburse Executive for any Qualified Expense within thirty (30) days of receipt of a reimbursement request, but in no event later than the last day of the Executive’s tax year following the year in which the Qualified Expense was incurred. Executive’s right to reimbursement of Qualified Expenses cannot be exchanged for any other benefit. The amount of Qualified Expenses eligible for reimbursement in one year will not affect the expenses eligible for reimbursement in any other year.
3.6 Incentive Equity Grants. Subject to approval by the Committee, as part of the consideration for Executive’s services to the Company during the Term, the Company shall grant to Executive, pursuant to the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan or such successor incentive plan as may be in place from time to time (the “Plan”):
(a) restricted shares of ASCMA Stock with a fair market value on the grant date of $2,000,000 that shall vest 100% on September 9, 2017 (the “Restricted Shares”), subject to the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan Restricted Stock Award Agreement; and
(b) commencing with the 2016 fiscal year, an annual grant of performance-based restricted stock units (the “PRSUs”) with a fair market value on the grant date of $1,500,000, as determined by the Committee in its sole discretion, as follows:
(i) $1,000,000 of the PRSUs may be earned and vest, in whole or in part, subject to the achievement for the 12-month performance period of such performance metrics as the Committee may establish in its sole discretion, including, without limitation, account growth, adjusted EBITDA, free cash flow, revenue and attrition. The “performance period” shall be the respective calendar year for which the PRSU award is made, with the 2016 calendar year as the initial performance period. The Committee shall determine, in its sole discretion, the extent to which the PRSUs have been earned (if at all) at the end of the performance period, with results between any threshold, target or maximum levels of performance set by the Committee determined by the Committee in its sole discretion. Any such earned PRSUs shall vest on a quarterly basis during the two year period beginning on January 1 of the year following the expiration of the respective performance period (e.g., each calendar quarter of 2017 and 2018 with respect to the PRSU granted in respect of the 2016 calendar year), subject to Executive’s continued employment on such dates.
(ii) $500,000 of the PRSUs may be earned and vest, in whole or in part, subject to the achievement for the 36-month performance period of such performance metrics as the Committee may establish in its sole discretion, including, without limitation, account growth, adjusted EBITDA, free cash flow, revenue and attrition. The “performance period” shall commence on January 1 of the respective calendar year for which the PRSU award is made and end on December 31 of third calendar year thereafter, with the 36-month period commencing on January 1, 2016 and ending on December 31, 2018 as the initial performance period. The Committee shall determine, in its sole discretion, the extent to which the PRSUs have been earned and vest (if at all) at the end of the performance period, with results between any threshold, target or maximum levels of performance set by the Committee determined by the Committee in its sole discretion.
The Restricted Shares and the PRSUs shall be subject in all respects to the terms and conditions of the Plan and the respective award agreements to be entered into by the Company and Executive with respect thereto.




Notwithstanding the foregoing, in lieu of an award of PRSU’s as outlined above, the Compensation Committee may elect to substitute Restricted Shares of ASCMA Class A common Stock (i.e., in substitution of all or a portion of such annual PRSU grant). The terms and conditions of any such award of Restricted Shares shall be subject to the Plan and based upon such terms and conditions that are no less favorable to Executive than as outlined above in Section 3.6 (b) (i) and (ii) as the Committee shall determine in its sole discretion.
ARTICLE IV
TERMINATION; DEATH; DISABILITY
4.1 Termination of Employment For Cause. In addition to any other remedies available to the Company at law, in equity or as set forth in this Agreement, the Company shall have the right, upon written notice to Executive, to terminate Executive’s employment hereunder at any time for “Cause” (a “Termination For Cause”). In the event of a Termination For Cause, Executive’s employment will terminate and the Company shall have no further liability or obligation to Executive (other than the Company’s obligation to pay Base Salary and vacation time accrued but unpaid as of the date of termination and reimbursement of expenses incurred prior to the date of termination in accordance with Section 3.2 above).
For purposes of this Agreement, “Cause” shall mean: (a) any act or omission that constitutes a breach by Executive of any of his material obligations under this Agreement; (b) the continued failure or refusal of Executive (i) to substantially perform the material duties required of him as an Executive of the Company and/or (ii) to comply with reasonable directions of the Chief Executive Officer of the Company; (c) any material violation by Executive of any (i) policy, rule or regulation of the Company or (ii) any law or regulation applicable to the business of the Company or any of its Affiliates; (d) Executive’s material act or omission constituting fraud, dishonesty or misrepresentation, occurring subsequent to the commencement of his employment with the Company; (e) Executive’s gross negligence in the performance of his duties hereunder; (f) Executive’s conviction of any crime (whether or not involving the Company) which constitutes a felony or crime of moral turpitude or is punishable by imprisonment of thirty days or more, provided, however, that nothing in this Agreement shall obligate the Company to pay Base Salary or any bonus compensation or benefits during any period that Executive is unable to perform his duties hereunder due to any incarceration, whether or not the circumstances relating to such incarceration would constitute Cause, and provided, further, that nothing shall prevent Executive’s termination under any other subsection of this Section 4.1 if it provides independent grounds for termination; or (g) any other misconduct by Executive that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company.
Notwithstanding the foregoing, no purported Termination For Cause pursuant to (a), (b), (c), (d), (e) and (g) of this Section 4.1 shall be effective unless all of the following provisions shall have been complied with: (i) Executive shall be given written notice by the Company of the intention to effect a Termination For Cause, such notice to state in detail the particular circumstances that constitute the grounds on which the proposed Termination For Cause is based; and (ii) Executive shall have ten business days after receiving such notice in which to cure such grounds, to the extent such cure is possible, as determined in the sole discretion of the Company.
4.2 Termination of Employment Without Cause. During the Term, the Company may at any time, in its sole discretion, terminate the employment of Executive hereunder for any reason (other than those set forth in Section 4.1 above) upon written notice, including a Non-Renewal Notice as described below (the “Termination Notice”), to Executive (a “Termination Without Cause”). In such event, the Company shall pay Executive an amount equal to the sum of the following:
(a) any Base Salary and vacation time accrued but unpaid as of the date of termination;




(b) subject to Sections 4.6 and 4.8 below, an amount (the “Severance Payment”) equal to the sum of:
(i) if the termination of Executive’s employment occurs prior to a Change in Control (as defined in Section 4.9), 2 x multiplied by Executive’s annual Base Salary, as in effect immediately prior to such Termination Without Cause; or
(ii) if the termination of Executive’s employment occurs concurrently with or following a Change in Control, 4 x multiplied by Executive’s annual Base Salary, as in effect immediately prior to such Termination Without Cause;
(c) subject to Sections 4.6 and 4.8 below, any award granted pursuant to the Bonus Plan to which Executive has become entitled with respect to any year prior to the year in which termination occurs, if such Award has not previously been paid to Executive; and
(d) any reimbursement for expenses incurred in accordance with Section 3.2.
Subject to Section 4.8, (i) any Severance Payment to which Executive becomes entitled shall be payable in a lump sum on the 60th day following the date of termination of Executive’s employment (or, if such day is not a business day, on the first business day thereafter), and (ii) any award payable pursuant to the terms of Section 4.2(d) shall be payable on the payment date established with respect to such award under the Bonus Plan (which shall in no event be later than December 31st of the calendar year in which termination occurs).
In addition, subject to Sections 4.5 and 4.6 below, to the extent such coverage is available and is elected by Executive under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall contribute to the health insurance plan maintained by the Company and covering the Executive and his dependents as of the date of termination, or any successor plan maintained by the Company, that amount that reflects the proportionate part of the premium for such coverage that is paid by the Company as of the date of termination (the “Benefits Payments”), such Benefits Payments to be made monthly in accordance with the Company’s normal procedures for the payment of health insurance premiums, throughout the period beginning on the date of termination and ending on the earlier of the 18-month anniversary of the date of termination and the expiration of the coverage period specified in COBRA, such period to be determined as of the date of termination (the “Reimbursement Period”) (i.e., Executive shall bear responsibility for that portion of the health insurance premiums in excess of the Benefits Payments), or, alternately, in the Company’s sole discretion, the Company shall reimburse Executive the amount of the Benefits Payment on a monthly basis during the Reimbursement Period, upon Executive’s submission to the Company of adequate proof of payment of the full COBRA premium by Executive; provided, however, that if Executive becomes employed with another employer during the Reimbursement Period and is eligible to receive health and/or medical benefits under such other employer’s plans, the Company’s payment obligation under this paragraph shall be reduced to the extent that comparable benefits and/or coverage is provided under such other employer’s plans. For the avoidance of doubt, Executive shall be responsible for paying any U.S. federal or state income taxes associated with the Benefits Payments.
At least 6 months prior to the expiration of the Term, the Company shall deliver a written notice to Executive stating either (i) that the Company does not intend to offer Executive a new employment agreement to take effect at the expiration of the Term (a “Non-Renewal Notice”) or (ii) that the Company offers Executive a new employment agreement to take effect at the expiration of the Term upon terms (other than the length of the term of such new employment agreement) that are, in material respects, taken as a whole, at least as favorable to Executive as the terms of this Agreement, and the material terms of such offer shall be summarized or set forth in the notice (“Renewal Notice”). If the Company delivers a Non-Renewal Notice, or if the




Company fails to deliver either a Renewal Notice or a Non-Renewal Notice on a timely basis as provided in the immediately preceding sentence, Executive’s employment shall be terminated at the expiration of the Term (or at such earlier date as may be set forth in the Non-Renewal Notice), and such termination shall be a Termination Without Cause, whereupon, subject to Sections 4.6, 4.7, 4.8, 4.9, 5.3 and 5.4 below, Executive shall be entitled to receive the amounts and benefits as provided under this Section 4.2
Executive acknowledges that the payments and benefits referred to in this Section 4.2, together with any rights or benefits under any written plan or agreement which have vested on or prior to the termination date of Executive’s employment under this Section 4.2, constitute the only payments which Executive shall be entitled to receive from the Company hereunder in the event of any termination of his employment pursuant to this Section 4.2, and the Company shall have no further liability or obligation to him hereunder or otherwise in respect of his employment.
4.3 Termination of Employment With Good Reason. In addition to any other remedies available to Executive at law, in equity or as set forth in this Agreement, Executive shall have the right during the Term, upon written notice to the Company, to terminate his employment hereunder upon the occurrence of any of the following events without the prior written consent of Executive: (a) a reduction in Executive’s then current Base Salary; (b) a material reduction in Executive’s authority, duties, or responsibilities with the Company, including, but not limited to, a loss of title as Chief Executive Officer and President of Monitronics; (c) the relocation by the Company of Executive’s principal place of employment to a location more than 35 miles from Executive’s principal place of employment prior to such relocation, without Executive’s consent or (d) a breach by the Company of any material provision of this Agreement (a “Termination With Good Reason”).
Notwithstanding the foregoing, no purported Termination With Good Reason pursuant to Section 4.3(a), (b), (c), or (d) shall be effective unless all of the following provisions shall have been complied with: (i) the Company shall be given written notice by Executive of the intention to effect a Termination With Good Reason, such notice to state in detail the particular circumstances that constitute the grounds on which the proposed Termination With Good Reason is based and to be given no later than 90 days after Executive first learns of such circumstances; and (ii) the Company shall have 30 days after receiving such notice in which to cure such grounds, to the extent such cure is possible.
In the event that a Termination With Good Reason occurs, then, subject to Sections 4.5, 4.6 and 4.8 below, Executive shall have the same entitlement to the same amounts and benefits as provided under Section 4.2 for a Termination Without Cause.
Executive acknowledges that the payments and benefits referred to in this Section 4.3, together with any rights or benefits under any written plan or agreement which have vested on or prior to the termination date of Executive’s employment under this Section 4.3, constitute the only payments which Executive shall be entitled to receive from the Company hereunder in the event of any termination of his employment pursuant to this Section 4.3, and the Company shall have no further liability or obligation to him hereunder or otherwise in respect of his employment.
4.4 Death; Disability. In the event that Executive dies or becomes Disabled (as defined herein) during the Term, Executive’s employment shall terminate when such death or Disability occurs and the Company shall pay Executive (or his legal representative, as the case may be) as follows:
(a) any Base Salary and vacation time accrued but unpaid as of the date of death or termination for Disability;




