THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Discovery Holding Company (DISCA)

4/21/2006 Proxy Information

Agreements with Liberty

In connection with our spin off from Liberty in July 2005, we entered into a series of agreements with Liberty, under which we have certain rights and liabilities. The following is a summary of the terms of the material agreements we entered into with Liberty.

Reorganization Agreement

On July 14, 2005, we entered into a reorganization agreement with Liberty and Ascent Media Group LLC to provide for, among other things, the principal corporate transactions required to effect the spin off, certain conditions to the spin off and provisions governing the relationship between our company and Liberty with respect to and resulting from the spin off. Pursuant to the reorganization agreement, Liberty transferred to us all of the interests in Ascent Media and Liberty’s 50% ownership interest in Discovery Communications. The reorganization agreement provides for mutual indemnification obligations, which are designed to make our company financially responsible for substantially all liabilities that may exist relating to the business of Ascent Media and Liberty’s ownership interest in Discovery prior to the spin off, as well as for all liabilities incurred by our company after the spin off, and to make Liberty financially responsible for all potential liabilities of our company which are not related to our businesses, including, for example, any liabilities arising as a result of our company having been a subsidiary of Liberty. In addition, the reorganization agreement provides for each of our company and Liberty to preserve the confidentiality of all confidential or proprietary information of the other party for three years following the spin off, subject to customary exceptions, including disclosures required by law, court order or government regulation.

Services Agreement

On July 21, 2005 we entered into a services agreement with Liberty, pursuant to which Liberty provides us with specified services and benefits, including:

• shared office space, including furniture, furnishings and building services, at Liberty’s executive headquarters;

• technical assistance (including management information systems, network maintenance and data storage), computers, office supplies, postage, courier service and other office services;

• insurance administration and risk management services;

• other services typically performed by Liberty’s treasury, legal, investor relations, tax and accounting personnel; and

• such other services as we and Liberty may from time to time mutually determine to be necessary or desirable.

We make payments to Liberty under the services agreement based upon a portion of Liberty’s personnel costs (taking into account wages and benefits) of the Liberty officers and employees who provide services to us, including the executive officers of Liberty who also act as our executive officers (as we describe above under the heading “Concerning Management — Executive Compensation”). These personnel costs are based upon the anticipated percentages of time to be spent by Liberty personnel performing services for us under the services agreement. We also reimburse Liberty for direct out-of-pocket costs incurred by Liberty for certain services provided to us pursuant to the services agreement. We and Liberty evaluate all charges for reasonableness semi-annually and make any adjustments to these charges as we and Liberty mutually agree upon. We paid Liberty approximately $745,000 in fees and reimbursable expenses under the services agreement for the period beginning on the date of the spin off and ending on December 31, 2005.

The services agreement is renewed automatically each year for successive one-year periods, unless earlier terminated (1) by us at any time on at least 30 days’ prior written notice, (2) by Liberty at the end of any renewal term, upon at least 180 days’ prior notice, (3) by Liberty upon written notice to our company, following certain changes in control of our company or our company being the subject of certain bankruptcy or insolvency-related events or (4) by us upon written notice to Liberty, following certain changes in control of Liberty or Liberty being the subject of certain bankruptcy or insolvency-related events.

Tax Sharing Agreement

On July 20, 2005 we entered into a tax sharing agreement with Liberty that governs Liberty’s and our respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters. References in this summary description of the tax sharing agreement to the terms “tax” or “taxes” mean taxes as well as any interest, penalties, additions to tax or additional amounts in respect of such taxes.

Prior to the spin off, we and our eligible subsidiaries joined with Liberty in the filing of a consolidated return for U.S. federal income tax purposes and also joined with Liberty in the filing of certain consolidated, combined, and unitary returns for state, local, and foreign tax purposes. However, for periods (or portions thereof) beginning after the spin off, we no longer join with Liberty in the filing of any federal, state, local or foreign consolidated, combined or unitary tax returns.

