SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CINCINNATI BELL INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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CINCINNATI BELL INC. NOTICE OF 2000
D/B/A BROADWING INC. ANNUAL MEETING AND
201 EAST FOURTH STREET PROXY STATEMENT
P.O. BOX 2301
CINCINNATI, OHIO 45202
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NOTICE OF ANNUAL MEETING
To Our Shareholders:
On Wednesday, April 19, 2000, Cincinnati Bell Inc. d/b/a Broadwing Inc. will
hold its Annual Meeting of Shareholders at the CINCINNATI MUSEUM CENTER AT UNION
TERMINAL, 1301 Western Avenue, Cincinnati, Ohio. The meeting will commence at
11:30 a.m., local time.
Only shareholders who owned shares at the close of business on February 25,
2000 can vote at this meeting or any adjournment of the meeting. At this
meeting, we will vote to:
1. Elect three directors (Class I) for three-year terms ending in 2003;
2. Amend Article First of the Company's Amended Articles of Incorporation
to change the Company's official name to Broadwing Inc.;
3. Approve the amended Broadwing Inc. 1997 Long Term Incentive Plan;
4. Approve the amended Broadwing Inc. Short Term Incentive Plan;
5. Approve the appointment of PricewaterhouseCoopers LLP as independent
accountants to audit the financial statements of the Company for the year
2000;
6. Act on a shareholder proposal, if properly presented at the meeting; and
7. Attend to any other business properly brought before the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSALS
1-5 AND AGAINST PROPOSAL 6 OUTLINED IN THIS PROXY STATEMENT.
Thomas E. Taylor,
Secretary
March 17, 2000
THE VOTE OF EACH SHAREHOLDER IS IMPORTANT. YOU CAN VOTE YOUR SHARES BY
COMPLETING AND RETURNING THE PROXY CARD SENT TO YOU. MOST SHAREHOLDERS CAN ALSO
VOTE THEIR SHARES OVER THE INTERNET OR BY TELEPHONE. IF INTERNET OR TELEPHONE
VOTING IS AVAILABLE TO YOU, VOTING INSTRUCTIONS ARE PRINTED ON THE PROXY CARD
SENT TO YOU.
PROXY STATEMENT
Cincinnati Bell Inc. d/b/a Broadwing Inc., as a result of its November 9,
1999 acquisition of IXC Communications, Inc. (now known as Broadwing
Communications Inc.), is a full-service provider of telecommunication services
to customers throughout the nation. By combining the well regarded Cincinnati
Bell name and reputation for service in the Cincinnati metropolitan area with
IXC's nationwide fiber-optic network and Internet backbone, the Company has
become a national integrated communications services provider. Its services fall
into five major categories: (i) national broadband services which include,
through its advanced fiber-optic network, internet access and transport, private
line, switched access, data transport and other services; (ii) local
communications services which include local services, data networking and
transport services, Internet services, pay phone services and sales of
communications equipment in southwestern Ohio, northern Kentucky and
southeastern Indiana; (iii) directory services which include the sale of
directory advertising and information services primarily to business customers
in southwestern Ohio, northern Kentucky and southeastern Indiana, primarily
through the yellow pages directory; (iv) wireless services which include
advanced digital personal communications and sales of related communications
equipment to both business and residential customers in its Greater Cincinnati
and Dayton, Ohio operating areas; and (v) other communications services which
include the resale of long distance and Internet access services and the
provision of data services and products to small- and medium-sized businesses,
the resale of telecommunications and computer equipment in the secondary market,
and the provision of network integration and consulting services.
QUESTIONS AND ANSWERS
QUESTION: WHY HAVE I RECEIVED THIS PROXY STATEMENT?
The Board of Directors has sent this proxy statement, on or about March 17,
2000, to ask for your vote as a shareholder of Cincinnati Bell Inc. d/b/a/
Broadwing Inc. (the "Company") on certain matters to be voted upon at the
upcoming annual shareholders' meeting.
QUESTION: WHEN WAS THIS PROXY STATEMENT MAILED TO SHAREHOLDERS?
This Proxy Statement was first mailed to shareholders on or about March 17,
2000.
QUESTION: WHAT MAY I VOTE ON?
1. The election of three directors (Class I) for three-year terms ending in
2003;
2. The amendment to Article First of the Company's Amended Articles of
Incorporation to change the Company's official name to Broadwing Inc.;
3. The approval of the amended Broadwing Inc. 1997 Long Term Incentive
Plan;
4. The approval of the amended Broadwing Inc. Short Term Incentive Plan;
5. The approval of the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the year 2000; and
6. A shareholder proposal.
QUESTION: DO I NEED TO ATTEND THE ANNUAL MEETING IN ORDER TO VOTE?
No. You can vote either in person by ballot at the annual meeting or by
completing and mailing the enclosed proxy card. In addition, most shareholders
can also vote over the Internet or by telephone. If Internet or telephone voting
is available to you, voting instructions are printed on the proxy card sent to
you.
QUESTION: WHO IS ENTITLED TO VOTE?
If you owned shares of the Company as of the close of business on
February 25, 2000 (the "Record Date"), you are entitled to vote. You are
entitled to one vote for each common share, $.01 par value per share (a "Common
Share"), for each 7 1/4% Junior Convertible Preferred Share Due 2007 (a "7 1/4%
Preferred Share") and for each 6 3/4% Cumulative Convertible Preferred Share (a
"6 3/4% Preferred Share"), you owned on the Record Date and which remain
outstanding on the date of the annual shareholders' meeting.
QUESTION: HOW DO I VOTE ANY COMMON SHARES HELD IN ANY OF THE COMPANY'S EMPLOYEE
STOCK OWNERSHIP PLAN (ESOP), RETIREMENT SAVINGS PLAN OR SAVINGS AND
SECURITY PLAN OR IXC COMMUNICATIONS, INC. 401(k) PLAN AND CREDITED TO
MY ACCOUNT UNDER ANY SUCH PLAN?
If you are a participant in any such plans, the proxy will serve as voting
instructions to the trustees of these plans with respect to the Common Shares
allocated to your account under such plans. Each of these plans, except the
ESOP, provides that the trustee shall vote any Common Shares that are held in
such plan and represented by proxy cards that are not signed and returned in the
same proportion as Common Shares held in such plan for which signed cards are
returned. Common Shares in the ESOP are not voted unless the participant to
whose ESOP account such shares are allocated signs and returns a proxy card as
to such shares.
QUESTION: HOW MANY COMMON SHARES AND PREFERRED SHARES ARE ENTITLED TO VOTE?
As of the Record Date, 202,550,808 Common Shares, 1,058,380 7 1/4% Preferred
Shares and 155,250 6 3/4% Preferred Shares were entitled to vote at the annual
meeting. The Preferred Shares vote with the Common Shares as one class on all
matters.
QUESTION: WHAT CONSTITUTES A QUORUM?
A "quorum" refers to the number of Common Shares and Preferred Shares that
must be represented (by attendance or by proxy) at a meeting in order that
business may be lawfully conducted. Pursuant to the Company's Amended
Regulations, at any meeting of shareholders, a quorum consists of the holders of
a majority of the Common Shares and Preferred Shares issued and outstanding and
entitled to vote at such meeting. However, no action that (by law, the Company's
Amended Articles of Incorporation or the Company's Amended Regulations) requires
authorization by a designated proportion of the Common Shares and Preferred
Shares may be authorized or taken by a lesser proportion. Abstentions from
voting and Common Shares and Preferred Shares held by custodians that do not
have the discretionary authority to vote on certain matters ("broker non-votes")
will be included in determining the presence of a quorum.
QUESTION: WHAT HAPPENS IF I SIGN AND RETURN MY PROXY CARD BUT DO NOT MARK MY
VOTE?
If you do not provide different voting instructions, your Common Shares will
be voted as follows:
1. FOR the election of the Class I directors;
2. FOR the amendment to Article First of the Company's Amended Articles
of Incorporation to change the Company's official name to
Broadwing Inc.;
3. FOR the approval of the amended Broadwing Inc. 1997 Long Term
Incentive Plan;
4. FOR the approval of the amended Broadwing Inc. Short Term Incentive
Plan;
5. FOR the approval of the appointment of PricewaterhouseCoopers LLP as
independent accountants;
6. AGAINST the shareholder proposal; and
7. Regarding any other matter to properly come before the meeting, in
accordance with the judgments of the persons voting the proxies.
QUESTION: CAN I CHANGE MY VOTE AFTER I HAVE RETURNED MY PROXY CARD?
Yes. You have the power to revoke your proxy and change your vote in one of
the following ways:
- Send a new proxy card to Thomas E. Taylor, Secretary of the Company, at
Broadwing Inc., 201 East Fourth Street, P.O. Box 2301, Cincinnati, Ohio
45201.
- Notify the Company in writing that you want to revoke your earlier
proxy. This written notice should be sent to Thomas E. Taylor,
Secretary of the Company, Broadwing Inc., 201 East Fourth Street,
P.O. Box 2301, Cincinnati, Ohio 45201.
2
- Timely deliver a later-dated proxy using the Internet or the telephone
procedures.
- Attend the annual meeting, give notice of your proxy revocation in open
meeting and vote in person.
QUESTION: WHO WILL COUNT THE VOTES?
Fifth Third Bank, our transfer agent and registrar, will count the votes and
act as inspector of the elections.
QUESTION: WHAT PERCENTAGE OF THE COMPANY'S VOTES DO DIRECTORS AND OFFICERS OWN?
Approximately 4.6% of our vote as of the Record Date is owned by directors
and officers. See page 7 for more details.
QUESTION: DO ANY SHAREHOLDERS OWN MORE THAN 5% OF THE COMPANY?
As of the Record Date, the only shareholders of the Company holding more
than 5% of the outstanding Common Shares and Preferred Shares were:
AMOUNT AND
NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER(A) OWNERSHIP OF CLASS
- -------------- --------------------------------------------- ---------- --------
Common Shares The Western and Southern 12,993,952(b) 6.42%
Life Insurance Company
("Western Southern")
400 Broadway
Cincinnati, Ohio 45202
7 1/4% Junior Convertible Highbridge Capital Corporation and 115,003(c) 10.7%
Preferred Shares Due 2007 Highbridge Capital Management, LLC
767 Fifth Avenue, 23(rd) Floor
New York, NY 10153
6 3/4% Cumulative Highbridge Capital Corporation and 13,740(c) 8.85%
Convertible Preferred Highbridge Capital Management, LLC
Shares 767 Fifth Avenue, 23(rd) Floor
New York, NY 10153
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(a) The Securities and Exchange Commission has defined "beneficial owner" of a
security to include any person who has or shares voting power or investment
power with respect to any such security or has the right to acquire
beneficial ownership of any such security within 60 days.
(b) Western Southern has advised the Company that 8,000,000 of these Common
Shares may be transferred, at its option, to Salomon Inc upon the maturity
of Salomon's 6 1/4% Exchangeable Notes due February 1, 2001.
(c) Highbridge Capital Management, LLC is the trading manager of Highbridge
Capital Corporation. The persons at Highbridge Capital Management, LLC who
actually exercise the power to dispose of and the power to vote the
investments of Highbridge Capital Corporation are registered as registered
representatives of Highbridge Capital Corporation, a registered
broker/dealer. Amount and Nature of Ownership and Percent of Class are as of
December 31, 1999.
3
BOARD OF DIRECTORS
GENERAL INFORMATION
The Board of Directors of the Company (the "Board") is responsible for
establishing broad corporate policies and for the overall performance of the
Company. Although they are not involved in day-to-day operating details,
directors keep informed of the Company's business by various reports and
documents sent to them. The Chairman, Chief Executive Officer and other officers
of the Company also present operating and financial reports at Board and
Committee meetings.
The Board schedules meetings approximately eight times a year. In addition,
the Board holds an organizational meeting following the annual meeting of
shareholders. The Board holds other meetings whenever needed.
In 1999, the Board held 15 meetings. Each director attended at least 78% of
the total number of the Board meetings and Committee meetings of which he or she
was a member.
COMMITTEES OF THE BOARD
The Board establishes committees to help it in the discharge of its
responsibilities.