(b) any reimbursement for expenses incurred in accordance with Section 3.2.; and
(c) an amount equal to Executive’s monthly Base Salary in effect on such termination date for one year, payable in a single lump sum on the 60th business day following the termination date.
For the purposes of this Agreement, Executive shall be deemed to be “Disabled” or have a “Disability” if, because of Executive’s physical or mental disability, he has been substantially unable to perform his duties hereunder for 12 work weeks in any 12 month period. Executive shall be considered to have been substantially unable to perform his duties hereunder only if he is either (a) unable to reasonably and effectively carry out his duties with reasonable accommodations by the Company or (b) unable to reasonably and effectively carry out his duties because any reasonable accommodation which may be required would cause the Company undue hardship. In the event of a disagreement concerning Executive’s purported Disability, Executive shall submit to such examinations as are deemed appropriate by three practicing physicians specializing in the area of Executive’s Disability, one selected by Executive, one selected by the Company, and one selected by both such physicians. The majority decision of such three physicians shall be final and binding on the parties.
Notwithstanding the foregoing, to the extent and for the period required by any state or federal family and medical leave law, upon Executive’s request (i) he shall be considered to be on unpaid leave of absence and not terminated, (ii) his group health benefits shall remain in full force and effect, and (iii) if Executive recovers from any such Disability, at that time, to the extent required by any state or federal family and medical leave law, upon Executive’s request, he shall be restored to his position hereunder or to an equivalent position, as the Company may determine, and the Term of Executive’s employment hereunder shall be reinstated effective upon such restoration. The Term shall not be extended by reason of such intervening leave of absence or termination, nor shall any compensation or benefits accrue in excess of those required by law during such intervening leave of absence or termination. Upon the expiration of any such rights, unless Executive has been restored to a position with the Company, he shall thereupon be considered terminated.
Executive acknowledges that the payments referred to in this Section 4.4, together with any rights or benefits under any written plan or agreement which have vested on or prior to the termination date of Executive’s employment under this Section 4.4, constitute the only payments which Executive (or his legal representative, as the case may be) shall be entitled to receive from the Company hereunder in the event of a termination of his employment for death or Disability, and the Company shall have no further liability or obligation to him (or his legal representatives, as the case may be) hereunder or otherwise in respect of his employment.
4.5 No Mitigation by Executive. Except as otherwise expressly provided herein, Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for herein be reduced by any compensation earned by Executive as the result of employment by another employer; provided, however, that if Executive becomes employed with another employer and is eligible to receive health and/or medical benefits under such other employer’s plans, Executive’s continued benefits and/or plan coverage as set forth in Section 4.2 or 4.3, as the case may be, shall be reduced to the extent that comparable benefits and/or coverage is provided under such other employer’s plans.
4.6 Severance Agreement and Release. In the event that Executive incurs a termination of employment pursuant to (i) a Termination Without Cause (as defined in Section 4.2 above), or (ii) a Termination With Good Reason (as defined in Section 4.3 above), payment by the Company of the amounts described in said sections shall be subject to the execution by Executive of the Company’s standard severance agreement and release (the “Release”).




The Release shall be delivered to Executive, in the case of a Termination Without Cause, at the time of delivery of the Termination Notice, and, in the case of a Termination With Good Reason, upon delivery of written notice by the Executive to the Company. Executive shall have a period of 21 days (or, if required by applicable law, a period of 45 days) after the effective date of termination of this Agreement (the “Consideration Period”) in which to execute and return the original, signed Release to the Company. If Executive delivers the original, signed Release to the Company prior to the expiration of the Consideration Period, then the Reimbursement Period shall be deemed to have commenced as of the first day of the Consideration Period and Executive shall be entitled to the amounts and benefits set forth in Section 4.2 or 4.3, as the case may be.
If Executive does not deliver the original, signed Release to the Company prior to the expiration of the Consideration Period, then:
(a) the Company shall pay Executive an amount equal to the sum of (i) any Base Salary and vacation time accrued but unpaid as of the date of termination, plus (ii) any reimbursement for expenses incurred in accordance with Section 3.2; and
(b) the Company shall have no obligation to (i) pay to Executive the Severance Payment (as that term is defined in Section 4.2(b) above) or (ii) make the Benefits Payments during the Reimbursement Period (as those terms are defined in Section 4.2 above).
4.7 Continued Compliance. Executive and the Company hereby acknowledge that the amounts or benefits payable by the Company under Sections 4.2(b) and (c), 4.3, and 4.4(c) and the Benefits Payments payable by the Company under Sections 4.2 or 4.3 are part of the consideration for Executive’s undertakings under Article V below. Such amounts and benefits are subject to Executive’s continued compliance with the provisions of Article V. If Executive violates the provisions of Article V, then the Company will have no obligation to make any of the payments that remain payable by the Company under Sections 4.2(b) or (c), 4.3 or 4.4 or the Benefits Payments that remain payable by the Company under Sections 4.2 or 4.3 on or after the date of such violation.
4.8 Timing of Payments Under Certain Circumstances. With respect to any amount that becomes payable to Executive under this Agreement upon Executive’s Separation from Service (as defined below) for any reason, the provisions of this Section 4.8 will apply, notwithstanding any other provision of this Agreement to the contrary. If the Company determines in good faith that Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code, any Treasury regulations promulgated thereunder and any guidance issued by the Internal Revenue Service relating thereto (collectively, “Code Section 409A”), then to the extent required under Code Section 409A, payment of any amount that becomes payable to Executive upon Separation from Service (other than by reason of the death of Executive) and that otherwise would be payable during the six-month period following Executive’s Separation from Service shall be suspended until the lapse of such six-month period (or, if earlier, the date of Executive’s death). A “Separation from Service” of Executive means Executive’s separation from service, as defined in Code Section 409A, with the Company and all other entities with which the Company would be considered a single employer under Internal Revenue Code Section 414(b) or (c), applying the 80% threshold used in such Internal Revenue Code Sections or any Treasury regulations promulgated thereunder. Any payment suspended as provided in this Section 4.8, unadjusted for interest on such suspended payment, shall be paid to Executive in a single payment on the first business day following the end of such six-month period or within 30 days following the death of Executive, as applicable, provided that the death of Executive during such six-month period shall not cause the acceleration of any amount that otherwise would be payable on any date during such six-month period following the date of Executive’s death.




4.9 Change in Control. “Change in Control” means any of the following that otherwise meets the definition of a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company within the meaning of Code Section 409A (as defined below):
(a)    the acquisition by any person or group (excluding John C. Malone and/or any family member(s) of John C. Malone and/or any company, partnership, trust or other entity or investment vehicle controlled by such persons or the holdings of which are for the primary benefit of any of such persons (collectively, the “Permitted Holders”)) of ownership of stock of the Company that, together with stock already held by such person or group, constitutes more than 50% of the total fair market value or more than 50% of the total voting power of the stock of the Company;
(b)    the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the 12-month period ending on the date of the most recent acquisition by such person or group, assets from the Company that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or
(c)    the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock of the Company possessing 30% or more of the total voting power of the stock of Company or the replacement of a majority of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of appointment or election.
For purposes of this Section 4.9, “person” and “group” have the meanings given to them for purposes of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provisions, and the term “group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision.
ARTICLE V
OWNERSHIP OF PROCEEDS OF EMPLOYMENT; NON-DISCLOSURE;
NON-COMPETITION
5.1 Ownership of Proceeds of Employment.
5.1.1. The Company shall be the sole and exclusive owner throughout the universe in perpetuity of all of the results and proceeds of Executive’s services, work and labor in connection with Executive’s employment by the Company, free and clear of any and all claims, liens or encumbrances. Executive shall promptly and fully disclose to the Company, with all necessary detail for a complete understanding of the same, any and all developments, client and potential client lists, know how, discoveries, inventions, improvements, conceptions, ideas, writings, processes, formulae, contracts, methods, works, whether or not patentable or copyrightable, which are conceived, made, acquired, or written by Executive, solely or jointly with another, while employed by the Company or within six months thereafter (whether or not at the request or upon the suggestion of the Company) and which are substantially related




to the business or activities of the Company or any of its Affiliates, or which Executive conceives as a result of his employment by the Company or its Affiliates, or as a result of rendering advisory or consulting services to the Company or its Affiliates (collectively, “Proprietary Rights”).
5.1.2. Executive hereby assigns and transfers, and agrees to assign and transfer, all his rights, title, and interests in the Proprietary Rights to the Company or its nominee. In addition, Executive shall deliver to the Company any and all drawings, notes, specifications, and data relating to the Proprietary Rights. All copyrightable Proprietary Rights shall be considered to be “works made for hire.” Whenever requested to do so by the Company, Executive shall execute and deliver to the Company any and all applications, assignments and other instruments and do such other acts that the Company shall request to apply for and obtain patents and/or copyrights in any and all countries or to otherwise protect the Company’s interest in the Proprietary Rights and/or to vest title thereto to the Company; provided, however, the provisions of this Section 5.1 shall not apply to any Proprietary Rights that Executive developed entirely on his own time without using the Company’s equipment, supplies, facilities or proprietary information, except for Proprietary Rights that (a) at the time of conception or reduction to practice of the Proprietary Rights, relate to the Company’s business, or actual or demonstrably anticipated research or development of the Company, or (b) result from any work performed by Executive for the Company.
5.1.3. Executive shall assist the Company in obtaining such copyrights and patents during the term of this Agreement, and any time thereafter on reasonable notice and at mutually convenient times, and Executive agrees to testify in any prosecution or litigation involving any of the Proprietary Rights; provided, however, Executive shall be reasonably compensated for his time and reimbursed for any out-of-pocket expenses incurred in rendering such assistance or giving or preparing to give such testimony.
5.2 Non-Disclosure of Confidential Information. As used herein, “Confidential Information” means any and all information affecting or relating to the business of the Company and its Affiliates, including without limitation, financial data, customer lists and data, licensing arrangements, business strategies, pricing information, product development, intellectual, artistic, literary, dramatic or musical rights, works, or other materials of any kind or nature (whether or not entitled to protection under applicable copyright laws, or reduced to or embodied in any medium or tangible form), including without limitation, all copyrights, patents, trademarks, service marks, trade secrets, contract rights, titles, themes, stories, treatments, ideas, concepts, technologies, art work, logos, hardware, software, and as may be embodied in any and all computer programs, tapes, diskettes, disks, mailing lists, lists of actual or prospective customers and/or suppliers, notebooks, documents, memoranda, reports, files, correspondence, charts, lists and all other written, printed or otherwise recorded material of any kind whatsoever and any other information, whether or not reduced to writing, including “know-how”, ideas, concepts, research, processes, and plans. “Confidential Information” does not include information that is in the public domain, information that is generally known in the trade, or information that Executive can prove he acquired wholly independently of his employment with the Company. Executive shall not, at any time during the Term or thereafter, directly or indirectly, disclose or furnish to any other person, firm or corporation any Confidential Information, except in the course of the proper performance of his duties hereunder or as required by law (in which event Executive shall give prior written notice to Company and shall cooperate with Company and Company’s counsel in complying with such legal requirements). Promptly upon the expiration or termination of Executive’s employment hereunder for any reason or whenever the Company so requests, Executive shall surrender to the Company all documents,