Under the tax sharing agreement, except as described below, Liberty is responsible for all U.S. federal, state, local and foreign income taxes reported on a consolidated, combined or unitary return that includes us or one of our subsidiaries, on the one hand, and Liberty or one of its subsidiaries (other than us or any of our subsidiaries), on the other hand. In addition, Liberty will indemnify us and our subsidiaries against any liabilities arising under its tax sharing agreement with AT&T Corp. We are responsible for all other taxes (including income taxes not reported on a consolidated, combined, or unitary return by Liberty or its subsidiaries) that are attributable to us or one of our subsidiaries, whether accruing before, on or after the spin off. We have no obligation to reimburse Liberty for the use, in any period following the spin off, of a tax benefit created before the spin off, regardless of whether such benefit arose with respect to taxes reported on a consolidated, combined or unitary basis.

Notwithstanding the tax sharing agreement, under U.S. Treasury Regulations, each member of a consolidated group is severally liable for the U.S. federal income tax liability of each other member of the consolidated group. Accordingly, with respect to periods in which we (or our subsidiaries) have been included in Liberty’s, AT&T Corp.’s or Tele-Communications, Inc.’s consolidated group, we (or our subsidiaries) could be liable to the U.S. government for any U.S. federal income tax liability incurred, but not discharged, by any other member of such consolidated group. However, if any such liability were imposed, we would generally be entitled to be indemnified by Liberty for tax liabilities allocated to Liberty under the tax sharing agreement.

Our ability to obtain a refund from a carryback of a tax benefit to a year in which we and Liberty (or any of our respective subsidiaries) joined in the filing of a consolidated, combined or unitary return will be at the discretion of Liberty. Moreover, any refund that we may obtain will be net of any increase in taxes resulting from the carryback for which Liberty is otherwise liable under the tax sharing agreement.

To the extent permitted by applicable tax law, we and Liberty will treat any payments made under the tax sharing agreement as a capital contribution or distribution (as applicable) made immediately prior to the spin off, and accordingly, as not includible in the taxable income of the recipient. However, if any payment causes, directly or indirectly, an increase in the taxable income of the recipient (or its affiliates), the payor’s payment obligation will be grossed up to take into account the deemed taxes owed by the recipient (or its affiliates).

We are responsible for preparing and filing all tax returns that include us or one of our subsidiaries (other than any consolidated, combined or unitary income tax return that includes us or one of our subsidiaries, on the one hand, and Liberty or one of its subsidiaries (other than us or any of our subsidiaries), on the other hand), and we have the authority to respond to and conduct all tax proceedings, including tax audits, involving any taxes or any deemed adjustment to taxes reported on such tax returns. Liberty is responsible for preparing and filing all consolidated, combined or unitary income tax returns that include us or one of our subsidiaries, on the one hand, and Liberty or one of its subsidiaries (other than us or any of our subsidiaries), on the other hand, and Liberty has the authority to respond to and conduct all tax proceedings, including tax audits, relating to taxes or any deemed adjustment to taxes reported on such tax returns. Liberty also has the authority to respond to and conduct all tax proceedings relating to any liability arising under its tax sharing agreement with AT&T Corp. We are entitled to participate in any tax proceeding involving any taxes or deemed adjustment to taxes for which we are liable under the tax sharing agreement. The tax sharing agreement further provides for cooperation between Liberty and our company with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the agreement.

Finally, the tax sharing agreement requires that neither we nor any of our subsidiaries will take, or fail to take, any action where such action, or failure to act, would be inconsistent with or prohibit the spin off from qualifying as a tax-free transaction to Liberty and Liberty’s stockholders as of the record date for the spin off under Sections 355 and 368(a)(1)(D) of the Code. Moreover, we must indemnify Liberty and its subsidiaries, officers and directors for any loss, including any deemed adjustment to taxes of Liberty, resulting from (1) such action or failure to act, (2) any agreement, understanding, arrangement or substantial negotiations entered into by us or any of our subsidiaries prior to the day after the first anniversary of the spin off, with respect to any transaction pursuant to which any of Cox Communications, Inc., Advance/Newhouse Programming Partnership or certain persons related to Cox Communications or Advance/Newhouse would acquire shares of, or other interests (including options) in our capital stock or (3) any action or failure to act by us or any of our subsidiaries following the completion of the spin off that would be inconsistent with, or otherwise cause any person to be in breach of, any representation or covenant made in connection with the tax opinion delivered to Liberty by Skadden, Arps, Slate, Meagher & Flom LLP or the private letter ruling obtained by Liberty from the IRS, in each case relating to, among other things, the qualification of the spin off as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code. For purposes of the tax sharing agreement, the deemed adjustment to taxes generally will be an amount equal to the gain recognized by Liberty multiplied by the highest applicable statutory rate for the applicable taxing jurisdiction, plus interest and any penalties.