During 1999, the following four Committees of the Board existed:
- AUDIT AND FINANCE COMMITTEE: This Committee consists of five persons, none
of whom is an officer. The Committee oversees the Company's financial
reporting process, evaluates the adequacy of the Company's internal
controls, reviews the Company's compliance with federal, state and local
laws and regulations, and monitors the legal and ethical conduct of
Company management and employees. A more detailed discussion of the
Committee's mission, composition, meetings, responsibilities and resources
as it pertains to its audit functions is contained in its Charter, a copy
of which is Appendix A attached hereto. Pursuant to new Securities and
Exchange Commission regulations, effective December 15, 2000, the audit
committee of every company is required to have a written charter, which
must be filed as an exhibit to its proxy statement once every three years.
The Company has chosen to comply voluntarily with this new requirement
early. In addition, the Committee reviews the Company's financial affairs,
including its capital structure, borrowing limits, financing of corporate
acquisitions and the performance of its benefit plans. The Committee met
five times in 1999. The Committee consists of William A. Friedlander
(Chairman), Phillip R. Cox, Karen M. Hoguet, Richard D. Irwin and Mary D.
Nelson.
- COMPENSATION COMMITTEE: This Committee consists of four persons, none of
whom is an officer. The Committee reviews the Company's executive
compensation and employee benefit plans and programs, including their
establishment, modification and administration. The Committee met seven
times in 1999. The Committee consists of David B. Sharrock (Chairman),
Phillip R. Cox, J. Taylor Crandall and Daniel J. Meyer.
- EXECUTIVE COMMITTEE: This Committee consists of four persons, two of whom
are officers. The Committee acts on behalf of the Board in certain matters
when necessary during the intervals between Board meetings. The Committee
met two times in 1999. The Committee consists of James D. Kiggen
(Chairman), Richard G. Ellenberger, William A. Friedlander and John T.
LaMacchia.
- GOVERNANCE AND NOMINATING COMMITTEE: This Committee consists of five
persons, one of whom is an officer. The Committee recommends nominees for
the election of directors and officers, monitors the performance of the
other Board Committees and informs the Board of shareholder concerns. The
Committee was formed in October, 1999 and consists of James D. Kiggen
(Chairman), William A. Friedlander, Daniel J. Meyer, David B. Sharrock and
John M. Zrno.
4
COMPENSATION OF DIRECTORS
COMPENSATION FOR EMPLOYEE DIRECTORS
Directors who are also employees of the Company (or any subsidiary of the
Company) receive no additional compensation for serving on the Board or its
Committees other than their normal salaries.
GENERAL COMPENSATION RULES FOR NON-EMPLOYEE DIRECTORS
Directors who are not employees of the Company or any subsidiary of the
Company ("non-employee directors") receive a $16,000 annual retainer and $1,000
for each Board and Committee meeting attended. Also, in 1999 the chairpersons of
the Audit and Finance Committee and the Compensation Committee were paid an
additional $3,000.
In lieu of the annual retainer and individual meeting fees, Mr. Kiggen, as
Chairman of the Board, received for 1999 a fee of $200,000 and supplemental
medical insurance, the cost of which is approximately $1,200.
EFFECT OF DIRECTORS DEFERRED COMPENSATION PLAN ON COMPENSATION OF NON-EMPLOYEE
DIRECTORS
The Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors
(the "Directors Deferred Compensation Plan") allows each non-employee director
of the Company to choose to defer receipt of all or a part of his or her
director fees and annual retainers and to have such deferred amounts credited to
an account of the director under the plan. Such account is also credited with
assumed interest on such amounts, compounded quarterly at the end of each
calendar quarter, at a rate equal to the average interest rate for ten-year
United States Treasury notes for the previous quarter. A non-employee director
is fully vested at all times in the amounts that are credited to his or her
account under the plan pursuant to the rules described in this paragraph.
Each person who was a non-employee director of the Company on January 1,
1999 also had his or her account under the Directors Deferred Compensation Plan
credited on such date with an amount equal to the value of 1,163 Common Shares,
and each person who is a non-employee director on the first business day of 2000
or any later calendar year has had or will (subject to future changes in the
plan or in the Common Shares) have his or her account under the plan credited on
such date with an amount equal to the value of 1,500 Common Shares. A
non-employee director's account under the plan is also credited with the
investment return that would result if such amounts (and any assumed cash
investment return thereon) were invested exclusively in Common Shares. A
non-employee director will be vested in the amounts credited to his or her
account under the plan pursuant to the rules described in this paragraph only if
he or she completes at least five years of active service as a non-employee
director for the Company (with a fraction of a year of service as a non-employee
director being rounded up or down to the nearest whole year).
Finally, also in conjunction with its spin-off of its former subsidiary,
Convergys Corporation, on January 4, 1999 (the first business day after the
Convergys Spin-Off) each person who was a non-employee director of the Company
on such date had his or her account under the Directors Deferred Compensation
Plan credited with an amount equal to the value of 6,784 Common Shares (or, in
the case of the non-employee director who was the Chairman of the Board on such
date, 13,568 Common Shares). A non-employee director's account under the plan is
also credited with the investment return that would result if such amount (and
any assumed cash investment return thereon) were invested exclusively in Common
Shares. A non-employee director will be vested in the amounts credited to his or
her account under the plan pursuant to the rules described in this paragraph
only if he or she remains a member of the Board continuously from January 4,
1999 through January 3, 2003 (or he or she terminates his or her status as a
member of the Board because of his or her death or retirement).
Except as is noted below, in the event of a change in control of the
Company, when a non-employee director of the Company terminates his or her
position as such a director, the vested amounts then credited to his or her
account under the Directors Deferred Compensation Plan (including certain
amounts
5
credited prior to 1998 or attributable to pre-1998 credits) are paid to him or
her (or, in the case of his or her death, to a beneficiary of such non-employee
director) in a lump sum cash payment or in annual cash installments (up to ten
such installments), as the director may elect under the provisions of the plan.
However, if a change in control of the Company (as such term is defined in
the Directors Deferred Compensation Plan) occurs prior to the non-employee
director terminating his or her position as a director of the Company, the
amounts credited to his or her account are generally fully vested without regard
to the forfeiture provisions noted in the preceding paragraphs of this
discussion or otherwise provided in the plan, and such amounts are generally
paid to the non-employee director in one lump sum cash payment as of the day
next following the date on which the change in control occurs.
Until paid, all amounts credited to a non-employee director's account under
the Directors Deferred Compensation Plan are not funded or otherwise secured,
and all payments under the plan are made from the general assets of the Company
and its subsidiaries.
EFFECT OF DIRECTORS STOCK OPTION PLAN ON COMPENSATION OF NON-EMPLOYEE DIRECTORS
The Company grants its non-employee directors stock options to purchase
Common Shares under the Cincinnati Bell Inc. 1997 Stock Option Plan for
Non-Employee Directors (together with certain predecessor non-employee director
stock option plans of the Company, the "Directors Stock Option Plan"). Pursuant
to the current terms of such plan, (i) a stock option for 25,000 Common Shares
is granted to each non-employee director of the Company on the first day of his
or her term of office as such a director and (ii) a stock option for 9,000
Common Shares is granted on the date of each annual meeting to each non-employee
director of the Company who first became a non-employee director before the date
of such annual meeting and who continues in office as a non-employee director
after such meeting.
Each stock option granted a non-employee director under the Directors Stock
Option Plan requires that the price to be paid upon the exercise of such option
for the Common Shares that are subject to the option will be equal to 100% of
the fair market value of such shares (as determined at the time the option is
granted).
OTHER COMPENSATION FOR NON-EMPLOYEE DIRECTORS
The Company also provides its non-employee directors with certain
telecommunications services. The cost of such services was approximately $1,317
per non-employee director in 1999.
6
SHARE OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth the beneficial ownership of Common Shares and
7 1/4% Preferred Shares as of February 25, 2000 by each director and named
executive officer and by all directors and officers of the Company as a group.
As of that date, all directors and officers of the Company as a group owned
beneficially 9,429,523 Common Shares or 4.66% of the Common Shares outstanding
and 6,478 7 1/4% Preferred Shares or .61% of the 7 1/4% Preferred Shares
outstanding.
SHARES BENEFICIALLY
OWNED AS OF
FEB. 25, 2000 (A) PERCENT OF
--------------------- --------------------
7 1/4% 7 1/4%
COMMON PREFERRED COMMON PREFERRED
NAME SHARES SHARES SHARES SHARES
---- --------- --------- -------- ---------
John F. Cassidy...................................... 71,200 0.04%
Phillip R. Cox....................................... 42,100 0.02%
J Taylor Crandall.................................... 25,000 0.01%
Richard G. Ellenberger............................... 411,743 0.20%
William A. Friedlander(b)(c)......................... 281,119 0.14%
Karen M. Hoguet...................................... 35,000 0.02%
Richard D. Irwin..................................... 5,544,975 6,442 2.74% 0.46%
James D. Kiggen(b)................................... 92,945 0.05%
John T. LaMacchia(b)................................. 1,358,162 0.67%
Daniel J. Meyer...................................... 27,500 0.01%
Kevin W. Mooney...................................... 127,719 0.06%
Mary D. Nelson....................................... 41,000 0.02%
Richard S. Pontin.................................... 58,500 0.03%
David B. Sharrock.................................... 39,802 0.02%
Thomas E. Taylor..................................... 114,062 0.06%
John M. Zrno......................................... 1,073,800 36 0.53% 0.00%
All directors and officers as a group (consisting of
17 persons, including those named above)........... 9,429,523 6,478 4.66% 0.61%
- ------------------------
(a) Includes Common Shares subject to outstanding options under the
Broadwing Inc. 1997 Long Term Incentive Plan and the Directors Stock Option
Plan which are exercisable by such individuals within 60 days. The following
options are included in the totals: 1,207,900 Common Shares for
Mr. LaMacchia; 1,073,800 Common Shares for Mr. Zrno; 127,195 Common Shares
for Mr. Ellenberger; 62,300 Common Shares for Mr. Mooney; 52,062 Common
Shares for Mr. Taylor; 41,000 Common Shares for each of Messrs. Friedlander
and Kiggen; 39,600 Common Shares for Mr. Cox; 34,000 Common Shares for
Mrs. Hoguet; 33,390 Common Shares for Mr. Irwin; 33,000 Common Shares for
Mr. Sharrock; 31,200 Common Shares for Mr. Cassidy; 25,000 Common Shares for
Messrs. Meyer and Crandall; and 21,000 Common Shares for Mrs. Nelson.
(b) Includes Common Shares held directly by members of the director's or
officer's family who have the same home as the director or officer but as to
which the director or officer disclaims beneficial ownership: 10,000 for
Mr. Friedlander; 3,626 for Mr. Kiggen; and 35,356 for Mr LaMacchia.
(c) Includes 167,755 Common Shares as to which Mr. Friedlander disclaims
beneficial ownership. Mr. Friedlander has sole investment power as to these
167,755 Common Shares.
7
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The Board of the Company presently consists of twelve members, two of whom
are officers of the Company. The Company's Amended Articles of Incorporation
require that the directors be divided into three classes. At each annual meeting
of shareholders, directors constituting a class are elected for three-year
terms. The terms of the Class I directors expire in 2000. Mr. Richard D. Irwin,
who became a director in November 1999 as a result of the Company's merger with
IXC, has decided not to stand for re-election, and on February 10, 2000 the
Board of Directors passed a resolution reducing the size of the Board from
twelve members to eleven members, effective April 19, 2000 with this year's
annual meeting of shareholders. The Board has nominated Richard G. Ellenberger,
Karen M. Hoguet and David B. Sharrock, who are incumbent directors, as directors
in Class I to serve until the 2003 annual meeting of shareholders. The three
nominees for Class I director receiving the greatest number of votes will be
elected. The four directors in Class II will continue to serve until the 2001
annual meeting of shareholders and the four directors in Class III will continue
to serve until the 2002 annual meeting of shareholders. Pursuant to the
Investment Agreement, dated July 21, 1999, among the Company and Oak Hill and
its affiliated entities, as long as Oak Hill and its affiliated entities hold at
least two-thirds of the Common Shares issued or issuable upon conversion of the
$400 million of convertible subordinated debentures of the Company, Oak Hill has
the right to designate one director. Mr. J. Taylor Crandall is currently the
designee of Oak Hill and is serving as a director in Class III. The directors of
each class will serve until their respective successors are elected and
qualified.
