Charter 2005 Annual Report Download - page 91

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
OPTION/STOCK INCENTIVE PLANS under the 2001 Stock Incentive Plan. Under the LTIP, employ-
ees of Charter and its subsidiaries whose pay classifications
The plans. We have granted stock options, restricted stock and exceed a certain level are eligible to receive stock options, and
other incentive compensation under two plans — the 1999 more senior level employees were eligible to receive stock
Charter Communications Option Plan and the 2001 Stock options and performance shares. The stock options vest 25% on
Incentive Plan. The 1999 Charter Communications Option Plan each of the first four anniversaries of the date of grant. The
provided for the grant of options to purchase membership units performance shares vest on the third anniversary of the date of
in Charter Holdco to current and prospective employees and grant shares at the end of a three-year performance cycle and
consultants of Charter Holdco and its affiliates and to our shares of Class A common stock are issued, conditional upon
current and prospective non-employee directors. Membership our performance against financial performance measures estab-
units received upon exercise of any options are immediately lished by our management and approved by the board of
exchanged for shares of Charter Class A common stock on a directors or Compensation Committee as of the time of the
one-for-one basis. award. We granted 3.2 million performance shares in 2005
The 2001 Stock Incentive Plan provides for the grant of under this program except that the 2005 performance share
non-qualified stock options, stock appreciation rights, dividend grants are based on a one-year performance cycle. We recog-
equivalent rights, performance units and performance shares, nized expense of $1 million in the first three quarters of 2005.
share awards, phantom stock and/or shares of restricted stock However, in the fourth quarter of 2005, we reversed the entire
(not to exceed 20,000,000 shares) as each term is defined in the $1 million of expense based on our assessment of the probability
2001 Stock Incentive Plan. Employees, officers, consultants and of achieving the financial performance measures established by
directors of Charter and its subsidiaries and affiliates are eligible management and required to be met for the performance shares
to receive grants under the 2001 Stock Incentive Plan. Generally, to vest. In February 2006, the Compensation Committee
options expire 10 years from the grant date. Unless sooner approved a modification to the financial performance measures
terminated by our board of directors, the 2001 Stock Incentive required to be met for the performance shares to vest after
Plan will terminate on February 12, 2011, and no option or which management believes that approximately 2.5 million of
award can be granted thereafter. the performance shares are likely to vest. As such, expense of
Together, the plans allow for the issuance of up to a total approximately $3 will be amortized over the remaining two year
of 90,000,000 shares of our Class A common stock (or units service period.
exchangeable for our Class A common stock). Any shares The 2001 Stock Incentive Plan must be administered by,
covered by options that are terminated under the 1999 Charter and grants and awards to eligible individuals must be approved
Communications Option Plan will be transferred to the 2001 by our board of directors or a committee thereof consisting
Stock Incentive Plan, and no new options will be granted under solely of nonemployee directors as defined in Section 16b-3
the 1999 Charter Communications Option Plan. At Decem- under the Securities Exchange Act of 1934, as amended. The
ber 31, 2005, 1,317,520 shares had been issued under the plans board of directors or such committee determines the terms of
upon exercise of options, 825,725 had been issued upon vesting each stock option grant, restricted stock grant or other award at
of restricted stock granted under the plans, and 4,252,570 shares the time of grant, including the exercise price to be paid for the
were subject to future vesting under restricted stock agreements. shares, the vesting schedule for each option, the price, if any, to
Of the remaining 83,604,185 shares covered by the plans, as of be paid by the grantee for the restricted stock, the restrictions
December 31, 2005, 29,126,744 were subject to outstanding placed on the shares, and the time or times when the
options (34% of which were vested), and there were 11,719,032 restrictions will lapse. The board of directors or such committee
performance shares granted under Charter’s Long-Term Incen- also has the power to accelerate the vesting of any grant or
tive Program as of December 31, 2005, to vest on the third extend the term thereof.
anniversary of the date of grant conditional upon Charter’s Upon a change of control of Charter, the board of directors
performance against certain financial targets approved by Char- or the administering committee can shorten the exercise period
ter’s board of directors at the time of the award. As of of any option, have the survivor or successor entity assume the
December 31, 2005, 42,758,409 shares remained available for options with appropriate adjustments, or cancel options and pay
future grants under the plans. As of December 31, 2005, there out in cash. If an optionee’s or grantee’s employment is
were 5,341 participants in the plans. terminated without ‘‘cause’’ or for ‘‘good reason’’ following a
The plans authorize the repricing of options, which could ‘‘change in control’’ (as those terms are defined in the plans),
include reducing the exercise price per share of any outstanding unless otherwise provided in an agreement, with respect to such
option, permitting the cancellation, forfeiture or tender of optionee’s or grantee’s awards under the plans, all outstanding
outstanding options in exchange for other awards or for new options will become immediately and fully exercisable, all
options with a lower exercise price per share, or repricing or outstanding stock appreciation rights will become immediately
replacing any outstanding options by any other method. and fully exercisable, the restrictions on the outstanding
restricted stock will lapse, and all of the outstanding perform-
Long-term incentive plan. In January 2004, the Compensation ance shares will vest and the restrictions on all of the
Committee of our board of directors approved our Long-Term
Incentive Program, or LTIP, which is a program administered
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