drawings, work papers, lists, memoranda, records and other data (including all copies) constituting or pertaining in any way to any of the Confidential Information.
5.3 Non-Competition. Executive shall not, during the Term or during the Consideration Period, directly: (a) compete with the Company; or (b) have an interest in, be employed by, be engaged in or participate in the ownership, management, operation or control of, or act in any advisory or other capacity for, any Competing Entity which conducts its business within the Territory (as such terms are hereinafter defined); provided, however, that notwithstanding the foregoing, Executive may make solely passive investments in any Competing Entity the common stock of which is “publicly held,” and of which Executive shall not own or control, directly or indirectly, in the aggregate securities which constitute more than one (1%) percent of the voting rights or equity ownership of such Competing Entity; or (c) solicit or divert any business or any customer from the Company or assist any person, firm or corporation in doing so or attempting to do so; or (d) cause or seek to cause any person, firm or corporation to refrain from dealing or doing business with the Company or assist any person, firm or corporation in doing so or attempting to do so.
For purposes of this Section 5.3, (i) the term “Competing Entity” shall mean any entity which presently or during the period referred to above engages in any business activity in which the Company or any of its Affiliates is then engaged; and (ii) the term “Territory” shall mean any geographic area in which the Company or any of its Affiliates conducts business during such period.
Notwithstanding the foregoing, in the event that Executive elects, during the Consideration Period, to either (a) compete with the Company, or (b) have an interest in, be employed by, be engaged in or participate in the ownership, management, operation or control of, or act in any advisory or other capacity for, any Competing Entity which conducts its business within the Territory (the foregoing subsections (a) and (b), collectively, the “Competitive Activities”), then, at least ten (10) business days prior to commencing any such Competitive Activities, Executive shall deliver to the Company a written notice (the “Competition Notice”) advising the Company of (i) Executive’s intent to commence Competitive Activities, and (ii) the commencement date for such Competitive Activities. Executive’s election to participate in any Competitive Activities during the Consideration Period shall not be deemed a breach of this Agreement; rather, in the event Executive delivers the Competition Notice (and thereafter engages in Competitive Activities prior to the expiration of the Consideration Period), then (x) Executive shall forfeit any Severance Payment or Benefits Payment otherwise payable pursuant to Section 4.2 or 4.3 above, and (y) the Company shall have no obligation to make any Severance Payment to Executive or any Benefits Payment under Section 4.2 or 4.3.
5.4 Non-Solicitation.
5.4.1. In consideration of the Company disclosing and providing access to Confidential Information, after the date hereof, and other good and valuable consideration (including the severance benefits set forth in Articles 4.2 and 4.3), the receipt and sufficiency of which are hereby acknowledged, Executive shall not, for a period of eighteen (18) months from the date of any termination or expiration of his employment hereunder, directly or indirectly: (a) acquire any financial interest in or perform any services for himself or any other entity in connection with a business in which Executive’s interest, duties or activities would inherently require Executive to reveal any Confidential Information; or (b) solicit or cause to be solicited the disclosure of or disclose any Confidential Information for any purpose whatsoever or for any other party.
5.4.2. In consideration of the Company disclosing and providing access to Confidential Information, after the date hereof, and other good and valuable consideration (including the severance benefits set forth in Articles 4.2 and 4.3 ), the receipt and sufficiency




of which are hereby acknowledged, Executive and the Company, intending to be legally bound, hereby agree as follows. Executive shall not, for a period of eighteen (18) months from the date of any termination or expiration of his employment hereunder, solicit, directly or indirectly, or cause or permit others to solicit, directly or indirectly, (a) any person employed by the Company (a “Current Employee”) to leave employment with the Company or (b) any Monitronics dealer (a “Dealer”) to leave the Monitronics dealer network (the “Dealer Network”) or sell alarm monitoring contracts to another alarm monitoring company. The term “solicit” includes, but is not limited to the following (regardless of whether done directly or indirectly): (i) requesting that a Current Employee change employment or that a Dealer leave the Dealer Network, (ii) informing a Current Employee that an opening exists elsewhere or inform a Dealer that alternative dealer arrangements are available, (iii) assisting a Current Employee in finding employment elsewhere or a Dealer in finding alternative distribution opportunities elsewhere, (iv) inquiring if a Current Employee “knows of anyone who might be interested” in a position elsewhere or if a Dealer “knows of anyone who might be interested” in joining an alternative dealer network, (v) inquiring if a Current Employee might have an interest in employment elsewhere or if a Dealer might have an interest in joining an alternative dealer network, (vi) informing others of the name or status of, or other information about, a Current Employee or Dealer, or (vii) any other similar conduct, the effect of which is that a Current Employee leaves the employment of the Company or that a Dealer leaves the Dealer Network.
5.5 Breach of Provisions. In the event that Executive shall breach any of the provisions of this Article V, or in the event that any such breach is threatened by Executive, in addition to and without limiting or waiving any other remedies available to the Company at law or in equity, the Company shall be entitled to immediate injunctive relief in any court, domestic or foreign, having the capacity to grant such relief, without the necessity of posting a bond, to restrain any such breach or threatened breach and to enforce the provisions of this Article V. Executive acknowledges and agrees that there is no adequate remedy at law for any such breach or threatened breach and, in the event that any action or proceeding is brought seeking injunctive relief, Executive shall not use as a defense thereto that there is an adequate remedy at law.
5.6 Reasonable Restrictions. The parties acknowledge that the foregoing restrictions, the duration and the territorial scope thereof as set forth in this Article V, are under all of the circumstances reasonable and necessary for the protection of the Company and its business.
5.7 Definition. For purposes of this Article V, the term “Company” shall be deemed to include (i) any predecessor to, or successor of the Company, (ii) any subsidiary of the Company (including, without limitation, any entity in which the Company owns 50% or more of the issued and outstanding equity), and (iii) any entity that is under the control or common control of the Company (including, by way of illustration and not as a limitation, any joint venture to which the Company or one of its subsidiaries is a party).
ARTICLE VI
MISCELLANEOUS
6.1 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, distributees, successors and assigns.
6.2 Assignment. The Company may assign this Agreement to any successor in interest to its business, or to any subsidiary of the Company, and Executive hereby agrees to be employed by such assignee as though such assignee were originally the employer named herein.  Executive hereby acknowledges that




the services to be rendered by Executive are unique and personal, and, accordingly, Executive may not assign any of his rights or delegate any of his duties or obligations under this Agreement.
6.3 Notices. Any notice provided for herein shall be in writing and shall be deemed to have been given or made when personally delivered or 3 days following deposit for mailing by first class registered or certified mail, return receipt requested, or if delivered by facsimile transmission (to a fax number specified by the recipient in writing pursuant to this Section 6.3), upon confirmation of receipt of the transmission, to the address of the other party set forth below or to such other address as may be specified by notice given in accordance with this Section 6.3:
a. If to the Company:
Ascent Capital Group, Inc.
5251 DTC Parkway, Suite 1000
Greenwood Village, CO 80111
Attention: Chief Executive Officer
With a copy to:
Ascent Capital Group, Inc.
5251 DTC Parkway, Suite 1000
Greenwood Village, CO 80111
Attention: General Counsel
b. If to Executive:
Jeffrey R. Gardner
6.4 Severability. If any provision of this Agreement, or portion thereof, shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall attach only to such provision or portion thereof, and shall not in any manner affect or render invalid or unenforceable any other provision of this Agreement or portion thereof, and this Agreement shall be carried out as if any such invalid or unenforceable provision or portion thereof were not contained herein. In addition, any such invalid or unenforceable provision or portion thereof shall be deemed, without further action on the part of the parties hereto, modified, amended or limited to the extent necessary to render the same valid and enforceable.
6.5 Confidentiality. The parties hereto agree that they will not, during the Term or thereafter, disclose to any other person or entity the terms or conditions of this Agreement (excluding the financial terms hereof) without the prior written consent of the other party, except as required by law, regulatory authority or as necessary for either party to obtain personal loans or financing. Approval of the Company and of Executive shall be required with respect to any press releases regarding this Agreement and the activities of Executive contemplated hereunder.
6.6 Arbitration. If any controversy, claim or dispute arises out of or in any way relates to this Agreement, the alleged breach thereof, Executive’s employment with the Company or termination therefrom, including without limitation, any and all claims for employment discrimination or harassment, civil tort and any other employment laws, excepting only claims which may not, by statute, be arbitrated, both Executive and the Company (and its directors, officers, employees or agents) agree to submit any such dispute exclusively to binding arbitration. Both Executive and the Company acknowledge that they are relinquishing their right to a jury trial in civil court. Executive and the Company agree that arbitration is the exclusive remedy for all disputes arising out of or related to Executive’s employment with the Company.




The arbitration shall be administered, at the election of the party initiating the arbitration proceeding, either by JAMS in accordance with the Employment Arbitration Rules & Procedures of JAMS then in effect and subject to JAMS Policy on Employment Arbitration Minimum Standards or by the American Arbitration Association in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association, except as provided otherwise in this Agreement. Arbitration shall be commenced and heard in Dallas County, Texas. Only one arbitrator shall preside over the proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of Texas or federal law, or both, as applicable to the claim(s) asserted. In any arbitration, the burden of proof shall be allocated as provided by applicable law. The arbitrator shall have the authority to award any and all legal and equitable relief authorized by the law applicable to the claim(s) being asserted in the arbitration, as of the claim(s) were brought in a court of law. Either party may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Discovery, such as depositions or document requests, shall be available to the Company and Executive as though the dispute were pending in Texas state court. The arbitrator shall have the ability to rule on pre-hearing motions, as though the matter were in a Texas state court, including the ability to rule on a motion for summary judgment.
Unless otherwise permitted under applicable law, the fees of the arbitrator and any other fees for the administration of the arbitration that would not normally be incurred if the action were brought in a court of law (e.g., filing fees, room rental fees, etc.) shall be paid by the Company, provided that Executive shall be required to pay the amount of filing fees equal to that which Executive would be required to pay to file an action in Texas state court. The arbitrator must provide a written decision which is subject to limited judicial review consistent with applicable law. If any part of this arbitration provision is deemed to be unenforceable by an arbitrator or a court of law, that part may be severed or reformed so as to make the balance of this arbitration provision enforceable.
6.7 Waiver. No waiver by a party hereto of a breach or default hereunder by the other party shall be considered valid unless in writing signed by such first party, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or any other nature.
6.8 Controlling Nature of Agreement. To the extent any terms of this Agreement are inconsistent with the terms or provisions of the Company’s Employee Handbook or any other personnel policy statements or documents, the terms of this Agreement shall control. To the extent that any terms and conditions of Executive’s employment are not covered in this Agreement, the terms and conditions set forth in the Employee Handbook or any similar document shall control such terms.
6.9 Entire Agreement. This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof, and supersedes any and all prior agreements or understanding between the Company and Executive, whether written or oral, fully or partially performed relating to any or all matters covered by and contained or otherwise dealt with in this Agreement.
6.10 Amendment. No modification, change or amendment of this Agreement or any of its provisions shall be valid unless in writing and signed by the party against whom such claimed modification, change or amendment is sought to be enforced.
6.11 Authority. The parties each represent and warrant that they have the power, authority and right to enter into this Agreement and to carry out and perform the terms, covenants and conditions hereof.
6.12 Applicable Law. This Agreement, and all of the rights and obligations of the parties in connection with the employment relationship established hereby, shall be governed by and construed in




accordance with the substantive laws of the State of Texas without giving effect to principles relating to conflicts of law.
6.13 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
6.14 Compliance with Section 409A. The provisions of this Agreement are intended to satisfy the requirements of Code Section 409A and will be interpreted in a manner that is consistent with such intent. Without limiting the generality of the foregoing, the Company and Executive agree that, to the extent any payments made upon Executive’s termination of employment pursuant to Section 4.2 (including by reason of Section 4.3) or Section 4.4 that constitute deferred compensation subject to Code Section 409A, Executive’s entitlement to such payments shall be conditioned upon Executive’s termination of employment constituting a Separation from Service of Executive as defined in Section 4.8. Taxable expense reimbursements will be paid as soon as practicable in accordance with and subject to Company policy, but in no event later than December 31st of the year following the year in which the expenses were incurred.