It is intended that shares represented by the accompanying form of proxy
will be voted for the election of the nominees, unless contrary instructions are
indicated as provided on the proxy card. (If you do not wish your shares to be
voted for particular nominees, please so indicate on the proxy card.) If one or
more of the nominees should at the time of the meeting be unavailable or unable
to serve as a candidate, the shares represented by the proxies will be voted to
elect the remaining nominees and any substitute nominee or nominees designated
by the Board. The Board knows of no reason why any of the nominees will be
unavailable or unable to serve.
OUR RECOMMENDATION
THE DIRECTOR NOMINEES WHO RECEIVE THE GREATEST NUMBER OF VOTES WILL BE
ELECTED TO THE BOARD OF DIRECTORS. VOTES AGAINST A CANDIDATE, ABSTENTIONS AND
BROKER NON-VOTES WILL HAVE NO LEGAL EFFECT. THE BOARD RECOMMENDS THE ELECTION OF
THE NAMED NOMINEES AS DIRECTORS.
EFFECT OF MANAGEMENT VOTE
Since the directors and officers of the Company own beneficially 9,436,001
voting shares, or 4.6% of the outstanding voting shares, their votes on this
proposal are not likely to have a material impact on whether this proposal is
adopted.
For each director of the Company, including those nominated for election,
there follows a brief listing of principal occupation during at least the past
five years, other major affiliations and age on the date of this Proxy
Statement.
8
NOMINEES FOR CLASS I DIRECTORS
(TERMS EXPIRE IN 2003)
Richard G. Ellenberger, President and Chief Executive
[PHOTO] Officer of the Company since March 1, 1999; Chief Operating
Officer of the Company since July 1, 1998; President, Chief
Executive Officer and a Director of Cincinnati Bell
Telephone Company since 1997; Chief Executive Officer of
Broadwing Communications Inc. since November 9, 1999. Chief
Executive Officer of XLConnect, 1996-1997; President,
Business Services of MCI Telecommunications, 1995-1996;
Senior Vice President, Worldwide Sales of MCI
Telecommunications, 1994-1995; Senior Vice President, Branch
Operations of MCI Telecommunications, 1993-1994; Vice
President, Southeast Region of MCI Telecommunications,
1992-1993. Director of the Company since 1998; member of the
Executive Committee. Age 47.
Karen M. Hoguet, Chief Financial Officer and Senior Vice
[PHOTO] President of Federated Department Stores, Inc. (owner and
operator of retail department stores); Senior Vice President
since 1991; Treasurer 1992-1999; Chief Financial Officer
since 1997. Director of the Company since February 1999;
member of the Audit and Finance Committee. Age 43.
David B. Sharrock, Consultant since 1994. Executive Vice
[PHOTO] President and Chief Operating Officer of Marion Merrell Dow
Inc. (researcher, manufacturer and seller of pharmaceutical
products), 1989-1993; President and Chief Operating Officer
of Merrell Dow Pharmaceuticals Inc., 1988-1989. Director of
Interneuron Pharmaceuticals Inc., Intercardia, Inc. and
Praecis Pharmaceutical, Inc. Director of the Company since
1987; Chairman of the Compensation Committee and member of
the Governance and Nominating Committee. Age 63.
9
CLASS II DIRECTORS
(TERMS EXPIRE IN 2001)
Phillip R. Cox, President and Chief Executive Officer of Cox
[PHOTO] Financial Corporation (a financial planning services
company) since 1972. Director of Federal Reserve Bank of
Cleveland, Cinergy Corp., BDM International, Touchstone
Mutual Funds and PNC Bank, Ohio, N.A. Director of the
Company since 1993; member of the Audit and Finance
Committee and the Compensation Committee. Age 53.
William A. Friedlander, Chairman of Bartlett & Co. (a
[PHOTO] registered investment advisor) since 1989; Chief Executive
Officer, 1966-1989. Director of The Union Central Life
Insurance Company. Director of the Company since 1986;
Chairman of the Audit and Finance Committee, member of the
Executive Committee and member of the Governance and
Nominating Committee. Age 67.
John T. LaMacchia, President and Chief Executive Officer
[PHOTO] since May 1999 of CellNet Data Systems, Inc. (which filed a
voluntary petition for Chapter 11 bankruptcy in February
2000 in connection with its acquisition by an affiliate of
Schlumberger Ltd.). President and Chief Executive Officer of
Cincinnati Bell Inc., 1993-February 28, 1999; Chairman of
Cincinnati Bell Telephone Company, 1993-February 28, 1999;
Chairman of Cincinnati Bell Information Systems Inc.,
1988-1996; Chief Operating Officer of Cincinnati Bell Inc.,
1988-1993. Director of The Kroger Co., Burlington Resources
Inc. and CellNet Data Systems. Director of the Company since
1985; member of the Executive Committee. Age 58.
John M. Zrno, Retired. President and Chief Executive Officer
[PHOTO] of IXC Communications, Inc., June 1999-November 1999.
President and Chief Executive Officer of ALC Communications
Corporation, 1988-1995. Director of Teleglobe, Inc. Director
of the Company since November 1999; member of the Governance
and Nominating Committee. Age 61.
10
CLASS III DIRECTORS
(TERMS EXPIRE IN 2002)
J. Taylor Crandall, a Managing Partner of Oak Hill Capital
[PHOTO] Management, Inc. since 1996 and has held various positions
at Keystone, Inc. since 1986. Director of Oncology Inc.,
Sunterra Corporation, Washington Mutual, Inc. and various
Keystone companies. Director of the Company since July 1999;
member of the Compensation Committee. Age 45.
James D. Kiggen, Chairman of the Board of the Company since
[PHOTO] January 1, 1999. Chairman of the Board of Xtek, Inc.
(manufacturer of engineered steel products for heavy
industry) 1985-1999; Chief Executive Officer of Xtek, Inc.,
1985-1998; President of Xtek, Inc., 1985-1995. Director of
Fifth Third Bancorp and its subsidiary, Fifth Third Bank,
Xtek, Inc. and The United States Playing Card Company.
Director of the Company since 1983; Chairman of the
Executive Committee and Chairman of the Governance and
Nominating Committee. Age 68.
Daniel J. Meyer, Chairman and Chief Executive Officer of
[PHOTO] Milacron, Inc. (a manufacturer of metal working and plastics
processing machinery and systems); President 1998-1999;
Chairman since 1991; Chief Executive Officer since 1990.
Director of The E.W. Scripps Company, AK Steel Corporation
and Hubbell Incorporated. Director of the Company since
1999; member of the Compensation Committee and member of the
Governance and Nominating Committee. Age 63.
Mary D. Nelson, Retired, President, Nelson & Co. (consulting
[PHOTO] actuaries) 1975-1999. Director of Blount International, Inc.
and its subsidiary, Blount Inc., (1986-1999) and The Union
Central Life Insurance Company. Director of the Company
since 1994; member of the Audit and Finance Committee.
Age 66.
11
PROPOSAL TO AMEND ARTICLE FIRST OF THE AMENDED ARTICLES OF
INCORPORATION TO CHANGE THE OFFICIAL NAME OF THE COMPANY TO
BROADWING INC.
(ITEM 2 ON THE PROXY CARD)
You are being asked to approve an amendment to the Company's Amended
Articles of Incorporation that will change the Company's official name to
Broadwing Inc. from Cincinnati Bell Inc. To accomplish this name change, the
Board proposes that Article First of the Amended Articles of Incorporation be
amended to read as follows:
FIRST: The name of the corporation is Broadwing Inc.
The Board believes that the corporate name Broadwing Inc. better reflects
the Company's business focus and future business strategies as an integrated
communications provider with voice, data, and internet solutions for customers
from coast-to-coast. Since November 15, 1999, the Company has been doing
business as Broadwing Inc. and the Company's trading symbol on the New York
Stock Exchange has changed to "BRW." The investment community and the public
generally have reacted positively to the new name. If the amendment is approved,
the Company will refer to itself officially as Broadwing Inc. rather than
Cincinnati Bell Inc. d/b/a Broadwing Inc.
It will not be necessary for you to surrender your share certificates upon
approval of the proposed name change. Rather, when share certificates are
presented for transfer, new share certificates bearing the name Broadwing Inc.
will be issued.
If completion of the name change becomes inadvisable in the opinion of the
Board because: (i) a suit, proceeding or claim has been instituted, made or
threatened relating to the name change; or (ii) any other circumstance exists
which, in the Board's judgment, makes the name change inadvisable, the Board may
terminate this proposal to amend the Company's Amended Articles of
Incorporation. The termination of this proposal may be effective either before
or after approval of the name change by the shareholders.
RECOMMENDATION
ADOPTION OF THIS PROPOSED AMENDMENT TO ARTICLE FIRST REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS OF THE ISSUED AND OUTSTANDING
COMMON SHARES AND PREFERRED SHARES, VOTING AS ONE CLASS. ACCORDINGLY,
ABSTENTIONS FROM VOTING AND BROKER NON-VOTES WILL HAVE THE EFFECT OF A VOTE
AGAINST THE PROPOSED AMENDMENT. THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED
AMENDMENT.
EFFECT OF MANAGEMENT VOTE ON PROPOSAL
Since the directors and officers of the Company own beneficially 9,436,001
voting shares, or 4.6% of the outstanding voting shares, their votes are not
likely to have a material impact on whether this proposal is adopted.
PROPOSAL TO APPROVE THE
AMENDED BROADWING INC. 1997 LONG TERM INCENTIVE PLAN
(ITEM 3 ON THE PROXY CARD)
The Board has amended and restated, effective as of January 1, 2000, the
terms of the long term incentive compensation plan that was previously named the
Cincinnati Bell Inc. 1997 Long Term Incentive Plan (the "Long Term Incentive
Plan"). The original plan was approved by the shareholders of the Company at the
annual meeting of such shareholders that was held on April 28, 1997.
The Long Term Incentive Plan is a very important component of the Company's
compensation program, through which awards can be made to salaried employees of
the Company and its subsidiaries based on long-term performance objectives.
Awards granted under the plan generally provide salaried employees the
opportunity to acquire Common Shares or monetary payments based on the value of
such shares and/or the financial performance of the Company.
12
The Board's amendment and restatement of the Long Term Incentive Plan
changes the name of the plan to the "Broadwing Inc. 1997 Long Term Incentive
Plan" and clarifies certain terms of the plan. More importantly, such amendment
and restatement makes changes in the plan in order to address issues that
involve the one million dollar deduction limits of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the granting of
incentive stock options ("ISOs").
In this regard, Section 162(m) of the Code generally provides that any
publicly traded corporation may not deduct compensation paid to any of certain
executives for a year to the extent such compensation exceeds one million
dollars, except that certain performance-based compensation awards can be exempt
from such deduction limits if: (i) certain limits on the number of shares and
other amounts that can be awarded are specified in a plan under which the awards
are made and certain other requirements set forth in the awards and in such plan
are met; and (ii) the plan's terms containing such limits and requirements are
approved by the corporation's shareholders.
Further, an ISO is a type of option which is described in Code Section 422
and which provides very favorable tax consequences to an employee. A stock
option can qualify as an ISO only if: (i) certain limits on the number of shares
that can be awarded as ISOs are specified in a plan under which the options are
granted and certain other requirements set forth in the option and in such plan
are met; and (ii) the plan's terms containing such limits and requirements are
approved by the corporation's shareholders.
The prior version of the Long Term Incentive Plan failed in its terms to
meet all of the requirements necessary for awards granted thereunder to avoid
being subject to the deduction limits of Code Section 162(m) or for stock
options granted thereunder to constitute ISOs (even if the terms of such awards
and stock options were intended to meet such requirements). The amended and
restated version of the Long Term Incentive Plan is designed to correct that
situation.