Information Agreement with Discovery

On June 24, 2005, we entered into an agreement with Discovery Communications, Inc. regarding the preparation and use by us of certain information regarding Discovery in connection with our financial reporting and disclosure requirements as a public company. We refer to this agreement as the Information Agreement.

The Information Agreement provides that Discovery will use commercially reasonable efforts:

• to provide us, on a timely basis, with

• historical financial information regarding Discovery that we identified as necessary for preparation of our annual and quarterly financial statements, and

• additional financial and business information regarding Discovery, as reasonably necessary for us to comply with our reporting and disclosure obligations under applicable securities laws and stock market rules

for use and inclusion in our SEC filings, reports and other disclosure documents and related meetings and conference calls; and

• to make its officers and, subject to any applicable professional standards and practices, accountants, attorneys and other advisors reasonably available for consultations and discussions with us and our accountants, attorneys and other advisors regarding such information.

With respect to information provided to us other than the historical financial information specified in the agreement, the Information Agreement limits the public disclosure by us of certain non-public information regarding Discovery, including information the disclosure of which could reasonably be expected to have an adverse effect on Discovery that is material in any respect, and provides procedures for resolving issues regarding such information.

The Information Agreement provides that we will reimburse Discovery for the reasonable fees, costs and expenses incurred by Discovery to perform its obligations under the Information Agreement, to the extent such fees, costs and expenses exceed those that would otherwise have been incurred by Discovery in the ordinary course of business. The Information Agreement also provides that we will indemnify Discovery, its subsidiaries and their respective officers, directors, employees and agents from and against any losses incurred by them relating to any third-party claims or investigations related to Discovery’s performance of its obligations under the Information Agreement or any disclosure by us of the information provided to us by Discovery pursuant to the Information Agreement (and will exculpate such persons from any liability to us relating thereto), other than any such losses and liabilities as may arise from the gross negligence, reckless conduct or willful misconduct of Discovery or any such indemnified person.

In addition, we have entered into separate agreements with Cox Communications and Advance/Newhouse, pursuant to which we have agreed to indemnify such parties, their affiliates, and their respective officers, directors, employees and agents, from and against any losses incurred by them relating to any third-party claims related to Discovery’s performance of its obligations under the Information Agreement or any disclosure by us of the information provided to us by Discovery pursuant to the Information Agreement (and will exculpate such persons from any liability to us relating thereto), other than any such losses and liabilities as may arise from the willful misconduct of, or any purchase or sale of our securities by, Cox Communications or Advance/Newhouse, as applicable, or any of such party’s officers, directors, employees and agents.

Termination of Tax Agreement between Ascent Media and Liberty

Prior to the spin off, Liberty and Ascent Media entered into an agreement pursuant to which their existing tax allocation and indemnification agreement was terminated and each of Liberty and Ascent Media were released from all liabilities and obligations under such agreement.

Services Agreement between Ascent Media and On Command Corporation

Since October 1, 2002, Ascent Media has provided uplink and satellite transport services to On Command Corporation, a wholly owned subsidiary of Liberty. Under the terms of a short-term services agreement and, later a content preparation and distribution services agreement, from October 1, 2002 through March 31, 2008, Ascent Media has provided, and will continue to provide, uplink and satellite transport services. The content preparation and distribution agreement also provides that Ascent Media may supply content preparation services. All agreements were entered into in the ordinary course of business on arm’s-length terms.

Arrangements between Discovery and Ascent Media

Discovery is a customer of Ascent Media and certain Discovery subsidiaries are parties to vendor agreements with Ascent Media. Such agreements and arrangements were entered into in the ordinary course of business on arm’s-length terms. In that connection, Ascent Media’s facilities in Singapore provide uplink and origination and other network services for Discovery’s channels in Asia and Ascent Media’s facilities in London provide origination and other network services for Discovery channels in the U.K. In 2005, Discovery and its subsidiaries were, collectively Ascent Media’s fifth largest customer, generating $34,188,000 in sales (or 4.9% of Ascent Media’s 2005 total revenue).