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S-4
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form S-4 on 01/25/2000
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<PAGE>   596
                     CABLE MICHIGAN, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma net earnings and earnings per share were as follows:
 

<TABLE>
<CAPTION>
                                                     FOR THE YEARS      FOR THE PERIOD
                                                   ENDED DECEMBER 31,   FROM JANUARY 1,
                                                   ------------------   TO NOVEMBER 5,
                                                    1996       1997          1998
                                                   -------    -------   ---------------
<S>                                                <C>        <C>       <C>
Net (Loss) as reported...........................  $(8,256)   $(4,358)     $(10,534)
Net (Loss) pro forma.............................   (8,256)    (4,373)      (10,174)
Basic (Loss) per share-as reported...............    (1.20)     (0.63)        (1.45)
Basic (Loss) per share-pro forma.................    (1.20)     (0.64)        (1.48)
Diluted (Loss) per share-as reported.............    (1.20)     (0.63)        (1.45)
Diluted (Loss) per share-pro forma...............    (1.20)     (0.64)        (1.48)
</TABLE>

 
     In November 1996, the C-TEC shareholders approved a stock purchase plan for
certain key executives (the "Executive Stock Purchase Plan" or "C-TEC ESPP").
Under the C-TEC ESPP, participants may purchase shares of C-TEC Common Stock in
an amount of between 1% and 20% of their annual base compensation and between 1%
and 100% of their annual bonus compensation and provided, however, that in no
event shall the participant's total contribution exceed 20% of the sum of their
annual compensation, as defined by the C-TEC ESPP. Participant's accounts are
credited with the number of share units derived by dividing the amount of the
participant's contribution by the average price of a share of C-TEC Common Stock
at approximately the time such contribution is made. The share units credited to
participant's account do not give such participant any rights as a shareholder
with respect to, or any rights as a holder or record owner of, any shares of
C-TEC Common Stock. Amounts representing share units that have been credited to
a participant's account will be distributed, either in a lump sum or in
installments, as elected by the participant, following the earlier of the
participant's termination of employment with the Company or three calendar years
following the date on which the share units were initially credited to the
participant's account. It is anticipated that, at the time of distribution, a
participant will receive one share of C-TEC Common Stock for each share unit
being distributed.
 
     Following the crediting of each share unit to a participant's account, a
matching share of Common Stock is issued in the participant's name. Each
matching share is subject to forfeiture as provided in the C-TEC ESPP. The
issuance of matching shares will be subject to the participant's execution of an
escrow agreement. A participant will be deemed to be the holder of, and may
exercise all the rights of a record owner of, the matching shares issued to such
participant while such matching shares are held in escrow. Shares of restricted
C-TEC Common Stock awarded under the C-TEC ESPP and share units awarded under
the C-TEC ESPP that relate to C-TEC Common Stock were adjusted so that following
the Distribution, each such participant was credited with an aggregate
equivalent value of restricted shares of common stock of CTE, the Company and
RCN. In September 1997, the Board approved the Cable Michigan, Inc. Executive
Stock Purchase Plan, ("the "Cable Michigan ESPP"), with terms substantially the
same as the C-TEC ESPP. The number of shares which may be distributed under the
Cable Michigan ESPP as matching shares or in payment of share units is 30,000.
 
9. PENSIONS AND EMPLOYEE BENEFITS
 
     Prior to the Distribution, the Company's financial statements reflect the
costs experienced for its employees and retirees while included in the C-TEC
plans.
 
                                      F-367