In particular, in order to meet the requirements necessary for the amended
and restated version of the Long Term Incentive Plan to be able both to issue
awards that are not subject to the deduction limits of Code Section 162(m) and
to issue ISOs (subject to the terms of such awards and options meeting certain
conditions), the plan has been amended: (i) to specify certain fixed limits on
the number of Common Shares that can be subject to awards granted under the plan
on or after January 1, 2000 (instead of specifying limits that were based only
on the number of Common Shares outstanding at the start of each calendar year
during the term of the plan, as the prior version of the plan did); and (ii) to
specify the criteria on which performance goals that must be met for payments to
be made under certain of the plan's awards may be based (instead of leaving the
makeup of such criteria solely to the committee that administers the plan, as
the prior version of the plan did). Both such Common Share limits and the basis
of such performance goal criteria are described in the following summary of the
plan.
Certain of the amendments to the plan require the approval of the Company's
shareholders in order to be effective for the purposes for which they are
intended. For the foregoing reasons, the Board is asking the shareholders of the
Company for, and recommends, the approval of the Long Term Incentive Plan, as
amended and restated effective as of January 1, 2000.
The material terms of the amended and restated Long Term Incentive Plan are
described below, including certain material terms that have not been changed
since the original approval of such plan by the shareholders of the Company. The
full text of the amended and restated Long Term Incentive Plan is set forth in
Appendix B of this Proxy Statement and the following discussion is qualified in
its entirety by reference to such text.
1. COMMON SHARES RESERVED FOR AWARDS.
Subject to adjustment in the case of certain changes in the capital
structure of the Company, the following limits apply to the grant of awards
under the amended and restated Long Term Incentive Plan:
(a) The maximum number of Common Shares, on which awards (of any type)
granted on or after January 1, 2000 to all salaried employees may be based,
shall be 50,000,000 Common Shares. This
13
limit is substantially the same that would have applied under the prior
version of the plan if both the terms of such prior plan and the number of
Common Shares outstanding as of January 1, 2000 had never changed.
(b) The maximum number of Common Shares, on which awards (of any type)
granted to all salaried employees during each calendar year that begins on
or after January 1, 2000 may be based, shall be 4,200,000 Common Shares
(plus the difference, if any, between the maximum number of Common Shares on
which awards could have been granted in the immediately preceding calendar
year and the number of Common Shares on which awards were actually granted
in such immediately preceding calendar year). This limit is substantially
the same that would have applied under the prior version of the plan if both
the terms of such prior plan and the number of Common Shares outstanding as
of January 1, 2000 had never changed.
(c) The maximum number of Common Shares, on which awards (of any type)
granted to any salaried employee during each and any calendar year that
begins on or after January 1, 2000 may be based, shall be 1,000,000 Common
Shares. The prior version of the plan did not provide a limit analogous to
this limit.
(d) The maximum number of Common Shares, on which ISO awards granted on
or after January 1, 2000 to all salaried employees may be based, shall be
12,500,000 Common Shares. This limit is substantially the same that would
have applied under the prior version of the plan if both the terms of such
prior plan and the number of Common Shares outstanding as of January 1, 2000
had never changed.
If any award or portion of an award granted on or after January 1, 2000 is
forfeited, expires or otherwise terminates without the payment of Common Shares
or any other amount, the Common Shares on which such award or portion of an
award was based shall again be available to be the basis on which other awards
may be granted but such award is still only counted once in determining whether
any limits set forth above (except for the limit set forth in paragraph (c)
above) is met.
The prior version of the plan indicated that the maximum number of Common
Shares on which awards could be granted to any employee would not exceed 10% of
the total number of Common Shares available for awards over the term of the
plan. This limit has been eliminated in the amended and restated version of the
plan.
2. ADMINISTRATION.
The amended and restated Long Term Incentive Plan will be administered by
the Compensation Committee of the Board (for purposes of this discussion as to
the Long Term Incentive Plan, the "Committee"). Subject to the limits and terms
of the plan, the Committee (i) selects the employees to whom awards will be
granted, (ii) makes the awards, in such forms and amounts and on such conditions
as it determines, (iii) interprets the terms of the plan and (iv) performs all
other actions necessary for the plan's administration.
The Committee may delegate to one or more senior managers of the Company and
its subsidiaries the Committee's right to make awards to employees who are not
officers of the Company (except that, unlike the prior version of the plan, it
may not so delegate that right with respect to employees who are otherwise
subject to certain insider-trading prohibitions and requirements set forth in
Section 16 of the Securities Exchange Act of 1934 or to the deduction limits of
Section 162(m) of the Code).
3. TYPES OF AWARDS.
Awards under the amended and restated Long Term Incentive Plan may be made
to salaried employees of the Company and its subsidiaries in any one or a
combination of the following: (i) stock options, including ISOs, (ii) stock
appreciation rights ("SARs"), (iii) restricted stock and/or (iv) performance
shares and performance units. No award may be granted under the plan after
April 27, 2007.
14
A stock option represents an option to purchase, over a certain period of
time, Common Shares at a fixed purchase price. The plan provides that the
purchase price of any Common Share purchasable under any stock option granted
under the plan shall not be less than 100% of the fair market value of a Common
Share as determined on the date that the option is granted.
Also, by reason of applicable law, the aggregate fair market value of Common
Shares for which ISOs are exercisable for the first time during any calendar
year as to any employee shall not exceed $100,000 (or, if such limit amount is
amended under the Code, such amended limit amount). The value of any ISO for
purposes of this rule is determined at the time of the grant of the ISO. Also,
by reason of applicable law, no ISO will be granted to any person who owns
(directly or constructively) more than 10% of the voting power of the shares of
the Company or any of its subsidiaries.
A SAR represents the right to receive payment of a sum not to exceed the
amount, if any, by which the fair market value of the Common Shares with respect
to which the SAR is based (as determined on the date of the exercise of the SAR)
exceeds the grant price of the SAR. The plan provides that the grant price of a
SAR may not be less than the fair market value of the Common Shares with respect
to which the SAR is based, as determined on the date of the grant of the SAR. A
SAR may be granted free-standing or in tandem with new stock options granted
under the plan or after the grant of a related option which is not an ISO.
Restricted stock constitutes Common Shares that may not be disposed of by
the employee to whom they are awarded until certain restrictions and conditions
established by the Committee lapse. The recipient shall have all rights of a
shareholder of the Company with respect to Common Shares awarded as restricted
stock, including the right to vote and to receive cash dividends, unless the
Committee shall otherwise determine. Upon termination of an applicable
employee's employment during the period in which his or her right to dispose of
his or her restricted stock is restricted, such restricted stock shall be
forfeited (subject to such exceptions, if any, as are authorized by the
Committee as to termination of employment, retirement, disability, death or
other special circumstances).
A performance share refers to an award which provides that the employee to
whom the award is granted will receive one Common Share if certain performance
goals that are set by the Committee (and any other conditions, which may include
a requirement that the employee be employed by the Company and its subsidiaries
for a specified continuous period of time, that are set by the Committee) are
met.
A performance unit refers, for purposes of the plan, to an award which
provides that the employee to whom the award is granted will receive an amount
that is equal to a percent, not more than 200%, of the fair market value of one
Common Share as determined on the date such amount becomes payable (or is equal
to a percent, not more than 200%, of the increase in the fair market value of
one Common Share from the date of the grant of the award to the date such amount
becomes payable) if certain performance goals that are set by the Committee (and
any other conditions, which may include a requirement that the employee be
employed by the Company and its subsidiaries for a specified continuous period
of time, that are set by the Committee) are met.
Unlike the amended and restated version of the plan, the plan's prior
version did not specify the basis on which an amount payable under a performance
unit would be based and failed to specify any limit on the amount payable under
such award.
4. PERFORMANCE GOALS.
To the extent the meeting of performance goals set by the Committee may be a
condition to the exercise of or payment under any award granted, the Committee
may base such performance goals on, and only on, one or more of the following
criteria applicable to the Company and its subsidiaries: earnings before
interest, taxes, depreciation and amortization; earnings per share; operating
income; total shareholder returns; cash generation targets; profit targets;
revenue targets; profitability targets as measured by return ratios; net income;
return on sales; return on assets; return on equity; and corporate performance
indicators (which are indices based on the level of service provided to
customers).
15
Any such performance criteria shall be measured or determined on the basis
of a period of such duration (a "Performance Period"), which period may be of
any length, as set by the Committee and shall be criteria that will be able to
be objectively determined by the Committee. In addition, any such performance
criteria (i) may be measured or determined for the Company, for any subsidiary
of the Company, for the Company and all of the Company's subsidiaries in the
aggregate or for any group of corporations that are included in the entire group
of the Company and its subsidiaries and (ii) may also be measured and determined
in an absolute sense and/or in comparison to the analogous performance criteria
of other publicly-traded companies (that are selected for such comparison
purposes by the Committee).
5. CHANGE IN CONTROL.
In the event a change in control of the Company (as is defined in the
amended and restated Long Term Incentive Plan) occurs, then, in general terms
and among other things: (i) all then outstanding stock options and SARs will
become exercisable in full; (ii) the restrictions still then in force and
applicable to any Common Shares that have been awarded as restricted stock shall
lapse; and (iii) a certain pro rata portion of all still then outstanding
performance shares and units will be paid within five business days after the
date of the change in control.
The amended and restated plan's change in control provisions have not been
materially changed from the plan's prior version.
6. AMENDMENT AND TERMINATION.
The amended and restated Long Term Incentive Plan may be further amended or
terminated by the Board, provided that no such action shall impair the rights of
an employee with respect to a previously granted award without the employee's
consent.
In addition, the plan provides that no amendment shall be made without
approval of the Company's shareholders: (i) if such amendment would increase the
total number of shares reserved for issuance under all awards that may be
granted under the plan (as the prior version of the plan also indicated); (ii)
if such amendment would change the class of employees eligible for awards under
the plan (as the prior version of the plan also indicated); (iii) if such
amendment would increase the total number of shares reserved for issuance under
all ISOs that may be granted under the plan (which type of amendment did not
require shareholder approval under the prior version of the plan); or (iv) if
such amendment would make any change in the plan that is required to be approved
by the Company's shareholders in order to satisfy the requirements of
Section 162(m) of the Code or any other applicable law (which type of amendment
did not require shareholder approval under the prior version of the plan).
The prior version of the plan had also indicated that any amendment that
materially increased the benefits under the plan required shareholder approval.
The amended and restated version of the plan eliminates the need for shareholder
approval of such an amendment unless shareholder approval of such amendment is
otherwise required under one of the four clauses of the immediately preceding
paragraph.
7. FEDERAL INCOME TAX CONSEQUENCES.
The following describes, in very general terms, the federal income tax
consequences arising with respect to awards granted under the amended and
restated Long Term Incentive Plan.
A stock option or SAR that is granted to an employee will create no tax
consequences for the employee or the Company at the time of the grant of the
award. Further, the employee will have no taxable income upon exercising an ISO
(except that the alternative minimum tax may apply), and the Company will
receive no deduction when an ISO is exercised. Upon exercising any other option
(an option that is not an ISO) or a SAR, however, the employee generally must
recognize ordinary compensation income equal to the amount by which the fair
market value of the Common Shares that are subject to the portion of the option
or SAR being exercised, as determined on the date of exercise, exceeds the
purchase or grant price of such Common Shares, and the Company will be entitled
to a deduction for the same amount.
16
The treatment to an employee of a disposition of Common Shares acquired
through the exercise of an option or a SAR depends on how long the Common Shares
have been held and on whether such Common Shares were acquired by exercising an
ISO or by exercising an option that is not an ISO or a SAR. Generally, there
will be no tax consequence to the Company in connection with a disposition of
Common Shares acquired under an option except that the Company may be entitled
to a deduction in the case of a disposition of Common Shares acquired under an
ISO before certain holding periods have been satisfied.
With respect to other awards that are settled in Common Shares or other
property that is restricted as to transferability and subject to a substantial
risk of forfeiture (such as restricted stock), the employee generally must
recognize ordinary compensation income equal to the fair market value of the
Common Shares or other property received only at the first time the Common
Shares or other property becomes transferable or not subject to a substantial
risk of forfeiture; and the Company will be entitled to a deduction for the same
amount. Different tax rules may apply with respect to employees who are subject
to Section 16 of the Securities Exchange Act of 1934.
