Charter 2005 Annual Report Download - page 93

CHARTER COMMUNICATIONS, INC. 2005 FORM 10-K
as of May 1 of the applicable year. The Plan awards will vest at reason termination,’’ as those terms are defined in the Employ-
the rate of 50% of the plan award balance at the end of 2007 ment Agreement, he will receive the greater of two times base
and 100% of the plan award balance at the end of 2009. salary or salary through the remainder to the term of the
Participants will be entitled to receive payment of the vested Employment Agreement; a pro rata bonus for the year of
portion of the award if the participant remains employed by termination; full vesting of options and restricted shares; vesting
Charter continuously from the date of the participant’s initial of performance stock if targets are achieved; and a lump sum
participation through the end of the calendar year in which his payment equal to twelve months of COBRA payments. The
or her award becomes vested, subject to payment of pro-rated Employment Agreement contains non-compete provisions from
award balances to a participant who terminates due to death or six months to two years, depending on the type of termination.
disability or in the event Charter elects to terminate the Plan. Charter will gross up federal taxes in the event that Mr. Smit is
A participant’s eligibility for, and right to receive, any subject to any additional tax under Section 409A of the Internal
payment under the Plan (except in the case of intervening Revenue Code.
death) is conditioned upon the participant first executing and Charter entered into an agreement with Mr. May, effective
delivering to Charter an agreement releasing and giving up all January 17, 2005, whereby Mr. May served as Charter’s Interim
claims that participant may have against Charter and related President and Chief Executive Officer (the ‘‘May Executive
parties arising out of or based upon any facts or conduct Services Agreement’’). Under the May Executive Services Agree-
occurring prior to the payment date, and containing additional ment, Mr. May received a $1,250,000 base fee per year. Mr. May
restrictions on post-employment use of confidential information, continued to receive the compensation and reimbursement of
non-competition and nonsolicitation and recruitment of custom- expenses to which he was entitled in his capacity as a member
ers and employees. of Charter’s board of directors Mr. May’s employment agree-
ment provided that Charter would provide equity incentives
EMPLOYMENT ARRANGEMENTS AND RELATED AGREEMENTS commensurate with his position and responsibilities, as deter-
mined by Charter’s board of directors. Accordingly, Mr. May
Charter and Neil Smit entered into an agreement as of was granted 100,000 shares of restricted stock under Charter’s
August 9, 2005 whereby Mr. Smit will serve as Charter’s 2001 Stock Incentive Plan. The 100,000 restricted shares vested
President and Chief Executive Officer (the ‘‘Employment Agree- on the date on which Mr. May’s interim service as President
ment’’) for a term expiring on December 31, 2008, and Charter and Chief Executive Officer terminated, August 22, 2005.
may extend the agreement for an additional two years by giving Mr. May served as an independent contractor and was not
Mr. Smit written notice of its intent to extend not less than six entitled to any vacation or eligible to participate in any
months prior to the expiration of the contract (Mr. Smit has the employee benefit programs of Charter. Charter reimbursed
right to reject the extension within a certain time period as set Mr. May for reasonable transportation costs from Mr. May’s
forth defined in the contract). Under the Employment Agree- residence in Florida or other locations to Charter’s offices and
ment, Mr. Smit will receive a $1,200,000 base salary per year, provided temporary living quarters or reimbursed expenses
through the third anniversary of the agreement, and thereafter related thereto. The May Executive Services Agreement was
$1,440,000 per year for the remainder of the Employment terminated effective December 31, 2005 and upon termination of
Agreement. Mr. Smit shall be eligible to receive a performance- the Agreement, Mr. May was eligible for a bonus payment. On
based target bonus of 125% of annualized salary, with a January 5, 2006, Charter paid him a bonus of $750,000, with the
maximum bonus of 200% of annualized salary, as determined by possibility that such bonus would be increased by an additional
the Compensation Committee of Charter’s Board of Directors. percentage. In February 2006, Charter’s Compensation Commit-
However, for 2005 only, he will receive a minimum bonus of tee approved an additional bonus of approximately $88,900 for
$1,200,000, provided that he is employed by Charter on Mr. May.
December 31, 2005. Under Charter’s Long-Term Incentive Plan On April 1, 2005, Charter entered into an employment
he will receive options to purchase 3,333,333 shares of Class A agreement with Mr. Lovett, pursuant to which he will be
common stock, exercisable for 10 years, with annual vesting of employed as Charter’s Executive Vice President and Chief
one-third of the grant in each of the three years from the Operating Officer for a term commencing April 1, 2005 and
employment date; a performance share award for a maximum of expiring on April 1, 2008. The contract will be reviewed every
4,123,720 shares of Class A common stock, to be earned during 18 months thereafter and may be extended pursuant to such
a three-year performance cycle starting January 2006; and a reviews. Under the agreement, Mr. Lovett will receive an annual
restricted stock award of 1,562,500 shares of Class A common base salary of $575,000 and will be eligible to receive an annual
stock, with annual vesting over three years following employ- bonus targeted at 80% of his base salary under our senior
ment date. In addition, Mr. Smit will receive another restricted management bonus plan. Charter agreed to provide Mr. Lovett
stock award for 1,250,000 shares of Class A common stock with equity incentives commensurate with his position and
vesting on the first anniversary of employment date. responsibilities, as determined by Charter’s board of directors in
Mr. Smit will receive full reimbursement for his relocation its discretion. Accordingly, Mr. Lovett has been granted
expenses and employee benefits consistent with those made 75,000 shares of restricted stock under Charter’s 2001 Stock
generally available to other senior executives. In the event that Incentive Plan. The 75,000 restricted shares will vest one third
Mr. Smit is terminated by Charter without ‘‘cause’’ or for ‘‘good
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