Charter 2004 Annual Report Download - page 85

CHARTER COMMUNICATIONS, INC. 2004 FORM 10-K
December 31, 2004, 54,996,480 shares remained available for ance shares will vest and the restrictions on all of the
future grants under the plans. outstanding performance shares will lapse as if all performance
The plans authorize the repricing of options, which could objectives had been satisfied at the maximum level.
include reducing the exercise price per share of any outstanding February 2004 Option Exchange. In January 2004, we
option, permitting the cancellation, forfeiture or tender of offered employees of Charter and its subsidiaries the right to
outstanding options in exchange for other awards or for new exchange all stock options (vested and unvested) under the 1999
options with a lower exercise price per share, or repricing or Charter Communications Option Plan and 2001 Stock Incentive
replacing any outstanding options by any other method. Plan that had an exercise price over $10 per share for shares of
In January 2004, the Compensation Committee of our restricted Charter Class A common stock or, in some instances,
board of directors approved our Long-Term Incentive Program, cash. Based on a sliding exchange ratio, which varied depending
or LTIP, which is a program administered under the 2001 Stock on the exercise price of an employee’s outstanding options, if an
Incentive Plan. Under the LTIP, employees of Charter and its employee would have received more than 400 shares of
subsidiaries whose pay classifications exceed a certain level are restricted stock in exchange for tendered options, we issued to
eligible to receive stock options, and more senior level employ- that employee shares of restricted stock in the exchange. If,
ees were eligible to receive stock options and performance based on the exchange ratios, an employee would have received
shares. The stock options vest 25% on each of the first four 400 or fewer shares of restricted stock in exchange for tendered
anniversaries of the date of grant. The performance shares vest options, we instead paid to the employee cash in an amount
at the end of a three-year performance cycle and shares of equal to the number of shares the employee would have
Class A common stock are issued, conditional upon our received multiplied by $5.00. The offer applied to options to
performance against financial performance measures established purchase a total of 22,929,573 shares of Class A common stock,
by our management and approved by the board of directors as or approximately 48% of our 47,882,365 total options (vested
of the time of the award. We granted 6,899,600 million and unvested) issued and outstanding as of December 31, 2003.
performance shares in January 2004 under this program and Participation by employees was voluntary. Non-employee mem-
recognized expense of $8 million in the first three quarters of bers of the board of directors of Charter or any of its
2004. However, in the fourth quarter of 2004, we reversed the subsidiaries were not eligible to participate in the exchange offer.
entire $8 million of expense based on our assessment of the In the closing of the exchange offer on February 20, 2004,
probability of achieving the financial performance measures we accepted for cancellation eligible options to purchase
established by management and required to be met for the approximately 18,137,664 shares of our Class A common stock.
performance shares to vest. In exchange, we granted approximately 1,966,686 shares of
The 2001 Stock Incentive Plan must be administered by, restricted stock, including 460,777 performance shares to eligible
and grants and awards to eligible individuals must be approved employees of the rank of senior vice president and above, and
by our board of directors or a committee thereof consisting paid a total cash amount of approximately $4 million (which
solely of nonemployee directors as defined in Section 16b-3 amount includes applicable withholding taxes) to those employ-
under the Securities Exchange Act of 1934, as amended. The ees who received cash rather than shares of restricted stock.
board of directors or such committee determines the terms of The restricted stock was granted on February 25, 2004.
each stock option grant, restricted stock grant or other award at Employees tendered approximately 79% of the options eligible
the time of grant, including the exercise price to be paid for the to be exchanged under the program.
shares, the vesting schedule for each option, the price, if any, to The cost of the stock option exchange program was
be paid by the grantee for the restricted stock, the restrictions approximately $10 million, with a 2004 cash compensation
placed on the shares, and the time or times when the expense of approximately $4 million and a non-cash compensa-
restrictions will lapse. The board of directors or such committee tion expense of approximately $6 million to be expensed ratably
also has the power to accelerate the vesting of any grant or over the three-year vesting period of the restricted stock issued
extend the term thereof. in the exchange.
Upon a change of control of Charter, the board of directors
EMPLOYMENT ARRANGEMENTS
or the administering committee can shorten the exercise period
of any option, have the survivor or successor entity assume the Messrs. May and Chang serve pursuant to letter agreements
options with appropriate adjustments, or cancel options and pay described below. Mr. Vogel and Ms. Bellville are no longer
out in cash. If an optionee’s or grantee’s employment is employees, but served during 2004 pursuant to employment
terminated without ‘‘cause’’ or for ‘‘good reason’’ following a agreements as described below.
‘‘change in control’’ (as those terms are defined in the plans), Charter entered into an agreement with Robert P. May,
unless otherwise provided in an agreement, with respect to such effective January 17, 2005, whereby Mr. May serves as Charter’s
optionee’s or grantee’s awards under the plans, all outstanding Interim President and Chief Executive Officer (the ‘‘May
options will become immediately and fully exercisable, all Executive Services Agreement’’). Under the May Executive
outstanding stock appreciation rights will become immediately Services Agreement, Mr. May receives a $1,250,000 base fee per
and fully exercisable, the restrictions on the outstanding year. If Mr. May becomes Charter’s permanent President and
restricted stock will lapse, and all of the outstanding perform- Chief Executive Officer or is terminated without cause, Mr. May
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