With respect to other awards (such as performance shares or performance
units) granted under the plan to an employee that are settled either in cash or
in Common Shares or other property that is either transferable or not subject to
a substantial risk of forfeiture, however, the employee generally must recognize
ordinary compensation income equal to the cash and the fair market value of
Common Shares or other property received at the time it is received; and the
Company will be entitled to a deduction for the same amount.
OUR RECOMMENDATION
APPROVAL OF THE BROADWING INC. 1997 LONG TERM INCENTIVE PLAN, AS AMENDED AND
RESTATED EFFECTIVE AS OF JANUARY 1, 2000, REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE COMMON SHARES AND PREFERRED SHARES, VOTING AS ONE
CLASS, PRESENT OR REPRESENTED AND ENTITLED TO VOTE. ABSTENTIONS WILL HAVE THE
SAME EFFECT AS VOTES AGAINST THE PROPOSAL. BROKER NON-VOTES WILL HAVE NO EFFECT
ON THE OUTCOME OF THE VOTE. THE BOARD RECOMMENDS A VOTE FOR ADOPTION OF THE
PROPOSAL.
EFFECT OF MANAGEMENT VOTE
Since the directors and officers of the Company own beneficially 9,436,001
voting shares, or 4.6% of the outstanding voting shares, their votes on the
proposal are not likely to have a material impact on whether this proposal is
adopted.
PROPOSAL TO APPROVE THE
AMENDED BROADWING INC. SHORT TERM INCENTIVE PLAN
(ITEM 4 ON THE PROXY CARD)
The Board of Directors has amended and restated, effective as of January 1,
2000, the terms of the annual incentive compensation plan that was previously
named the Cincinnati Bell Inc. Short Term Incentive Plan (the "Short Term
Incentive Plan"). The Short Term Incentive Plan has not previously been
presented to the Company's shareholders for their approval.
The Board's amendment and restatement of the Short Term Incentive Plan
changes the name of the plan to the "Broadwing Inc. Short Term Incentive Plan"
and clarifies certain terms of the plan. More importantly, such amendment and
restatement makes changes in the plan in order to address the following
deduction limit issue.
Specifically, awards made under the prior version of the Short Term
Incentive Plan were subject to the one million dollar deduction limits of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Section 162(m) of the Code generally provides that any publicly traded
corporation may not deduct compensation paid to any of certain executives for a
year to the extent such compensation exceeds one million dollars, except that
certain performance-based compensation awards can be exempt from such deduction
limits if: (i) certain limits on the amounts that can be awarded are specified
in a plan under which
17
the awards are made and certain other requirements set forth in the awards and
in such plan are met; and (ii) the plan's terms containing such limits and
requirements are approved by the corporation's shareholders.
The amended and restated version of the Short Term Incentive Plan is
designed to specify the applicable limits and other requirements applicable to
such a plan so that, if certain conditions are met in the terms of the actual
awards granted under the Short Term Incentive Plan, such awards can be exempt
from the deduction limits of Section 162(m) of the Code.
As is indicated above, in order for the Short Term Incentive Plan to provide
any awards that are not subject to the deduction limits of Section 162(m) of the
Code, the approval of the Company's shareholders to the terms of the amendment
and restated plan is required.
For the foregoing reasons, the Board is asking the shareholders of the
Company for, and recommends, the approval of the Short Term Incentive Plan, as
amended and restated effective as January 1, 2000.
The principal terms of the amended and restated Short Term Incentive Plan
are described below. The full text of the amended and restated Short Term
Incentive Plan is set forth in Appendix C of this Proxy Statement and the
following discussion is qualified in its entirety by reference to such text.
1. PURPOSE OF PLAN.
The purpose of the amended and restated Short Term Incentive Plan is to
provide key executives of the Company and its subsidiaries with incentive
compensation based upon the achievement of specific annual performance goals.
2. ADMINISTRATION.
The amended and restated Short Term Incentive Plan will be administered by
the Board's Compensation Committee (the "Committee"). Subject to the limits and
terms of the plan, the Committee will (i) select the key executives to whom
awards under the plan will be granted, (ii) make the awards under the plan, in
such amounts and on such conditions as it determines, (iii) interpret the terms
of the plan and adopt administrative rules in connection with the plan's
operation and (iv) perform all other actions necessary for the plan's
administration.
3. EMPLOYEES TO WHOM AWARDS MAY BE GRANTED.
Awards may be granted under the amended and restated Short Term Incentive
Plan to, and only to, key executives of the Company and its subsidiaries. A key
executive refers to an employee of the Company or a subsidiary of the Company
whose regular and incentive compensation is principally established by the
Committee.
4. AWARDS.
Any award granted under the amended and restated Short Term Incentive Plan
to a key executive will be made with respect to a specific calendar year (the
award's "Award Year") and will, only if certain performance goals that are made
applicable to the award by the Committee are met, provide for the payment to the
executive of a lump sum cash amount in the first quarter of the next following
calendar year. No more than one award may be granted to a key executive under
the plan with respect to any calendar year.
Any award granted under the plan to an executive generally will specify a
standard payment amount (the award's "Standard Award Level") if certain but not
all (or a certain level but not the highest level) of the performance goals
applicable to the award are met and will also specify payment amounts more or
less than the Standard Award Level if additional or fewer (or if a higher or
lower level) of the performance goals applicable to the award are met. In no
event may the amount of the award exceed 200% of the award's Standard Award
Level (or, if less, $3,000,000).
18
The performance goals to be set by the Committee with respect to any award
granted under the plan to a key executive may be based on, and only on, one or
more of the following criteria applicable to the Company and its subsidiaries:
earnings before interest, taxes, depreciation and amortization; earnings per
share; operating income; total shareholder returns; cash generation targets;
profit targets; revenue targets; profitability targets as measured by return
ratios; net income; return on sales; return on assets; return on equity; and
corporate performance indicators (which are indices based on the level of
certain services provided to customers).
The performance criteria that shall apply to any award granted under the
plan to a key executive shall be criteria that will be able to be objectively
determined by the Committee, shall be measured or determined on the basis of the
award's Award Year and shall be set by the Committee.
In addition, any such performance criteria may be measured or determined for
the Company, for any subsidiary of the Company, for the Company and all of the
Company's subsidiaries in the aggregate or for any group of corporations that
are included in the entire group of the Company and its subsidiaries. Any such
performance criteria may also be measured and determined in an absolute sense
and/or in comparison to the analogous performance criteria of other
publicly-traded companies (that are selected for such comparison purposes by the
Committee).
Notwithstanding the foregoing, the Committee may, in its sole and
unrestricted discretion, reduce the amount payable under any award granted under
the plan below the amount that would otherwise be payable under the award based
solely on the performance goals that are set by the Committee for the award
(although the Committee does not have discretion to increase the amount that
would otherwise be payable under any award granted under the plan based solely
on such performance goals). The Committee could, for instance, exercise its
discretion to reduce the amount otherwise payable under a plan award because it
determines that the performance goals applicable to the award were unduly
affected by extraordinary or nonrecurring events or because the key executive to
whom the award was granted failed to meet certain individual goals set for him
or her by the Committee or his or her managers.
In addition, and notwithstanding the foregoing, the amount that is otherwise
payable under an award granted under the plan to a key executive is generally
reduced on a pro rata basis to reflect any portion in the award's Award Year
(i) during which the executive is not a key executive of the Company or one of
its subsidiaries because he or she only became a key executive after the start
of such year or ceased to be a key executive prior to the end of such year for a
reason other than his or her retirement or death, (ii) during which the
executive receives disability benefits under a plan of the Company or a Company
subsidiary (if such benefits were received for more than three months in such
year) or (iii) during which the key executive is on a leave of absence approved
by the Company or a subsidiary of the Company (if such leave of absence lasts
for more than three months in such year).
Further, and also notwithstanding the foregoing, a key executive to whom an
award has been granted under the plan shall not in any event be entitled to
receive any amount by reason of the award unless he or she both: (i) either is
an employee of the Company or a subsidiary of the Company on the last day of the
award's Award Year or terminated his or her employment with the Company and its
subsidiaries during such year because of his or her disability, his or her
retirement or his or her death; and (ii) has had at least three months of active
service for the Company and its subsidiaries during the award's Award Year (not
including any time the key executive was absent from active service during such
Award Year by reason of any leave of absence or for any other reason, including
an absence on account of disability).
Notwithstanding any other provision of the plan to the contrary, the amount
to be received by a key executive by reason of any award that is granted to the
key executive under the plan with respect to any calendar year shall not in any
event exceed $3,000,000.
If a key executive is entitled to receive a payment under any award granted
to him or her under the plan, but he or she dies before such payment is made to
him or her, then such payment shall be made to the key executive's beneficiary
(as determined under the provisions of the plan).
19
5. CHANGE IN CONTROL.
In the event a Change in Control of the Company (as is defined in the
amended and restated Short Term Incentive Plan) occurs, then, in general terms,
the following actions apply to awards previously granted under the plan that
have not yet been paid:
(a) The amount payable under any award that was granted under the plan
with respect to the calendar year that immediately precedes the calendar
year in which the Change in Control occurs will be paid within five business
days after the date of the Change in Control (and, if the amount of such
award has not been determined by the Committee by the date of the Change in
Control, its amount will be deemed to be equal to the award's Standard Award
Level).
(b) A pro rata amount of any award granted under the plan with respect
to the calendar year in which the Change in Control occurs will be paid
within five business days after the date of the Change in Control. Such pro
rata amount is generally based on the present value of the award's Standard
Award Level (determined as of the date of payment) multiplied by a fraction
that has a numerator equal to the number of full and partial months from the
first day of the calendar year in which the Change in Control occurs to the
date of the Change in Control and a denominator equal to twelve.
Other than for minor or administrative changes, such Change in Control
provisions may not be amended as to any award granted to a key executive under
the plan at any time on or after the grant of such award if the amendment would
be materially adverse to the key executive, unless his or her consent to the
amendment is obtained.
6. AMENDMENT AND TERMINATION.
The amended and restated Short Term Incentive Plan may be further amended or
terminated by the Board, provided that no such action shall impair the rights of
a key executive with respect to a previously granted award without the key
executive's consent and provided that no amendment shall be made without
approval of the Company's shareholders if such amendment would (i) change the
class of persons eligible for awards under the plan or (ii) make any change in
the plan that is required to be approved by the Company's shareholders in order
to satisfy the requirements of Section 162(m) of the Code or any other
applicable law.
7. FEDERAL INCOME TAX CONSEQUENCES.
In general, any key executive who receives an amount that is paid by reason
of an award granted under the amended and restated Short Term Incentive Plan
must recognize for federal income tax consequences, at the time of the payment,
ordinary compensation income equal to such amount; and the Company will be
entitled to a deduction for the same amount.
OUR RECOMMENDATION
APPROVAL OF THE BROADWING INC. SHORT TERM INCENTIVE PLAN, AS AMENDED AND
RESTATED EFFECTIVE AS OF JANUARY 1, 2000, REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE COMMON SHARES AND PREFERRED SHARES, VOTING AS ONE
CLASS, PRESENT OR REPRESENTED AND ENTITLED TO VOTE. ABSTENTIONS WILL HAVE THE
SAME EFFECT AS VOTES AGAINST THE PROPOSAL. BROKER NON-VOTES WILL HAVE NO EFFECT
ON THE OUTCOME OF THE VOTE. THE BOARD RECOMMENDS A VOTE FOR ADOPTION OF THE
PROPOSAL.
EFFECT OF MANAGEMENT VOTE
Since the directors and officers of the Company own beneficially 9,436,001
voting shares, or 4.6% of the outstanding voting shares, their votes on the
proposal are not likely to have a material impact on whether this proposal is
adopted.
20
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 5 ON THE PROXY CARD)
Upon the Audit and Finance Committee's recommendation, the Board has
re-appointed the firm of PricewaterhouseCoopers LLP as independent accountants
to audit the financial statements of the Company for the year 2000.
PricewaterhouseCoopers LLP has audited the financial statements of the Company
for many years. One or more members of the firm of PricewaterhouseCoopers LLP
will attend the annual meeting, will have an opportunity to make a statement and
will be available to answer questions.