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

 
 
 
 
"COMPANY"
 
 
 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
By:
/s/ William E. Niles
 
 
 
 
William E. Niles
 
 
 
 
Executive Vice President
 
 
 
 
 
 
 
 
 
"EXECUTIVE"
 
 
 
By:
/s/ Jeffery R. Gardner
 
 
 
 
Jeffery R. Gardner
 
 
 
 
 








Exhibit 10.5
ASCENT CAPITAL GROUP, INC.
2015 OMNIBUS INCENTIVE PLAN
PERFORMANCE-BASED RESTRICTED STOCK UNITS AWARD AGREEMENT

THIS PERFORMANCE-BASED RESTRICTED STOCK UNITS AWARD AGREEMENT (this “Agreement”) is made as of June 22, 2015 (the “Grant Date”), by and between ASCENT CAPITAL GROUP, INC., a Delaware corporation (the “Company”), and the person signing as “Grantee” on the signature page hereof (the “Grantee”).
The Company has adopted the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan (as has been or may hereafter be amended, the “Plan”), a copy of which is attached hereto as Exhibit A and by this reference made a part hereof, for the benefit of eligible employees of the Company and its Subsidiaries. Capitalized terms used and not otherwise defined in this Agreement will have the meanings ascribed to them in the Plan.
In consideration of the Grantee’s entry into a four (4) year extension of his employment agreement (the “Employment Agreement”) with the Company, the Compensation Committee appointed by the Board of Directors of the Company (the “Committee”) has determined that it would be in the interest of the Company and its stockholders to enter into an amendment to the Grantee’s employment agreement (the “Amended Employment Agreement”) and, the Committee, appointed by the Board of Directors of the Company pursuant to Section 3.1 of the Plan to administer the Plan, has also determined that it would be in the interest of the Company and its stockholders to award restricted stock units to the Grantee, subject to the conditions and restrictions set forth herein and in the Plan, in order to provide the Grantee with additional remuneration for services rendered, to encourage the Grantee to enter into the Amended Employment Agreement and to remain in the employ of the Company or its Subsidiaries and to increase the Grantee’s personal interest in the continued success and progress of the Company and its Subsidiaries.
The Company and the Grantee therefore agree as follows:
1. Definitions . The following terms, when used in this Agreement, have the following meanings:
“2015 Vesting Cycle” means the nine (9) month period beginning on May 1, 2015 and ending on January 31, 2016.
“2016 Vesting Cycle” means the twelve (12) month period beginning on January 1, 2016.
“2017 Vesting Cycle” means the twelve (12) month period beginning on January 1, 2017.
“Accelerated Restricted Stock Units” has the meaning specified in Section 6 of this Agreement.
“Cause” has the meaning specified in the Amended Employment Agreement.
“Close of Business” means, on any day, 5:00 p.m., Denver, Colorado time.
“Committee Certification Date” has the meaning specified in Section 3(c) of this Agreement.
“Common Stock” means the Company’s Series A Common Stock, par value $0.01 per share.
“Disability” has the meaning specified in the Amended Employment Agreement.
“Earned Restricted Stock Unit” has the meaning specified in Section 3(c) of this Agreement.

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“Key Performance Indicators” means the performance metrics as established by the Committee for any of the 2015 Vesting Cycle, 2016 Vesting Cycle or 2017 Vesting Cycle.
“Vesting Date” has the meaning specified in Section 3(d) of this Agreement.
“Termination for Good Reason” has the meaning specified in the Amended Employment Agreement.
2. Award. Pursuant to the terms of the Plan and in consideration of the covenants and promises of the Grantee herein contained, the Company hereby awards to the Grantee as of the Grant Date, that number of performance-based Restricted Stock Units set forth on Schedule 1, each representing the right to receive one share of the Company’s Common Stock, as authorized by the Committee, subject to the conditions and restrictions set forth below and in the Plan (the “Restricted Stock Units”). This Award of Restricted Stock Units granted to the Grantee under this paragraph 2 is subject to forfeiture in the event that the Grantee fails to execute and deliver the Amended Employment Agreement by December 31, 2015.
3. Achievement of Key Performance Indicators; Vesting; Forfeiture of Restricted Stock Units.
(a) Subject to Section 10.1(b) of the Plan and to earlier vesting in accordance with Section 6, Restricted Stock Units will be earned and vest, in whole or in part, only in accordance with the conditions stated in this Section 3.
(b) Schedule 1 sets forth the maximum number of Restricted Stock Units that may be earned based on the achievement and satisfaction of Key Performance Indicators, as determined and certified by the Committee.
(c) No later than sixty (60) days following the end of the 2015 Vesting Cycle and, if applicable, each of the 2016 Vesting Cycle and 2017 Vesting Cycle (each, a “Committee Certification Date”), the Committee will measure the Grantee’s performance against the Key Performance Indicators applicable to such vesting cycle. The Committee will then promptly notify (a “Vesting Notification”) the Grantee regarding the number of Restricted Stock Units, if any, that have been earned (each, an “Earned Restricted Stock Unit”) pursuant to this Section 3 as of the Committee Certification Date relating to such vesting cycle. If the Key Performance Indicators are satisfied with respect to the 2015 Vesting Cycle, 100% of the Restricted Stock Units will be earned, but, if the Key Performance Indicators are not so satisfied, all of the Restricted Stock Units will instead be available to be earned with respect to the 2016 Vesting Cycle. If the Key Performance Indicators with respect to the 2016 Vesting Cycle are not satisfied, all of the Restricted Stock Units will instead be available to be earned with respect to the 2017 Vesting Cycle. Any Restricted Stock Units that remain outstanding and unearned as of the Committee Certification Date relating to the 2017 Vesting Cycle will automatically be forfeited as of the Close of Business on such Committee Certification Date. Upon forfeiture of any unearned Restricted Stock Units pursuant to Section 2, this Section 3 or Section 6, such Restricted Stock Units and any related Unpaid Dividend Equivalents will be immediately cancelled, and the Grantee will cease to have any rights with respect thereto. All Restricted Stock Units earned on a Committee Certification Date will vest in accordance with the schedule set forth in Section 3(d).
(d) Grantee will become vested subject to continued employment until the applicable Vesting Date in any Earned Restricted Stock Units as follows (each date specified below being a “Vesting Date”):

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(1)
20% of the Earned Restricted Stock Units shall vest in equal installments on each of May 31, 2017, August 31, 2017, November 30, 2017 and February 28, 2018, if the Committee delivers a Vesting Notification to the Grantee relating to the 2015 Vesting Cycle;
(2)
(x) 30% of the Earned Restricted Stock Units shall vest in equal installments on each of May 31, 2018, August 31, 2018, November 30, 2018 and March 1, 2019, if the Committee delivers a Vesting Notification to the Grantee relating to the 2015 Vesting Cycle or (y) 50% of the Earned Restricted Stock Units shall instead vest in equal installments on each of such dates if the Committee instead delivers a Vesting Notification to the Grantee relating to the 2016 Vesting Cycle; and
(3)
(x) 50% of the Earned Restricted Stock Units shall vest in equal installments on each of May 31, 2019, August 31, 2019, November 30, 2019 and February 28, 2020, if the Committee delivers a Vesting Notification to the Grantee relating to the 2015 Vesting Cycle or the 2016 Vesting Cycle or (y) 100% of the Earned Restricted Stock Units shall instead vest in equal installments on each of such dates if the Committee instead delivers a Vesting Notification to the Grantee relating to the 2017 Vesting Cycle;
provided, however, that in no event will Grantee become vested in more than 100% of the Earned Restricted Stock Units.
(e) Any Dividend Equivalents with respect to Earned Restricted Stock Units that have not theretofore become Vested Dividend Equivalents (“Unpaid Dividend Equivalents”) will become vested only to the extent that the Earned Restricted Stock Units related thereto shall have become vested in accordance with this Agreement.
(f) Notwithstanding the foregoing, the Grantee will not vest, pursuant to this Section 3, in Earned Restricted Stock Units or related Unpaid Dividend Equivalents which the Grantee would otherwise vest in with respect to a given Vesting Date if the Grantee has not been continuously employed by the Company or any of its Subsidiaries from the Grant Date through such Vesting Date. Notwithstanding the foregoing, if any date on which vesting would otherwise occur is a Saturday, Sunday or a holiday, such vesting will instead occur on the business day next following such date.
4. Settlement of Restricted Stock Units. Settlement of Earned Restricted Stock Units or Accelerated Restricted Stock Units that vest in accordance with Section 3 or Section 6, respectively, shall be made as soon as administratively practicable after the applicable Vesting Date, but in no event later than sixty (60) days after such Vesting Date. Settlement of vested Earned Restricted Stock Units and Accelerated Restricted Stock Units shall be made in payment of shares of Common Stock, together with any related Dividend Equivalents, in accordance with Section 7.
5. Mandatory Withholding for Taxes. To the extent that the Company is subject to withholding tax requirements under any national, state, local or other governmental law with respect to the award of the Restricted Stock Units to the Grantee or the vesting or settlement thereof, or the designation of any Dividend Equivalents as payable or distributable or the payment or distribution thereof, the Grantee must make arrangement satisfactory to the Company to make payment to the Company or its designee of the amount required to be withheld under such tax laws, as determined by the Company (collectively, the “Required Withholding Amount”). To the extent such withholding is required, the Company shall withhold (a) from