The Company needs shareholder approval of its appointment of
PricewaterhouseCoopers LLP. If the shareholders do not approve this appointment,
the Audit and Finance Committee will recommend and the Board will appoint
different independent accountants to audit the financial statements of the
Company for the year 2000.
OUR RECOMMENDATION
APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMMON SHARES AND PREFERRED
SHARES, VOTING AS ONE CLASS, PRESENT OR REPRESENTED AND ENTITLED TO VOTE.
ABSTENTIONS WILL HAVE THE SAME EFFECT AS VOTES AGAINST THE PROPOSAL. BROKER
NON-VOTES WILL HAVE NO EFFECT ON THE OUTCOME OF THE VOTE. THE BOARD RECOMMENDS A
VOTE FOR SUCH APPROVAL.
SHAREHOLDER PROPOSAL ON INCENTIVE COMPENSATION
(ITEM 6 ON THE PROXY CARD)
The following proposal was submitted for inclusion in this Proxy Statement
by Mr. Ronald Robinson, 631 Dundee Lane, Holmes Beach, Florida, 34217. As of the
date that the proposal originally was submitted, Mr. Robinson owned
approximately 7,079 Common Shares.
SHAREHOLDER SUPPORTING STATEMENT AND PROPOSAL
"Cincinnati Bell Inc. has changed from a dividend paying company to
a growth company. Since the shareholders should realize greater
increases in stock value in lieu of dividends, it only seems fair that
Cincinnati Bell Inc. Executives share in increased values of Cincinnati
Bell Stock. I therefore propose, to be voted on at the 2000 Cincinnati
Bell shareholders meeting, the following:
The total combined value of bonus and stock options granted
Cincinnati Bell Inc. Executives in any given year shall be a percent of
their annual salary (in effect on the last day of that year) equal to
the percent increase in the price of Cincinnati Bell Inc. stock on the
last day of that year over the price of Cincinnati Bell Inc. stock used
in computing the last increase. In the first year, the last year end
price that was lower shall be used.
Due to Cincinnati Bell Inc. notifying the Security (sic) and
Exchange Commission of the Companies (sic) intention to exclude this
shareholder proposal from the proxy statement and form of proxy for its
2000 annual meeting, the Security (sic) and Exchange Commission requires
the following revisions in order for this proposal to be submitted to
the shareholders:
This proposal is a recommendation to the Board of Directors rather
than an edict.
This proposal applies only to compensation arrangements made in the
future.
This proposal is directed at bonus and stock options granted only to
executive officers."
*****
21
BOARD OF DIRECTORS RECOMMENDATION AND STATEMENT
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THIS
PROPOSAL.
The Board believes that the Company's current executive compensation program
with its three components of base salary, annual incentive compensation and
long-term incentive compensation is appropriate for the Company. As described
later in the Compensation Committee Report on Executive Compensation, the
Company's executive compensation program is designed to more closely align the
executives' interests with shareholders' interests by placing a significant
portion of executive compensation at risk by tying it to the achievement of
specific short-term and long-term performance objectives, principally the
Company's earnings and the performance of its Common Shares, with a greater
emphasis on long-term incentives. The emphasis on long-term incentives is an
important component in assuring that the executive officers consider the
long-term best interests of the Company in managing its business rather than
managing for a "quick-hit" short-term gain.
If the proposal were to be adopted by the shareholders and if the Company
were to implement it, the long term incentive component of executive
compensation would be eliminated. The Company does not believe that such
elimination would be in the shareholders' best interests. Since the compensation
package that could be offered to existing and potential new executives would be
limited and would be considered inferior to compensation packages that other
companies are offering, the Company's ability to retain existing executives and
to attract top-flight executives will be severely hampered. As a result, the
Company's performance might suffer because of its inability to attract the best
executives available. In addition, the Company would most likely have to offer a
higher level of cash compensation to replace the eliminated performance-based
incentive compensation and, thus, incur higher expenses. Most importantly, with
the elimination of long-term incentive compensation, executive compensation
would no longer be linked to returns realized by shareholders.
In addition, linking executive incentive compensation totally to the
Company's stock price is not an accurate method of measuring the Company's or
the executive's performance. The trading price of the Common Shares can be
subject to wide fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new products,
applications or product enhancements by the Company or its competitors, changes
in financial estimates by securities analysts, the performance of or
announcements by the Company's competitors, general market conditions and other
events or factors. In addition, the capital markets have experienced substantial
volatility that is not necessarily related to the performance of all of the
affected companies. These broad market fluctuations could have a material
adverse effect on the value of the Common Shares. In effect, factors beyond the
control of any of the executives of the Company and, despite a sterling
performance by such executives, could cause the value of the Common Shares to
decrease on an annual basis and thereby deprive an executive of any incentive
compensation.
Accordingly, the Board agrees that the compensation of the Company's
executives should be correlated with the performance of the Company. The Board
believes that the compensation practices established by the Compensation
Committee properly align the interests of the Company's executives with those of
its shareholders by directly tying many components of an executive's
compensation to Company performance. Consequently, the Board does not believe
that any substantial benefit will result from an affirmative vote on this
proposal. For these reasons, the Board recommends that you vote AGAINST the
proposal.
EFFECT OF ADOPTION
Adoption of this proposal would not, in any event, change the compensation
practices regarding the Company's executives. It would merely constitute a
recommendation that the Board take the necessary steps to change the
compensation practices for the Company's executives. If this proposal is
adopted, and if the Board subsequently agrees with the recommendation,
implementation of the proposal could not take
22
effect until current employment contracts with Company executive officers have
ended. Further, implementation of the proposal would be modified or delayed
because of the terms and conditions of the Long Term Incentive Plan. A vote in
favor of this proposal, therefore, constitutes an advisory recommendation to the
Board.
RECOMMENDATION
APPROVAL OF THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE COMMON SHARES AND PREFERRED SHARES, VOTING AS ONE CLASS, PRESENT
OR REPRESENTED AND ENTITLED TO VOTE. ABSTENTIONS WILL HAVE THE SAME EFFECT AS
VOTES AGAINST THE PROPOSAL. BROKER NON-VOTES WILL HAVE NO EFFECT ON THE OUTCOME
OF THE VOTE. THE BOARD RECOMMENDS A VOTE AGAINST THE PROPOSAL.
EFFECT OF MANAGEMENT VOTE ON PROPOSAL
Because the directors and officers of the Company own beneficially 9,436,001
voting shares, or 4.6% of the outstanding voting shares, their votes are not
likely to have a material impact on whether this proposal is adopted.
THE FOLLOWING COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION AND
RELATED DISCLOSURE, INCLUDING THE PERFORMANCE GRAPH, SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The principles of the executive compensation program established by the
Compensation Committee are that:
- Compensation must be competitive with other companies to attract and
retain high-quality executives;
- A significant portion of executive compensation should be "at risk" and
tied to the achievement of specific short and long term performance
objectives, principally the Company's earnings and the performance of the
Common Shares, thereby linking executive compensation with the returns
realized by shareholders; and
- Emphasis should be given to the long term incentive component of each
executive's compensation package, rather than to base salary or annual
incentives.
The Compensation Committee has the responsibility to administer executive
compensation programs and policies and recommends to the Board of Directors
compensation for the Company's Chief Executive Officer ("CEO") and other
executive officers of the Company as well as the compensation for the Presidents
of the Company's principal operating divisions, Cincinnati Bell Telephone
Company ("CBT"), Cincinnati Bell Enterprises ("CBE") and Broadwing
Communications Inc. ("BRWC") (formerly, IXC Communications, Inc.).
The Company's executive compensation program consists of three elements:
base salary, annual incentive compensation and long term incentive compensation.
The Compensation Committee targets each executive's total direct
compensation (base salary, annual incentive compensation and long term incentive
compensation) to be competitive with the revenue adjusted median of the
marketplace, using information from general industry and telecommunication
surveys conducted by outside consultants.
BASE SALARY. Based on its review of the market data, the Compensation
Committee recommended base salary increases for the named executive officers,
excluding the Chief Executive Officer, Mr. Ellenberger, to ensure equity with
the market, reflect the assumption of increased responsibilities and,
23
where appropriate, reflect an analysis of each officer's individual performance.
The salaries of Messrs. Ellenberger, Mooney, Cassidy, Pontin and Taylor appear
in the "Summary Compensation Table" on page 26.
ANNUAL INCENTIVE. The Company's Short Term Incentive Plan, in which all of
the above-named executives participated, was one of the means by which the
Compensation Committee encouraged the Company's management to enhance
shareholder value. As in the case of base salary, short term award targets under
this plan for 1999 were benchmarked against market data. For
Messrs. Ellenberger, Mooney, Pontin and Taylor to receive a short term award,
the Company must have achieved certain levels of "earnings per share" ("EPS").
For 1999, 110% of the Company's EPS was achieved. The short term award for
Mr. Cassidy was based on various objectives set throughout the year as his
positions and responsibilities changed, which objectives were achieved at levels
of between 80% and greater than 100%. In addition, a portion of each executive's
short term award was based on individual performance.
LONG TERM INCENTIVES. The Company's executive compensation program
currently includes two long term elements that are used on a systematic basis,
stock options and performance unit awards, both of which are described below and
are intended to more closely align the interests of the Company's executives
with those of the Company's shareholders.
In the discretion of the Compensation Committee, stock options for the
purchase of Common Shares are awarded by the Company under the Company's Long
Term Incentive Plan.
The present value of the stock options awarded to certain executives has
generally been targeted by the Compensation Committee to represent approximately
two-thirds of the present value of the executive's total long term incentives
(with the present value of performance unit award targets constituting the
remaining one-third). The options granted during 1999 to the named executive
officers are shown in the "Grants of Stock Options" table on page 28.
In addition, consistent with a new program under which almost all employees
of the Company and its subsidiaries will be granted a stock option for the
purchase of Common Shares, each person who is an executive (or other salaried or
hourly employee) on the first day of any calendar month falling in the period
that begins with January of 1999 and ends with January of 2001 receives a
special stock option to purchase from 500 to 300 Common Shares (the specific
number of shares being dependent on when the executive first is an employee of
the Company).
The Compensation Committee has also granted stock options in cases of
certain special events. In particular, it granted stock options to certain
executives in January 1999 in order to provide extra incentive to such
executives to manage the Company after the Company's 1998 spin-off of Convergys
Corporation and in September 1999 to provide additional incentive for such
executives to manage the acquisition of IXC Communications successfully.
In the discretion of the Compensation Committee, executives also have the
opportunity to receive performance unit awards under the LTIP. Under the current
policies of the Compensation Committee, each such award generally is, if and
when paid, made in a cash payment that is equal to the value (determined at the
time the award is paid) of a certain number of Common Shares, with such number
of Common Shares generally being based on the number of Common Shares to which
such award is targeted at the time the award is made and on the extent to which
the Company's total shareholder return ("TSR"), which includes dividends and
share price appreciation, for a performance period of three years compares with
a comparison group mean TSR for the same period.
Specifically, under the Compensation Committee's current policies, a
performance unit award that is granted with respect to a performance period does
not to any extent become payable if the Company's TSR is negative for such
period or is less than 80% of the comparison group mean TSR for such performance
period but becomes payable based on from 50% to 200% of its targeted number of
Common Shares if the Company's TSR for such period is at least 80% of the
comparison group mean TSR for such period (with, for example, 100% applying if
the Company's TSR is 100% of the comparison group mean TSR and 200% applying if
the Company's TSR is 140% of the comparison group mean TSR).
24
In 1999, certain executives were awarded performance units in accordance
with the current policies of the Compensation Committee that are described
above, with the performance period applicable to each such award being the
three-year period that ends on December 31, 2001. The awards are shown in the
"Performance Unit Awards Under the Long Term Incentive Plan--Last Fiscal Year"
table on page 30.
RESTRICTED STOCK. The Compensation Committee has, in addition to the stock
options and performance unit awards, also granted under the Long Term Incentive
Plan restricted stock to executives in cases of certain special events. In
particular, it granted restricted stock to certain executives in early 1999 in
order to provide extra incentives to such executives to manage the Company after
the Company's 1998 spin-off of Convergys Corporation. The grant of restricted
stock has not been used on a systematic basis under the Company's executive
compensation program, however.
Each grant of restricted stock generally provides an executive with a
certain number of Common Shares that are subject to forfeiture if the executive
fails to continue to be employed by the Company or its subsidiaries for a
certain number of years (unless such termination is by reason of the executive's
death or disability or after a change in control of the Company has occurred).
The restrictions on any restricted stock awarded can be waived by the
Compensation Committee.
The restricted stock grants for 1999 are shown in the "Summary Compensation
Table" on page 26.
STOCK OWNERSHIP GUIDELINES. To further align the interests of the
executives and the Company's shareholders, the Compensation Committee has
established Common Share ownership guidelines for its executive officers. The
Chief Executive Officer is expected to have Common Shares having a present value
of approximately three times his or her base salary and other officers are
expected to have Common Shares having a present value of approximately one and
one-half times their base salary. Executives are given a reasonable amount of
time to satisfy these guidelines.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Ellenberger served in the
capacity of President and Chief Executive Officer since February 28, 1999. Prior
to that date, he was President and CEO Elect. As President and Chief Executive
Officer, in accordance with the policies discussed, his base salary increased
from $365,000 to $550,000 in 1999, and he received a short term award of
$576,000, stock option grants totaling 2,028,000 Common Shares, a performance
unit award target of 17,350 Common Shares for a three-year performance period
that is scheduled to end December 31, 2001 and a grant of 300,000 restricted
shares. These actions were primarily related to the assumption of the CEO
responsibilities early in 1999, additional responsibilities assumed with the
acquisition of Broadwing Communications, Inc. (formerly IXC
Communications, Inc.) and Mr. Ellenberger's individual performance throughout
the year.
COMPENSATION LIMITATION. Section 162(m) of the Internal Revenue Code (the
"Code") generally limits the available deduction to the Company for compensation
paid to any of the Company's named executives to $1,000,000, except for
performance-based compensation that meets certain technical requirements. The
Compensation Committee desires to maximize the amount of compensation expense
that is deductible by the Company when it is appropriate and in the best
interests of the Company and its shareholders. To this objective, the Company is
making proposals to the shareholders at the 2000 Annual Meeting regarding
amendments to the Company's Short Term Incentive Plan and the Long Term
Incentive Plan in order to provide that certain portions of future awards made
under such plans can avoid the deduction limits of Section 162(m) of the Code.
However, compensation decisions will continue to be based primarily on the
extent to which performance goals have been achieved and on whether awards under
such plans provide proper incentives to the Company's executives to further the
goals of the Company, and awards that are made under such plans may not in every
case meet all of the applicable conditions necessary to be exempt from the
limits of Section 162(m) of the Code.
Compensation Committee:
David B. Sharrock, Chairman
J. Taylor Crandall
Phillip R. Cox
Daniel J. Meyer
25
EXECUTIVE COMPENSATION
I. SUMMARY COMPENSATION TABLE
The following table shows the compensation of the Chief Executive Officer
and the other four most highly compensated executive officers of the Company or
any of its subsidiaries for services to the Company and its subsidiaries in all
capacities. Mr. Ellenberger served as a director of the Company but received no
separate compensation in that capacity.
LONG-TERM COMPENSATION
-----------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------------------------- ----------
----------------------------------- RESTRICTED SECURITIES LONG-TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE
SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- -------------------------------- -------- -------- -------- ------------- ------------- ------------ ----------
Richard G. Ellenberger 1999 $550,000 $576,000 (b) $5,025,000(c) 2,028,000 $ 0
President and Chief Executive 1998 $345,000 $293,490 (b) $ 436,407(d) 54,400(e) $167,567
Officer 1997 $180,603 $135,452 $95,574(f) $ 329,219(g) 54,000(h) $ 0
Kevin W. Mooney 1999 $266,640 $240,000 (b) $ 837,500(i) 815,700 $ 0
Executive Vice President and 1998 $201,530 $139,146 (b) $ 197,325(j) 20,000(e) $ 0
Chief
Financial Officer 1997 $138,852 $ 70,000 (b) $ 0 20,000(h) $ 0
John F. Cassidy 1999 $205,570 $297,550 (b) $ 670,000(i) 277,300 $ 0
President--Cincinnati Bell 1998 $169,396 $282,700 (b) $ 0 12,000(e) $ 0
Enterprises Subsidiaries 1997 $142,590 $ 66,624 (b) $ 0 12,000(h) $ 0
Richard S. Pontin 1999 $190,320 $208,000 (b) $1,190,375(k) 699,900 $ 0
President and Chief Operating 1998 -- -- -- -- -- --
Officer--Broadwing 1997 -- -- -- -- -- --
Communications Services Inc.
Thomas E. Taylor 1999 $205,000 $119,000 (b) $ 837,500(i) 118,750 $ 0
Secretary and General Counsel 1998 $197,144 $131,048 (b) $ 0 20,000(e) $ 0
1997 $185,000 $ 83,280 (b) $ 0 20,000(h) $ 0
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($) (A)
- -------------------------------- -------------
Richard G. Ellenberger $ 0
President and Chief Executive $ 0
Officer $ 0
Kevin W. Mooney $6,400
Executive Vice President and $6,400
Chief
Financial Officer $6,400
John F. Cassidy $4,000
President--Cincinnati Bell $6,400
Enterprises Subsidiaries $4,106
Richard S. Pontin $1,820
President and Chief Operating --
Officer--Broadwing --
Communications Services Inc.
Thomas E. Taylor $8,174
Secretary and General Counsel $6,400
$3,364
(a) Represents Company contributions to defined contribution savings plans and
to the Executive Deferred Compensation Plan described on page 37.
(b) Does not include the value of perquisites and other personal benefits
because the total amount of such compensation, if any, does not exceed the
lesser of $50,000 or 10% of the total amount of the annual salary and bonus
for the individual for the year.
(c) The Company awarded Mr. Ellenberger 300,000 Common Shares, 25% vesting on
December 31, 1999 and December 31 of each year thereafter. The value of
these shares as of December 31, 1999 was $11,118,750. Dividends were paid on
all restricted shares through August 1999 when the Company ceased paying
dividends.
(d) Value of restricted stock holdings as of December 31, 1999 was $772,675 with
respect to 25,000 restricted Convergys common shares granted in connection
with the Convergys Spin-Off to all holders of Company restricted share
awards (the "Spin-Off Restricted Shares").
(e) Includes: for Mr. Ellenberger, options to purchase 27,200 Common Shares and
options to purchase 27,200 Convergys common shares granted in connection
with the Convergys Spin-Off to all holders of Company options (the "Spin-Off
Options"); for Mr. Mooney, options to purchase 10,000 Common Shares and
10,000 Spin-Off Options; for Mr. Cassidy, options to purchase 6,000 Common
Shares and 6,000 Spin-Off Options; and for Mr. Taylor, options to purchase
10,000 Common Shares and 10,000 Spin-Off Options.
(f) Includes $74,677 of relocation expenses. Other amounts were less than 25% of
the total perquisites and other personal benefits reported for
Mr. Ellenberger.
(g) The Company awarded Mr. Ellenberger 25,000 Common Shares, vesting 25% a year
from the date of grant. Dividends were paid on all restricted shares through
August 1999 when the Company ceased paying dividends. The value of these
shares as of December 31, 1999 was $926,563.
26
(h) Includes: for Mr. Ellenberger, options to purchase 27,000 Common Shares and
27,000 Spin-Off Options; for Mr. Mooney, options to purchase 10,000 Common
Shares and 10,000 Spin-Off Options; for Mr. Cassidy, 6,000 options to
purchase Common Shares and 6,000 Spin-Off Options; and for Mr. Taylor,
10,000 options to purchase Common Shares and 10,000 Spin-Off Options.
(i) The Company awarded a restricted stock grant to Messrs. Mooney and Taylor
for 50,000 Common Shares each and to Mr. Cassidy for 40,000 Common Shares,
100% vesting on December 31, 2002. The value as of December 31, 1999 of the
50,000 share grant was $1,853,125 and the 40,000 share grant was $1,482,500.
Dividends were paid on all restricted shares through August 1999 when the
Company ceased paying dividends.
(j) Includes for Mr. Mooney 15,000 Common Shares and 15,000 Spin-Off Restricted
Shares. The value of these shares as of December 31, 1999 was $555,938 and
$463,605, respectively. Dividends were paid on all restricted shares through
August 1999 when the Company ceased paying dividends.
(k) The Company awarded Mr. Pontin 53,000 Common Shares, 25% vesting on the
first anniversary of the grant and each anniversary thereafter. The value of
these shares as of December 31, 1999 was $1,982,844. Dividends were paid on
all restricted shares through August 1999 when the Company ceased paying
dividends.
27
II. GRANTS OF STOCK OPTIONS
The following table shows all individual grants by the Company of stock
options to purchase Common Shares granted to the named executive officers of the
Company during the fiscal year ended December 31, 1999.
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(B)
GRANTED IN PRICE EXPIRATION ------------------------------
NAME (#)(A) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ----------- -------- ---------- ------------ ------------
Richard G. Ellenberger 127,500(c) 1.146% $ 16.750 1/4/09 $ 1,341,173 $ 3,402,051
300,000(d) 2.696% $ 16.750 1/4/09 $ 3,155,700 $ 8,004,825
500(e) 0.004% $ 16.750 1/4/09 $ 5,260 $ 13,341
1,600,000(f) 14.380% $ 16.781 9/17/09 $16,861,850 $42,772,177
Kevin W. Mooney 35,200(c) 0.316% $ 16.750 1/4/09 $ 370,269 $ 939,233
30,000(d) 0.270% $ 16.750 1/4/09 $ 315,570 $ 800,483
500(e) 0.004% $ 16.750 1/4/09 $ 5,260 $ 13,341
750,000(f) 6.740% $ 16.781 9/17/09 $ 7,903,992 $20,049,458
John F. Cassidy 26,800(c) 0.241% $ 16.750 1/4/09 $ 281,909 $ 715,098
30,000(d) 0.270% $ 16.750 1/4/09 $ 315,570 $ 800,483
500(e) 0.004% $ 16.750 1/4/09 $ 5,260 $ 13,341
20,000(g) 0.180% $ 18.688 8/20/09 $ 234,715 $ 595,384
200,000(f) 1.797% $ 16.781 9/17/09 $ 2,107,731 $ 5,346,522
Richard S. Pontin 99,500(h) 0.894% $ 22.250 4/9/09 $ 1,390,314 $ 3,526,703
400(e) 0.004% $ 22.813 1/4/09 $ 5,539 $ 14,053
600,000(f) 5.392% $ 16.781 9/17/09 $ 6,323,194 $16,039,567
Thomas E. Taylor 38,250(c) 0.344% $ 16.750 1/4/09 $ 402,352 $ 1,020,615
30,000(d) 0.270% $ 16.750 1/4/09 $ 315,570 $ 800,483
500(e) 0.004% $ 16.750 1/4/09 $ 5,260 $ 13,341
50,000(f) 0.449% $ 16.813 9/17/09 $ 527,928 $ 1,339,155
(a) The material terms of the options granted are: grant type, non-incentive;
exercise price, fair market value on grant date; generally exercisable 25%
after one year, an additional 25% after the second year and the remaining
50% after the third year; term of grant, 10 years; except in case of
retirement, disability, death or change in control of the Company, any
unexercisable options are generally cancelled upon termination of
employment.