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the shares of Common Stock represented by such vested Earned Restricted Stock Units or Accelerated Restricted Stock Units and otherwise deliverable to the Grantee a number of shares of Common Stock and/or (b) from any related Dividend Equivalents otherwise deliverable to the Grantee an amount of such Dividend Equivalents, which collectively have a value (or, in the case of securities withheld, a Fair Market Value) as of the date the obligation to withhold arises equal to the Required Withholding Amount, unless the Grantee remits the Required Withholding Amount to the Company or its designee in cash or shares of Common Stock and by such time as the Company may require or other provisions for withholding such amount satisfactory to the Company have been made. Notwithstanding any other provisions of this Agreement, the delivery of any shares of Common Stock represented by vested Earned Restricted Stock Units or Accelerated Restricted Stock Units and any related Dividend Equivalents may be postponed until any required withholding taxes have been paid to the Company.
6. Early Termination or Vesting of Restricted Stock Units.
Subject to Section 23 hereof, unless otherwise determined by the Committee in its sole discretion, if the Grantee’s employment with the Company or a Subsidiary terminates prior to the last day of any applicable Vesting Cycle:  
(a) In the event of Grantee’s Termination Without Cause or Termination With Good Reason (each as defined in Grantee’s Employment Agreement), then a number of Restricted Stock Units granted by this Agreement will become vested on the date of the Grantee’s termination equal to (A) the product of (x) the number of Restricted Stock Units granted by this Agreement (without regard to any prior Vesting Dates) and (y) the number of calendar quarters which have elapsed between April 1, 2016 and the date of the Grantee’s termination (and will include, for the avoidance of doubt, the entire calendar quarter of the Grantee’s termination) divided by sixteen (16) (with such quotient not to exceed one (1)), less (B) any Restricted Stock Units that have previously vested. Example: Assume Grantee’s employment terminates August 1, 2018. 35,928 Units (less any previously Vested Units) would be deemed earned e.g., April 1, 2016 - August 1 , 2018 = 10 quarters / 16 = 62.50% x 57,485 Units = 35,928 Units;
(b) If the Grantee dies while employed by the Company or a Subsidiary, then each Restricted Stock Unit will immediately become an Earned Restricted Stock Unit and fully vested;
(c) If the Grantee’s employment with the Company or a Subsidiary terminates by reason of Disability, then each Restricted Stock Unit will immediately become an Earned Restricted Stock Unit and fully vested; and
(d) If the Grantee’s employment with the Company or a Subsidiary is terminated for Cause, or Grantee resigns without Good Reason then any unvested the Restricted Stock Units will be forfeited as of the Close of Business on the date of such termination of employment.
Unless the Committee otherwise determines, a change of the Grantee’s employment from the Company to a Subsidiary or from a Subsidiary to the Company or another Subsidiary will not be considered a termination of the Grantee’s employment for purposes of this Agreement. The Restricted Stock Units that vest pursuant to this Section 6 shall be referred to as “Accelerated Restricted Stock Units”.
7. Delivery by the Company. As soon as practicable after the vesting of Earned Restricted Stock Units, and any related Unpaid Dividend Equivalents, pursuant to Section 3 or Section 6 (but in no event later than sixty (60) days thereafter) and subject to the withholding referred to in Section 5, the Company

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will (a) register in a book entry account in the name of the Grantee, or cause to be issued and delivered to the Grantee (in electronic form), that number of shares of Common Stock represented by such vested Earned Restricted Stock Units and any securities representing any related Vested Dividend Equivalents, and (b) cause to be delivered to the Grantee any cash payment representing Vested Dividend Equivalents. Any delivery of securities will be deemed effected for all purposes when a statement of holdings reflecting such securities and, in the case of any Vested Dividend Equivalents, any other documents necessary to reflect ownership thereof by the Grantee, have been delivered personally to the Grantee or, if delivery is by mail, when the Company or its stock transfer agent has deposited the statement of holdings and/or such other documents in the United States mail, addressed to the Grantee. Any cash payment will be deemed effected when a check from the Company, payable to the Grantee and in the amount equal to the amount of the cash owed, has been delivered personally to the Grantee or deposited in the United States mail, addressed to the Grantee.
8. Nontransferability of Restricted Stock Units. Restricted Stock Units, and any related Unpaid Dividend Equivalents that have not been earned or vested, are not transferable (either voluntarily or involuntarily) before or after the Grantee’s death, except as follows: (a) during the Grantee’s lifetime, pursuant to a domestic relations order issued by a court of competent jurisdiction that is not contrary to the terms and conditions of the Plan or this Agreement, and in a form acceptable to the Committee; or (b) after the Grantee’s death, by will or pursuant to the applicable laws of descent and distribution, as may be the case. Any person to whom Restricted Stock Units are transferred in accordance with the provisions of the preceding sentence shall take such Restricted Stock Units subject to all of the terms and conditions of the Plan and this Agreement, including that the vesting and termination provisions of this Agreement will continue to be applied with respect to the Grantee. Statements of holdings reflecting Restricted Stock Units that have been earned and vested may be delivered only to the Grantee (or during the Grantee’s lifetime, to the Grantee’s court appointed legal representative) or to a person to whom the Restricted Stock Units have been transferred in accordance with this Section.
9. No Stockholder Rights; Dividend Equivalents. The Grantee will not be deemed for any purpose to be, or to have any of the rights of, a stockholder of the Company with respect to any shares of Common Stock represented by any Restricted Stock Units unless and until such time as shares of Common Stock represented by vested Earned Restricted Stock Units or Accelerated Restricted Stock Units, as the case may be, have been delivered to the Grantee in accordance with Section 7, nor will the existence of this Agreement affect in any way the right or power of the Company or any stockholder of the Company to accomplish any corporate act, including, without limitation, any reclassification, reorganization or other change of or to its capital or business structure, merger, consolidation, liquidation or sale or other disposition of all or any part of its business or assets. The Grantee will have no right to receive, or otherwise with respect to, any Dividend Equivalents until such time, if ever, as (a) the Restricted Stock Units with respect to which such Dividend Equivalents relate shall have become earned and vested, or (b) such Dividend Equivalents shall have become Vested Dividend Equivalents as described herein, and, if vesting does not occur, the related Dividend Equivalents will be forfeited. Dividend Equivalents shall not bear interest or be segregated in a separate account. Notwithstanding the foregoing, the Committee may, in its sole discretion, accelerate the vesting of any portion of the Dividend Equivalents (any Dividend Equivalent that vests pursuant to Sections 3, 6 or this 9, “Vested Dividend Equivalents”). The settlement of any Vested Dividend Equivalents shall be made as soon as administratively practicable after the accelerated vesting date, but in no event later than sixty (60) days following the date on which such accelerated vesting date occurs. With respect to any Restricted Stock Units and Dividend Equivalents, the Grantee is a general unsecured creditor of the Company.
10. Adjustments; Early Vesting in Certain Events.
(a) The Restricted Stock Units will be subject to adjustment (including, without limitation, as to the number of Restricted Stock Units) in such manner as the Committee, in its sole discretion, deems

5


equitable and appropriate in connection with the occurrence of any of the events described in Section 4.2 of the Plan following the Grant Date.
(b) Subject to Section 23, in the event of any Approved Transaction, Board Change or Control Purchase following the Grant Date, the Restricted Stock Units may vest in accordance with Section 10.1(b) of the Plan.
11. Restrictions Imposed by Law. Without limiting the generality of Section 10.10 of the Plan, the Company will not be obligated to deliver any shares of Common Stock represented by vested Earned Restricted Stock Units, Accelerated Restricted Stock Units or Unpaid Dividend Equivalents if counsel to the Company determines that the issuance or delivery thereof would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association upon which shares of Common Stock or other applicable securities are listed or quoted. The Company will in no event be obligated to take any affirmative action in order to cause the delivery of shares of Common Stock represented by vested Restricted Stock Units, Accelerated Restricted Stock Units or securities constituting or cash payment related to any Unpaid Dividend Equivalents to comply with any such law, rule, regulation, or agreement.
12. Notice. Unless the Company notifies the Grantee in writing of a different procedure or address, any notice or other communication to the Company with respect to this Agreement will be in writing and will be delivered personally or sent by United States first class mail, postage prepaid and addressed as follows:
Ascent Capital Group, Inc.
5251 DTC Parkway, Suite 1000
Greenwood Village, Colorado 80111
Attn: General Counsel
Any notice or other communication to the Grantee with respect to this Agreement will be in writing and will be delivered personally, or will be sent by United States first class mail, postage prepaid, to the Grantee’s address as listed in the records of the Company on the date of this Agreement, unless the Company has received written notification from the Grantee of a change of address.
13. Amendment. Notwithstanding any other provision hereof, this Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by Section 10.9(b) of the Plan. Without limiting the generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented from time to time as approved by the Committee (i) to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, (ii) to add to the covenants and agreements of the Company for the benefit of the Grantee or surrender any right or power reserved to or conferred upon the Company in this Agreement, subject to any required approval of the Company’s stockholders, and provided, in each case, that such changes or corrections will not adversely affect the rights of the Grantee with respect to the Award evidenced hereby, or (iii) to make such other changes as the Company, upon advice of counsel, determines are necessary or advisable because of the adoption or promulgation of, or change in the interpretation of, any law or governmental rule or regulation, including any applicable federal or state securities laws; and
(b) subject to any required action by the Board or the stockholders of the Company, the Restricted Stock Units granted under this Agreement may be canceled by the Committee and a new Award made in substitution therefor, provided, that the Award so substituted will satisfy all of the

6


requirements of the Plan as of the date such new Award is made and no such action will adversely affect the Restricted Stock Units to the extent then earned or vested.
14. Grantee Employment. Nothing contained in this Agreement, and no action of the Company or the Committee with respect hereto, will confer or be construed to confer on the Grantee any right to continue in the employ of the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the Grantee’s employment at any time, with or without Cause, subject to the provisions of any employment agreement between the Grantee and the Company or any Subsidiary.
15. Nonalienation of Benefits. Except as provided in Section 8 and prior to vesting of the Earned Restricted Stock Units or Accelerated Restricted Stock Units, (a) no right or benefit under this Agreement will be subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same will be void, and (b) no right or benefit hereunder will in any manner be liable for or subject to the debts, contracts, liabilities or torts of the Grantee or other person entitled to such benefits.
16. Governing Law. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of Delaware. Each party irrevocably submits to the general jurisdiction of the state and federal courts located in the State of Delaware in any action to interpret or enforce this Agreement and irrevocably waives any objection to jurisdiction that such party may have based on inconvenience of forum.
17. Construction. References in this Agreement to “this Agreement” and the words “herein,” “hereof,” “hereunder” and similar terms include all Exhibits and Schedules appended hereto, including the Plan. This Agreement is entered into, and the Award evidenced hereby is granted, pursuant to the Plan and will be governed by and construed in accordance with the Plan and the administrative interpretations adopted by the Committee thereunder. All decisions of the Committee upon questions regarding the Plan or this Agreement will be conclusive. Unless otherwise expressly stated herein, in the event of any inconsistency between the terms of the Plan and this Agreement, the terms of the Plan will control. The headings of the sections of this Agreement have been included for convenience of reference only, are not to be considered a part hereof and will in no way modify or restrict any of the terms or provisions hereof.
18. Duplicate Originals . The Company and the Grantee may sign any number of copies of this Agreement. Each signed copy will be deemed to be an original, but all of them together represent the same agreement.
19. Rules by Committee. The rights of the Grantee and the obligations of the Company hereunder will be subject to such reasonable rules and regulations as the Committee may adopt from time to time hereafter.
20. Entire Agreement. This Agreement is in satisfaction of and in lieu of all prior discussions and agreements, oral or written, between the Company and the Grantee, with respect to the subject matter hereof. The Grantee and the Company hereby declare and represent that no promise or agreement not expressed herein has been made and that this Agreement contains the entire agreement between the parties hereto with respect to the Award and replaces and makes null and void any prior agreements between the Grantee and the Company regarding the Award. Subject to the restrictions set forth in Sections 8 and 15, this Agreement will be binding upon and inure to the benefit of the parties and their respective heirs, successors and assigns.

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21. Grantee Acceptance. The Grantee shall signify acceptance of the terms and conditions of this Agreement by signing in the space provided at the end hereof and returning a signed copy to the Company.
22. Code Section 409A Compliance. If any provision of this Agreement would result in the imposition of an excise tax under Section 409A of the Code and related regulations and Treasury pronouncements (“Section 409A”), that provision will be reformed to avoid imposition of the excise tax and no action taken to comply with Section 409A (or to provide that the Restricted Stock Units are exempt from Section 409A) shall be deemed to impair a benefit under this Agreement. If any portion of the benefits to be provided pursuant to this Agreement constitute deferred compensation subject to Section 409A, then, to the extent required by Section 409A, if Grantee is a “specified employee” within the meaning of Seciton 409A, any amounts payable on account of Grantee’s separation from service will not be paid until the date that is six months and one day following such separation from service or, if earlier, the date of Grantee’s death.
23. Change in Control.
(a) If the Grantee’s employment with the Company or any of its Subsidiaries terminates and such termination constitutes a Termination With Good Reason (as such term is defined in the Amended Employment Agreement) or a Termination Without Cause (as such term is defined in the Amended Employment Agreement), and such termination occurs within twelve (12) months following a Change in Control, all Restricted Stock Units and all related Unvested Dividend Equivalents held by the Grantee on the date of termination, to the extent not theretofore vested, will vest fully on the date of such termination.
(b) For purposes of this Section 23, “Change in Control” means any of the following that otherwise meets the definition of a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A:
(1)
the acquisition by any person or group (excluding John C. Malone and/or any family member(s) of John C. Malone and/or any company, partnership, trust or other entity or investment vehicle controlled by such persons or the holdings of which are for the primary benefit of any of such persons (collectively, the “Permitted Holders”)) of ownership of stock of the Company that, together with stock already held by such person or group, constitutes more than 50% of the total fair market value or more than 50% of the total voting power of the stock of the Company;
(2)
the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the twelve (12)-month period ending on the date of the most recent acquisition by such person or group, assets from the Company that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or
(3)
the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the twelve (12)-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock of the Company possessing 30% or

8


more of the total voting power of the stock of Company or the replacement of a majority of the Company’s Board of Directors during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of appointment or election.
24. Forfeiture for Misconduct and Repayment of Certain Amounts. If the Grantee holds the office of Vice President or above as of the Grant Date, and if (i) a material restatement of any financial statement of the Company (including any consolidated financial statement of the Company and its consolidated Subsidiaries) is required and (ii) in the reasonable judgment of the Committee, (A) such restatement is due to material noncompliance with any financial reporting requirement under applicable securities laws and (B) such noncompliance is a result of misconduct on the part of the Grantee, the Grantee will repay to the Company Forfeitable Benefits received by the Grantee during the Misstatement Period in such amount as the Committee may reasonably determine, taking into account, in addition to any other factors deemed relevant by the Committee, the extent to which the market value of Common Stock during the Misstatement Period was affected by the error(s) giving rise to the need for such restatement. “Forfeitable Benefits” means (i) any and all cash and/or shares of Common Stock received by the Grantee upon the vesting during the Misstatement Period of any Restricted Stock Units and Unvested Dividend Equivalents held by the Grantee and (ii) any proceeds received by the Grantee from the sale, exchange, transfer or other disposition during the Misstatement Period of any Restricted Stock Units and Unvested Dividend Equivalents received by the Grantee upon the vesting during the Misstatement Period of any Award held by the Grantee. By way of clarification, “Forfeitable Benefits” will not include any shares of Common Stock received upon vesting of any Restricted Stock Units and Unvested Dividend Equivalents during the Misstatement Period that are not sold, exchanged, transferred or otherwise disposed of during the Misstatement Period. “Misstatement Period” means the twelve (12)-month period beginning on the date of the first public issuance or the filing with the Securities and Exchange Commission, whichever occurs earlier, of the financial statement requiring restatement.

[Signature Page Follows]


9





IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the Grant Date.



 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
 
 
 
 
 
By:
/s/ William Fitzgerald
 
 
 
Name:
William Fitzgerald
 
 
 
Title:
Chief Executive Officer
 
 
 
 
 
 
 
ACCEPTED:
 
 
 
 
/s/ William E. Niles
 
 
 
 
William E. Niles, Grantee
 
 
 
 
 
 
 
 
 
Address:
 
 
 
 
 
 
 
 
 
SSN:



10



Exhibit A to Performance-Based Restricted Stock Unit Agreement
dated as of March 27, 2015 between
Ascent Capital Group, Inc. and Grantee



Designation of Beneficiary

I, _____________ William E. Niles _______________ (the “Grantee”), hereby declare

that upon my death                              (the “Beneficiary”) of
Name

,
Street Address              City          State              Zip Code

who is my                                  , will be entitled to the
Relationship to the Grantee

Restricted Stock Units and all other rights accorded the Grantee by the above‑referenced grant agreement (the “Agreement”).

It is understood that this Designation of Beneficiary is made pursuant to the Agreement and is subject to the conditions stated herein, including the Beneficiary’s survival of the Grantee’s death. If any such condition is not satisfied, such rights will devolve according to the Grantee’s will or the laws of descent and distribution.
It is further understood that all prior designations of beneficiary under the Agreement are hereby revoked and that this Designation of Beneficiary may only be revoked in writing, signed by the Grantee, and filed with the Committee prior to the Grantee’s death.

                                                  
Date                              Grantee



A-1



Schedule 1
to
Ascent Performance-Based Restricted Stock Units Award Agreement
Vesting of Restricted Stock Units Based on Key Performance Indicators
Total Number of Potential Maximum Restricted Stock Units : 57,485


1-1


Exhibit 10.6
ASCENT CAPITAL GROUP, INC.
2015 OMNIBUS INCENTIVE PLAN
PERFORMANCE-BASED RESTRICTED STOCK UNITS AWARD AGREEMENT

THIS PERFORMANCE-BASED RESTRICTED STOCK UNITS AWARD AGREEMENT (this “Agreement”) is made as of March 24, 2015 (the “Grant Date”), by and between ASCENT CAPITAL GROUP, INC., a Delaware corporation (the “Company”), and the person signing as “Grantee” on the signature page hereof (the “Grantee”).
The Company has adopted the Ascent Capital Group, Inc. 2015 Omnibus Incentive Plan (as has been or may hereafter be amended, the “Plan”), a copy of which is attached hereto as Exhibit A and by this reference made a part hereof, for the benefit of eligible employees of the Company and its Subsidiaries. Capitalized terms used and not otherwise defined in this Agreement will have the meanings ascribed to them in the Plan.
The Compensation Committee appointed by the Board of Directors of the Company (the “Committee”) has determined that it would be in the interest of the Company and its stockholders to enter into an amendment to the Grantee’s employment agreement (the “Amended Employment Agreement”) and, the Committee, appointed by the Board of Directors of the Company pursuant to Section 3.1 of the Plan to administer the Plan, has also determined that it would be in the interest of the Company and its stockholders to award restricted stock units to the Grantee, subject to the conditions and restrictions set forth herein and in the Plan, in order to provide the Grantee with additional remuneration for services rendered, to encourage the Grantee to enter into the Amended Employment Agreement and to remain in the employ of the Company or its Subsidiaries and to increase the Grantee’s personal interest in the continued success and progress of the Company and its Subsidiaries.
The Company and the Grantee therefore agree as follows:
1. Definitions . The following terms, when used in this Agreement, have the following meanings:
“2015 Vesting Cycle” means the nine (9) month period beginning on May 1, 2015 and ending on January 31, 2016.
“2016 Vesting Cycle” means the twelve (12) month period beginning on January 1, 2016.
“2017 Vesting Cycle” means the twelve (12) month period beginning on January 1, 2017.
“Accelerated Restricted Stock Units” has the meaning specified in Section 6 of this Agreement.
“Cause” has the meaning specified in the Amended Employment Agreement.
“Close of Business” means, on any day, 5:00 p.m., Denver, Colorado time.
“Committee Certification Date” has the meaning specified in Section 3(c) of this Agreement.
“Common Stock” means the Company’s Series A Common Stock, par value $0.01 per share.
“Disability” has the meaning specified in the Amended Employment Agreement.
“Earned Restricted Stock Unit” has the meaning specified in Section 3(c) of this Agreement.

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“Key Performance Indicators” means the performance metrics as established by the Committee for any of the 2015 Vesting Cycle, 2016 Vesting Cycle or 2017 Vesting Cycle.
“Vesting Date” has the meaning specified in Section 3(d) of this Agreement.
“Termination for Good Reason” has the meaning specified in the Amended Employment Agreement.
2. Award. Pursuant to the terms of the Plan and in consideration of the covenants and promises of the Grantee herein contained, the Company hereby awards to the Grantee as of the Grant Date, that number of performance-based Restricted Stock Units set forth on Schedule 1, each representing the right to receive one share of the Company’s Common Stock, as authorized by the Committee, subject to the conditions and restrictions set forth below and in the Plan (the “Restricted Stock Units”). This Award of Restricted Stock Units granted to the Grantee under this paragraph 2 is subject to forfeiture in the event that the Grantee fails to execute and deliver the Amended Employment Agreement by January 1, 2016.
3.
Achievement of Key Performance Indicators; Vesting; Forfeiture of Restricted Stock Units.
(a) Subject to Section 10.1(b) of the Plan and to earlier vesting in accordance with Section 6, Restricted Stock Units will be earned and vest, in whole or in part, only in accordance with the conditions stated in this Section 3.
(b) Schedule 1 sets forth the maximum number of Restricted Stock Units that may be earned based on the achievement and satisfaction of Key Performance Indicators, as determined and certified by the Committee.
(c) No later than sixty (60) days following the end of the 2015 Vesting Cycle and, if applicable, each of the 2016 Vesting Cycle and 2017 Vesting Cycle (each, a “Committee Certification Date”), the Committee will measure the Grantee’s performance against the Key Performance Indicators applicable to such vesting cycle. The Committee will then promptly notify (a “Vesting Notification”) the Grantee regarding the number of Restricted Stock Units, if any, that have been earned (each, an “Earned Restricted Stock Unit”) pursuant to this Section 3 as of the Committee Certification Date relating to such vesting cycle. If the Key Performance Indicators are satisfied with respect to the 2015 Vesting Cycle, 100% of the Restricted Stock Units will be earned, but, if the Key Performance Indicators are not so satisfied, all of the Restricted Stock Units will instead be available to be earned with respect to the 2016 Vesting Cycle. If the Key Performance Indicators with respect to the 2016 Vesting Cycle are not satisfied, all of the Restricted Stock Units will instead be available to be earned with respect to the 2017 Vesting Cycle. Any Restricted Stock Units that remain outstanding and unearned as of the Committee Certification Date relating to the 2017 Vesting Cycle will automatically be forfeited as of the Close of Business on such Committee Certification Date. Upon forfeiture of any unearned Restricted Stock Units pursuant to Section 2, this Section 3 or Section 6, such Restricted Stock Units and any related Unpaid Dividend Equivalents will be immediately cancelled, and the Grantee will cease to have any rights with respect thereto. All Restricted Stock Units earned on a Committee Certification Date will vest in accordance with the schedule set forth in Section 3(d).
(d) Grantee will become vested subject to continued employment until the applicable Vesting Date in any Earned Restricted Stock Units as follows (each date specified below being a “Vesting Date”):

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(1)
20% of the Earned Restricted Stock Units shall vest in equal installments on each of March 31, 2016, June 30, 2016, September 30, 2016 and December 31 2016, if the Committee delivers a Vesting Notification to the Grantee relating to the 2015 Vesting Cycle;
(2)
(x) 30% of the Earned Restricted Stock Units shall vest in equal installments on each of March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017, if the Committee delivers a Vesting Notification to the Grantee relating to the 2015 Vesting Cycle or (y) 50% of the Earned Restricted Stock Units shall instead vest in equal installments on each of such dates if the Committee instead delivers a Vesting Notification to the Grantee relating to the 2016 Vesting Cycle; and
(3)
(x) 50% of the Earned Restricted Stock Units shall vest in equal installments on each of March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, if the Committee delivers a Vesting Notification to the Grantee relating to the 2015 Vesting Cycle or the 2016 Vesting Cycle or (y) 100% of the Earned Restricted Stock Units shall instead vest in equal installments on each of such dates if the Committee instead delivers a Vesting Notification to the Grantee relating to the 2017 Vesting Cycle;
provided, however, that in no event will Grantee become vested in more than 100% of the Earned Restricted Stock Units.
(e) Any Dividend Equivalents with respect to Earned Restricted Stock Units that have not theretofore become Vested Dividend Equivalents (“Unpaid Dividend Equivalents”) will become vested only to the extent that the Earned Restricted Stock Units related thereto shall have become vested in accordance with this Agreement.
(f) Notwithstanding the foregoing, the Grantee will not vest, pursuant to this Section 3, in Earned Restricted Stock Units or related Unpaid Dividend Equivalents which the Grantee would otherwise vest in with respect to a given Vesting Date if the Grantee has not been continuously employed by the Company or any of its Subsidiaries from the Grant Date through such Vesting Date. Notwithstanding the foregoing, if any date on which vesting would otherwise occur is a Saturday, Sunday or a holiday, such vesting will instead occur on the business day next following such date.
4. Settlement of Restricted Stock Units. Settlement of Earned Restricted Stock Units or Accelerated Restricted Stock Units that vest in accordance with Section 3 or Section 6, respectively, shall be made as soon as administratively practicable after the applicable Vesting Date, but in no event later than sixty (60) days after such Vesting Date. Settlement of vested Earned Restricted Stock Units and Accelerated Restricted Stock Units shall be made in payment of shares of Common Stock, together with any related Dividend Equivalents, in accordance with Section 7.
5. Mandatory Withholding for Taxes. To the extent that the Company is subject to withholding tax requirements under any national, state, local or other governmental law with respect to the award of the Restricted Stock Units to the Grantee or the vesting or settlement thereof, or the designation of any Dividend Equivalents as payable or distributable or the payment or distribution thereof, the Grantee must make arrangement satisfactory to the Company to make payment to the Company or its designee of the amount required to be withheld under such tax laws, as determined by the Company (collectively, the “Required Withholding Amount”). To the extent such withholding is required, the Company shall withhold (a) from

3


the shares of Common Stock represented by such vested Earned Restricted Stock Units or Accelerated Restricted Stock Units and otherwise deliverable to the Grantee a number of shares of Common Stock and/or (b) from any related Dividend Equivalents otherwise deliverable to the Grantee an amount of such Dividend Equivalents, which collectively have a value (or, in the case of securities withheld, a Fair Market Value) as of the date the obligation to withhold arises equal to the Required Withholding Amount, unless the Grantee remits the Required Withholding Amount to the Company or its designee in cash or shares of Common Stock and by such time as the Company may require or other provisions for withholding such amount satisfactory to the Company have been made. Notwithstanding any other provisions of this Agreement, the delivery of any shares of Common Stock represented by vested Earned Restricted Stock Units or Accelerated Restricted Stock Units and any related Dividend Equivalents may be postponed until any required withholding taxes have been paid to the Company.
6. Early Termination or Vesting of Restricted Stock Units.
Subject to Section 23 hereof, unless otherwise determined by the Committee in its sole discretion, if the Grantee’s employment with the Company or a Subsidiary terminates prior to the last day of any applicable Vesting Cycle:  
a.
In the event of Grantee’s Termination Without Cause or Termination With Good Reason (each as defined in Grantee’s Employment Agreement), then a number of Restricted Stock Units granted by this Agreement will become vested on the date of the Grantee’s termination equal to (A) the product of (x) the number of Restricted Stock Units granted by this Agreement (without regard to any prior Vesting Dates) and (y) the number of calendar quarters which have elapsed between January 1, 2016 and the date of the Grantee’s termination (and will include, for the avoidance of doubt, the entire calendar quarter of the Grantee’s termination) divided by twelve (12) (with such quotient not to exceed one (1)), less (B) any Restricted Stock Units that have previously vested. Example: Assume Grantee’s employment terminates May 1, 2017. 15,000 Units (less any previously vested Units) would vest e.g., January 1, 2016 - May 1, 2017 = 6 quarters / 12 = 50% x 30,000 Units = 15,000 Units

(b) If the Grantee dies while employed by the Company or a Subsidiary, then each Restricted Stock Unit will immediately become an Earned Restricted Stock Unit and fully vested;
(c) If the Grantee’s employment with the Company or a Subsidiary terminates by reason of Disability, then each Restricted Stock Unit will immediately become an Earned Restricted Stock Unit and fully vested; and
(d)    If the Grantee’s employment with the Company or a Subsidiary is terminated for Cause, or Grantee voluntarily resigns without Good Reason, then any unvested Restricted Stock Units will be forfeited as of the close of Business on the date of such termination of employment.
Unless the Committee otherwise determines, a change of the Grantee’s employment from the Company to a Subsidiary or from a Subsidiary to the Company or another Subsidiary will not be considered a termination of the Grantee’s employment for purposes of this Agreement. The Restricted Stock Units that vest pursuant to this Section 6 shall be referred to as “Accelerated Restricted Stock Units”.

4


7. Delivery by the Company. As soon as practicable after the vesting of Earned Restricted Stock Units, and any related Unpaid Dividend Equivalents, pursuant to Section 3 or Section 6 (but in no event later than sixty (60) days thereafter) and subject to the withholding referred to in Section 5, the Company will (a) register in a book entry account in the name of the Grantee, or cause to be issued and delivered to the Grantee (in electronic form), that number of shares of Common Stock represented by such vested Earned Restricted Stock Units and any securities representing any related Vested Dividend Equivalents, and (b) cause to be delivered to the Grantee any cash payment representing Vested Dividend Equivalents. Any delivery of securities will be deemed effected for all purposes when a statement of holdings reflecting such securities and, in the case of any Vested Dividend Equivalents, any other documents necessary to reflect ownership thereof by the Grantee, have been delivered personally to the Grantee or, if delivery is by mail, when the Company or its stock transfer agent has deposited the statement of holdings and/or such other documents in the United States mail, addressed to the Grantee. Any cash payment will be deemed effected when a check from the Company, payable to the Grantee and in the amount equal to the amount of the cash owed, has been delivered personally to the Grantee or deposited in the United States mail, addressed to the Grantee.
8. Nontransferability of Restricted Stock Units. Restricted Stock Units, and any related Unpaid Dividend Equivalents that have not been earned or vested, are not transferable (either voluntarily or involuntarily) before or after the Grantee’s death, except as follows: (a) during the Grantee’s lifetime, pursuant to a domestic relations order issued by a court of competent jurisdiction that is not contrary to the terms and conditions of the Plan or this Agreement, and in a form acceptable to the Committee; or (b) after the Grantee’s death, by will or pursuant to the applicable laws of descent and distribution, as may be the case. Any person to whom Restricted Stock Units are transferred in accordance with the provisions of the preceding sentence shall take such Restricted Stock Units subject to all of the terms and conditions of the Plan and this Agreement, including that the vesting and termination provisions of this Agreement will continue to be applied with respect to the Grantee. Statements of holdings reflecting Restricted Stock Units that have been earned and vested may be delivered only to the Grantee (or during the Grantee’s lifetime, to the Grantee’s court appointed legal representative) or to a person to whom the Restricted Stock Units have been transferred in accordance with this Section.
9. No Stockholder Rights; Dividend Equivalents. The Grantee will not be deemed for any purpose to be, or to have any of the rights of, a stockholder of the Company with respect to any shares of Common Stock represented by any Restricted Stock Units unless and until such time as shares of Common Stock represented by vested Earned Restricted Stock Units or Accelerated Restricted Stock Units, as the case may be, have been delivered to the Grantee in accordance with Section 7, nor will the existence of this Agreement affect in any way the right or power of the Company or any stockholder of the Company to accomplish any corporate act, including, without limitation, any reclassification, reorganization or other change of or to its capital or business structure, merger, consolidation, liquidation or sale or other disposition of all or any part of its business or assets. The Grantee will have no right to receive, or otherwise with respect to, any Dividend Equivalents until such time, if ever, as (a) the Restricted Stock Units with respect to which such Dividend Equivalents relate shall have become earned and vested, or (b) such Dividend Equivalents shall have become Vested Dividend Equivalents as described herein, and, if vesting does not occur, the related Dividend Equivalents will be forfeited. Dividend Equivalents shall not bear interest or be segregated in a separate account. Notwithstanding the foregoing, the Committee may, in its sole discretion, accelerate the vesting of any portion of the Dividend Equivalents (any Dividend Equivalent that vests pursuant to Sections 3, 6 or this 9, “Vested Dividend Equivalents”). The settlement of any Vested Dividend Equivalents shall be made as soon as administratively practicable after the accelerated vesting date, but in no event later than sixty (60) days following the date on which such accelerated vesting date occurs. With respect to any Restricted Stock Units and Dividend Equivalents, the Grantee is a general unsecured creditor of the Company.

5


10. Adjustments; Early Vesting in Certain Events.
(a) The Restricted Stock Units will be subject to adjustment (including, without limitation, as to the number of Restricted Stock Units) in such manner as the Committee, in its sole discretion, deems equitable and appropriate in connection with the occurrence of any of the events described in Section 4.2 of the Plan following the Grant Date.
(b) Subject to Section 23, in the event of any Approved Transaction, Board Change or Control Purchase following the Grant Date, the Restricted Stock Units may vest in accordance with Section 10.1(b) of the Plan.
11. Restrictions Imposed by Law. Without limiting the generality of Section 10.10 of the Plan, the Company will not be obligated to deliver any shares of Common Stock represented by vested Earned Restricted Stock Units, Accelerated Restricted Stock Units or Unpaid Dividend Equivalents if counsel to the Company determines that the issuance or delivery thereof would violate any applicable law or any rule or regulation of any governmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association upon which shares of Common Stock or other applicable securities are listed or quoted. The Company will in no event be obligated to take any affirmative action in order to cause the delivery of shares of Common Stock represented by vested Restricted Stock Units, Accelerated Restricted Stock Units or securities constituting or cash payment related to any Unpaid Dividend Equivalents to comply with any such law, rule, regulation, or agreement.
12. Notice. Unless the Company notifies the Grantee in writing of a different procedure or address, any notice or other communication to the Company with respect to this Agreement will be in writing and will be delivered personally or sent by United States first class mail, postage prepaid and addressed as follows:
Ascent Capital Group, Inc.
5251 DTC Parkway, Suite 1000
Greenwood Village, Colorado 80111
Attn: General Counsel
Any notice or other communication to the Grantee with respect to this Agreement will be in writing and will be delivered personally, or will be sent by United States first class mail, postage prepaid, to the Grantee’s address as listed in the records of the Company on the date of this Agreement, unless the Company has received written notification from the Grantee of a change of address.
13. Amendment. Notwithstanding any other provision hereof, this Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by Section 10.9(b) of the Plan. Without limiting the generality of the foregoing, without the consent of the Grantee,
(a) this Agreement may be amended or supplemented from time to time as approved by the Committee (i) to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, (ii) to add to the covenants and agreements of the Company for the benefit of the Grantee or surrender any right or power reserved to or conferred upon the Company in this Agreement, subject to any required approval of the Company’s stockholders, and provided, in each case, that such changes or corrections will not adversely affect the rights of the Grantee with respect to the Award evidenced hereby, or (iii) to make such other changes as the Company, upon advice of counsel, determines are necessary or advisable because of the adoption or promulgation of, or change in the interpretation of, any law or governmental rule or regulation, including any applicable federal or state securities laws; and

6


(b) subject to any required action by the Board or the stockholders of the Company, the Restricted Stock Units granted under this Agreement may be canceled by the Committee and a new Award made in substitution therefor, provided, that the Award so substituted will satisfy all of the requirements of the Plan as of the date such new Award is made and no such action will adversely affect the Restricted Stock Units to the extent then earned or vested.
14. Grantee Employment. Nothing contained in this Agreement, and no action of the Company or the Committee with respect hereto, will confer or be construed to confer on the Grantee any right to continue in the employ of the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the Grantee’s employment at any time, with or without Cause, subject to the provisions of any employment agreement between the Grantee and the Company or any Subsidiary.
15. Nonalienation of Benefits. Except as provided in Section 8 and prior to vesting of the Earned Restricted Stock Units or Accelerated Restricted Stock Units, (a) no right or benefit under this Agreement will be subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same will be void, and (b) no right or benefit hereunder will in any manner be liable for or subject to the debts, contracts, liabilities or torts of the Grantee or other person entitled to such benefits.
16. Governing Law. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of Delaware. Each party irrevocably submits to the general jurisdiction of the state and federal courts located in the State of Delaware in any action to interpret or enforce this Agreement and irrevocably waives any objection to jurisdiction that such party may have based on inconvenience of forum.
17. Construction. References in this Agreement to “this Agreement” and the words “herein,” “hereof,” “hereunder” and similar terms include all Exhibits and Schedules appended hereto, including the Plan. This Agreement is entered into, and the Award evidenced hereby is granted, pursuant to the Plan and will be governed by and construed in accordance with the Plan and the administrative interpretations adopted by the Committee thereunder. All decisions of the Committee upon questions regarding the Plan or this Agreement will be conclusive. Unless otherwise expressly stated herein, in the event of any inconsistency between the terms of the Plan and this Agreement, the terms of the Plan will control. The headings of the sections of this Agreement have been included for convenience of reference only, are not to be considered a part hereof and will in no way modify or restrict any of the terms or provisions hereof.
18. Duplicate Originals . The Company and the Grantee may sign any number of copies of this Agreement. Each signed copy will be deemed to be an original, but all of them together represent the same agreement.
19. Rules by Committee. The rights of the Grantee and the obligations of the Company hereunder will be subject to such reasonable rules and regulations as the Committee may adopt from time to time hereafter.
20. Entire Agreement. This Agreement is in satisfaction of and in lieu of all prior discussions and agreements, oral or written, between the Company and the Grantee, with respect to the subject matter hereof. The Grantee and the Company hereby declare and represent that no promise or agreement not expressed herein has been made and that this Agreement contains the entire agreement between the parties hereto with respect to the Award and replaces and makes null and void any prior agreements between the

7


Grantee and the Company regarding the Award. Subject to the restrictions set forth in Sections 8 and 15, this Agreement will be binding upon and inure to the benefit of the parties and their respective heirs, successors and assigns.
21. Grantee Acceptance. The Grantee shall signify acceptance of the terms and conditions of this Agreement by signing in the space provided at the end hereof and returning a signed copy to the Company.
22. Code Section 409A Compliance. If any provision of this Agreement would result in the imposition of an excise tax under Section 409A of the Code and related regulations and Treasury pronouncements (“Section 409A”), that provision will be reformed to avoid imposition of the excise tax and no action taken to comply with Section 409A (or to provide that the Restricted Stock Units are exempt from Section 409A) shall be deemed to impair a benefit under this Agreement. If any portion of the benefits to be provided pursuant to this Agreement constitute deferred compensation subject to Section 409A, then, to the extent required by Section 409A, if Grantee is a “specified employee” within the meaning of Seciton 409A, any amounts payable on account of Grantee’s separation from service will not be paid until the date that is six months and one day following such separation from service or, if earlier, the date of Grantee’s death.
23. Change in Control.
(a) If the Grantee’s employment with the Company or any of its Subsidiaries terminates and such termination constitutes a Termination With Good Reason (as such term is defined in the Amended Employment Agreement) or a Termination Without Cause (as such term is defined in the Amended Employment Agreement), and such termination occurs within twelve (12) months following a Change in Control, all Restricted Stock Units and all related Unvested Dividend Equivalents held by the Grantee on the date of termination, to the extent not theretofore vested, will vest fully on the date of such termination.
(b) For purposes of this Section 23, “Change in Control” means any of the following that otherwise meets the definition of a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A:
(1)
the acquisition by any person or group (excluding John C. Malone and/or any family member(s) of John C. Malone and/or any company, partnership, trust or other entity or investment vehicle controlled by such persons or the holdings of which are for the primary benefit of any of such persons (collectively, the “Permitted Holders”)) of ownership of stock of the Company that, together with stock already held by such person or group, constitutes more than 50% of the total fair market value or more than 50% of the total voting power of the stock of the Company;
(2)
the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the twelve (12)-month period ending on the date of the most recent acquisition by such person or group, assets from the Company that have a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; or

8


(3)
the acquisition by any person or group (other than the Permitted Holders), in a single transaction or in multiple transactions all occurring during the twelve (12)-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock of the Company possessing 30% or more of the total voting power of the stock of Company or the replacement of a majority of the Company’s Board of Directors during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of appointment or election.
24. Forfeiture for Misconduct and Repayment of Certain Amounts. If the Grantee holds the office of Vice President or above as of the Grant Date, and if (i) a material restatement of any financial statement of the Company (including any consolidated financial statement of the Company and its consolidated Subsidiaries) is required and (ii) in the reasonable judgment of the Committee, (A) such restatement is due to material noncompliance with any financial reporting requirement under applicable securities laws and (B) such noncompliance is a result of misconduct on the part of the Grantee, the Grantee will repay to the Company Forfeitable Benefits received by the Grantee during the Misstatement Period in such amount as the Committee may reasonably determine, taking into account, in addition to any other factors deemed relevant by the Committee, the extent to which the market value of Common Stock during the Misstatement Period was affected by the error(s) giving rise to the need for such restatement. “Forfeitable Benefits” means (i) any and all cash and/or shares of Common Stock received by the Grantee upon the vesting during the Misstatement Period of any Restricted Stock Units and Unvested Dividend Equivalents held by the Grantee and (ii) any proceeds received by the Grantee from the sale, exchange, transfer or other disposition during the Misstatement Period of any Restricted Stock Units and Unvested Dividend Equivalents received by the Grantee upon the vesting during the Misstatement Period of any Award held by the Grantee. By way of clarification, “Forfeitable Benefits” will not include any shares of Common Stock received upon vesting of any Restricted Stock Units and Unvested Dividend Equivalents during the Misstatement Period that are not sold, exchanged, transferred or otherwise disposed of during the Misstatement Period. “Misstatement Period” means the twelve (12)-month period beginning on the date of the first public issuance or the filing with the Securities and Exchange Commission, whichever occurs earlier, of the financial statement requiring restatement.

[Signature Page Follows]

9


IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the Grant Date.



 
 
ASCENT CAPITAL GROUP, INC.
 
 
 
 
 
 
 
 
By:
/s/ William E. Niles
 
 
 
Name:
William E. Niles
 
 
 
Title:
Executive Vice President and General Counsel
 
 
 
 
 
 
 
ACCEPTED:
 
 
 
 
/s/ Michael R. Meyers
 
 
 
 
Michael R. Meyers, Grantee
 
 
 
 
 
 
 
 
 
Address:
 
 
 
 
 
 
 
 
 
SSN:


10


Exhibit A to Performance-Based Restricted Stock Unit Agreement
dated as of March 27, 2015 between
Ascent Capital Group, Inc. and Grantee



Designation of Beneficiary

I, _____________ Michael R. Meyers _______________ (the “Grantee”), hereby declare

that upon my death                              (the “Beneficiary”) of
Name

,
Street Address              City          State              Zip Code

who is my                                  , will be entitled to the
Relationship to the Grantee

Restricted Stock Units and all other rights accorded the Grantee by the above‑referenced grant agreement (the “Agreement”).

It is understood that this Designation of Beneficiary is made pursuant to the Agreement and is subject to the conditions stated herein, including the Beneficiary’s survival of the Grantee’s death. If any such condition is not satisfied, such rights will devolve according to the Grantee’s will or the laws of descent and distribution.
It is further understood that all prior designations of beneficiary under the Agreement are hereby revoked and that this Designation of Beneficiary may only be revoked in writing, signed by the Grantee, and filed with the Committee prior to the Grantee’s death.

                                                  
Date                              Grantee




A-1


Schedule 1
to
Ascent Performance-Based Restricted Stock Units Award Agreement
Vesting of Restricted Stock Units Based on Key Performance Indicators
Total Number of Potential Maximum Restricted Stock Units : 30,000


1-1


Exhibit 31.1
 
CERTIFICATION
 
I, William R. Fitzgerald, certify that:
 
1.                                       I have reviewed this quarterly report on Form 10-Q of Ascent Capital Group, Inc.;
 
2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.                                       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
 
a)              designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b)              designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)               evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
 
d)              disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.                                       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)              all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)              any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:
November 9, 2015
 
 
 
 
 
 
 
/s/ William R. Fitzgerald
 
William R. Fitzgerald
 
Chairman of the Board, Director and Chief Executive Officer
 





Exhibit 31.2
 
CERTIFICATION
 
I, Michael R. Meyers, certify that:
 
1.                                       I have reviewed this quarterly report on Form 10-Q of Ascent Capital Group, Inc.;
 
2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.                                       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
 
a)              designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b)              designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)               evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
 
d)              disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.                                       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)              all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)              any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:
November 9, 2015
 
 
 
 
 
 
 
/s/ Michael R. Meyers
 
Michael R. Meyers
 
Senior Vice President and Chief Financial Officer
 





Exhibit 32
 
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
 
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Ascent Capital Group, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
 
The Quarterly Report on Form 10-Q for the period ended September 30, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014 .
 
 
Dated:
November 9, 2015
 
/s/ William R. Fitzgerald
 
 
 
William R. Fitzgerald
 
 
 
Chairman of the Board, Director and
 
 
 
Chief Executive Officer
 
 
 
 
Dated:
November 9, 2015
 
/s/ Michael R. Meyers
 
 
 
Michael R. Meyers
 
 
 
Senior Vice President and Chief Financial Officer
 
 
 
(Principal Financial and Accounting Officer)
 
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.