(b) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that the Common Shares
will appreciate in value from the date of the grant to the end of the option
term (ten years from the date of the grant (except in Mr. Pontin's case, the
grant for 400 shares will vest in less than ten years) at annualized rates
of 5% and 10% (total appreciation of 62.8% and 159.3% except for the 400
shares for Mr. Pontin which is 60.7% and 154.0%) resulting in values of
approximately $27.27 and $43.43 for all options expiring on January 4, 2009;
$36.22 and $57.69 for all options expiring on April 9, 2009; $30.42 and
$48.46 for all options expiring on August 20, 2009 and $27.37 and $43.60 for
all options expiring on September 17, 2009. They are not intended, however,
to forecast possible future appreciation, if any, in the price of Common
Shares. The total of all stock options granted to employees, including
executive officers, during fiscal 1999 was approximately 5.3% of the total
Common Shares outstanding as of December 31, 1999. As an alternative to the
assumed potential realizable values stated in the above table, the
Securities and Exchange Commission rules would permit stating the present
value of such options at date of grant. Methods of computing present values
suggested by different authorities can produce
28
significantly different results. Moreover, since stock options granted by
the Company are not transferable to persons other than family members, there
are no objective criteria by which any computation of present value can be
verified. Consequently, the Company's management does not believe there is a
reliable method of computing the present value of such stock options for
proxy disclosure purposes.
(c) Options to purchase Common Shares granted in January 1999 as the annual
grant.
(d) Options to purchase Common Shares granted in January 1999 to provide
additional incentive to manage the Company after the Convergys Spin-Off.
(e) Options to purchase Common Shares granted in January 1999 under a new
program whereby almost all employees of the Company and its subsidiaries
were granted options for the purchase of Common Shares. Options to purchase
500 common shares were granted to eligible employees who were employed on
the first business day in January 1999 and options to purchase 400 common
shares were granted to employees hired in 1999. In the case of Mr. Pontin,
the grant was made in May 1999. 100% of the options granted become
exercisable on January 4, 2002 and have an expiration date of January 4,
2009.
(f) Options to purchase Common Shares granted in September 1999 to provide
additional incentive to make the acquisition of IXC Communications Inc. a
success, 25% of the options become exercisable after three years, an
additional 25% after the fourth year and the remaining 50% after the fifth
year. Exercisability may be accelerated if specific earnings before
interest, taxes, depreciation and amortization results are achieved.
(g) Options to purchase Common Shares granted in August 1999 in recognition of
Mr. Cassidy's promotion to President of Cincinnati Bell Enterprises.
(h) Options to purchase Common Shares granted in April 1999 in conjunction with
Mr. Pontin being hired by the Company.
29
III. AGGREGATE OPTION EXERCISES
The following table shows aggregate option exercises for Common Shares in
the last fiscal year and fiscal year-end values:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END (#) FY-END ($) (A)
SHARES ACQUIRED VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- -------------------------- --------------- ------------ ---------------------- -----------------------
Richard G. Ellenberger 0 $0 (E) 95,300 (E)$ 2,008,571
(U) 1,986,900 (U)$40,430,508
Kevin W. Mooney 0 $0 (E) 16,500 (E) $ 448,309
(U) 828,200 (U)$16,845,183
John F. Cassidy 0 $0 (E) 12,500 (E) $ 314,086
(U) 284,800 (U)$ 4,767,475
Richard S. Pontin 0 $0 (E) 0 (E) $ 0
(U) 699,900 (U)$ 1,479,544
Thomas E. Taylor 0 $0 (E) 27,500 (E) $ 709,646
(U) 131,250 (U) $2,710,258
(a) On December 31, 1999, the value of a Common Share on the New York Stock
Exchange (based on the average of the high and low) was $37.06 per share.
IV. PERFORMANCE UNIT AWARDS UNDER THE LONG TERM INCENTIVE PLAN --LAST FISCAL
YEAR
The following table provides information concerning performance unit awards
granted to the named executive officers during 1999 under the Long Term
Incentive Plan. Only Messrs. Ellenberger and Mooney received such awards. Each
performance unit is equivalent to a percent, not more than 200%, of the value of
a Common Share, based upon the extent to which the Company's total shareholder
return ("TSR"), which includes dividends and share price appreciation, for a
three-year performance period, compares with a comparison group mean total
shareholder return for the same period. No performance unit awards will be
awarded at the end of the performance period if the Company's TSR is negative.
If the Company's TSR is 80% of the comparison group mean TSR, 50% of the value
of the targeted number of performance units will be awarded. If the Company's
TSR is greater than 80% of the comparison group mean TSR, up to 200% of the
targeted number of performance units will be awarded, with, for example, 100%
being awarded if the Company's TSR is 100% of the comparison group mean TSR and
200% being awarded if the Company's TSR is 140% of the comparison group mean
TSR.
ESTIMATED FUTURE PAYOUTS UNDER NON-
NUMBER OF PERFORMANCE OR OTHER STOCK PRICE-BASED PLANS
SHARES, UNITS OR PERIOD UNTIL MATURATION -----------------------
NAME OTHER RIGHTS (#) OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
---- ---------------- ----------------------- ------------- ---------- -----------
Richard G. Ellenberger 17,350 1999-2001 8,875 17,350 34,700
Kevin W. Mooney 4,800 1999-2001 2,400 4,800 9,600
V. DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
All of the named executive officers of the Company participated during 1999
in both the Cincinnati Bell Management Pension Plan (the "Management Pension
Plan"), which is a tax-qualified defined benefit pension plan, and a
non-tax-qualified pension plan known as the Cincinnati Bell Inc. Pension Program
(the "Pension Program"); except that Messrs. Cassidy and Pontin did not
participate during 1999 in the Pension Program.
30
Under the Pension Program, each current active participant's pension at
retirement, if paid in the form of a single life annuity, generally will be an
amount equal to the difference between 50% of the participant's average monthly
compensation (for the 36-month period that occurs during the 60-month period
preceding retirement that produces the highest compensation amount) and the sum
of the participant's benefits payable under the Management Pension Plan
(including for this purpose amounts which are intended to supplement or be in
lieu of benefits under the Management Pension Plan) and Social Security
benefits. Also, there is a reduction in such pension amount of 2.5% for each
year by which the sum of the participant's years of age and years of service at
retirement total less than 75, and no benefits are payable if the participant
terminates employment (other than by reason of his or her death) prior to
attaining age 55 and completing at least 10 years of service credited for the
purposes of the plan.
The basic benefit formula under the Management Pension Plan is a cash
balance formula. Under this formula, each participant has an account to which
pension credits are allocated at the end of each year based upon the
participant's attained age and plan compensation for the year (with such plan
compensation being subject to a maximum legal annual compensation limit, which
limit is $160,000 for 1999 and $170,000 for 2000). To the extent that a
participant's plan compensation exceeds the Social Security old age retirement
taxable wage base, additional pension credits are given for such excess
compensation. The following chart shows the annual pension credits which are
given at the ages indicated:
ATTAINED AGE PENSION CREDITS
- ------------------------- ---------------------------------------------------
Less than 30 years 2.50% of total plan compensation plus 2.50% of
excess compensation
30 but less than 35 years 2.75% of total plan compensation plus 2.75% of
excess compensation
35 but less than 40 years 3.25% of total plan compensation plus 3.25% of
excess compensation
40 but less than 45 years 4.00% of total plan compensation plus 4.00% of
excess compensation
45 but less than 50 years 5.25% of total plan compensation plus 5.25% of
excess compensation
50 but less than 55 years 6.50% of total plan compensation plus 6.50% of
excess compensation
55 or more years 8.00% of total plan compensation plus 8.00% of
excess compensation
A participant's account under the Management Pension Plan is also generally
credited with assumed interest for each calendar year at a certain interest
rate. Such interest rate is 7.75% per annum for 1999 and 2000 with respect to a
participant while he or she is still employed by the Company or a subsidiary of
it and 3 1/2% (or 4% if a participant elects out of a preretirement death
benefit) for a participant while he or she is not so employed. (In the case of a
participant who was a participant in the Management Pension Plan on
December 31, 1993 or who has benefits transferred from other plans to the
Management Pension Plan, the participant's account also was credited with
pension credits equivalent to the participant's accrued benefit on that date or
when such benefits are transferred, as the case may be.)
After retirement or other termination of employment, a participant under the
Management Pension Plan is entitled to elect to receive a benefit under the plan
in the form of a lump sum payment or as an annuity, generally based on the
balance credited to the participant's cash balance account under the plan when
the benefit begins to be paid (but also subject to certain transition or special
benefit formula rules in certain situations).
As participants under the Pension Program, if Messrs. Ellenberger, Mooney
and Taylor continue in employment and retire at age 65, their estimated single
life annuity annual pension amounts under both the Management Pension Plan and
the Pension Program combined, prior to deduction for Social Security benefits,
would be: $563,000 for Mr. Ellenberger, $253,000 for Mr. Mooney and $162,000 for
Mr. Taylor.
31
These annual pension amounts would be reduced: in the case of Mr. Ellenberger
(age 47 and two years of service) if he retires prior to age 60; in the case of
Mr. Mooney (age 41 and 9 years of service) if he retires prior to age 55; and in
the case of Mr. Taylor (age 53 and three years of service) if he retires prior
to age 63.
VI. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Effective January 1, 1999, the Company entered into an Employment Agreement
with Mr. Ellenberger which provides for the employment and retention of
Mr. Ellenberger for a four-year term commencing on January 1, 1999, subject to
automatic one year extensions unless terminated prior to the beginning of the
final year. The Employment Agreement provides for a minimum base salary of
$550,000 per year; a minimum bonus target of $360,000 per year; a grant of
options to purchase 300,000 Common Shares, which options will become exercisable
as to 75,000 Common Shares on January 1 of each year commencing January 1, 2000
(this grant was amended to provide that it became exercisable as to the first
75,000 Common Shares on December 31, 1999 rather than January 1, 2000); a
restricted stock award of 300,000 Common Shares which will vest on December 31,
2002 (this grant was amended to provide that one-fourth of its shares vest on
December 31 of each of 1999, 2000, 2001 and 2002); and annual grants of long
term incentives with a present value of not less than $750,000. The Employment
Agreement provides that, if Mr. Ellenberger's employment terminates within two
years following a change in control of the Company, Mr. Ellenberger will receive
a lump sum payment equal to three times his annual base salary and bonus target
on the date of termination, plus certain continued medical, dental, vision and
life insurance coverages as well as retiree medical benefits. In the event that
the Company terminates Mr. Ellenberger's employment (other than for cause or
disability or within two years of a change in control of the Company),
Mr. Ellenberger will receive a lump sum payment equal to the greater of (a) two
times his base salary rate and bonus target or (b) the base salary rate and
bonus target for the remainder of the term of the Employment Agreement, plus the
medical benefits and retiree medical benefits described above. In addition, to
the extent that Mr. Ellenberger is deemed to have received an excess parachute
payment by reason of a change in control, the Company shall pay Mr. Ellenberger
an additional sum sufficient to pay (i) any taxes imposed under Section 4999 of
the Code plus (ii) any federal, state and local taxes applicable to any taxes
imposed under Section 4999 of the Code.
Effective January 1, 1999 the Company entered into an Employment Agreement
with Mr. Mooney containing substantially similar terms to those contained in
Mr. Ellenberger's Employment Agreement, except that it provides for: a minimum
base salary of $230,000 per year; a minimum bonus target of $105,000 per year; a
grant of options to purchase 30,000 Common Shares for 1999 and an amount to be
determined each year for subsequent years; a restricted stock award of 50,000
Common Shares which will vest on December 31, 2002; and annual grants of long
term incentives with a present value of not less than $130,000.
Effective January 1, 1999, the Company entered into an Employment Agreement
with Mr. Cassidy containing substantially similar terms to those contained in
Mr. Ellenberger's Employment Agreement, except that it provides for: a minimum
base salary of $190,000; a minimum bonus target of $70,000; a grant of options
to purchase 30,000 Common Shares for 1999 and an amount to be determined each
year for subsequent years; a restricted stock award of 40,000 Common Shares
which will vest on December 31, 2002; and a supplemental non-qualified pension
in accordance with the following. If Mr. Cassidy's employment terminates after
April 8, 2001 and prior to April 7, 2006, his non-qualified pension will be
equal to that portion of his accrued pension under the Cincinnati Bell
Management Pension Plan which is attributable to his first five years of
service. If his employment terminates on or after April 8, 2006, his
non-qualified pension shall equal that portion of his accrued pension under the
Cincinnati Bell Management Pension Plan which is attributable to his first ten
years of service. Mr. Cassidy's pension shall be paid to him (or his estate if
his employment terminates by reason of death) within ninety days after the
termination of his employment. In addition, if Mr. Cassidy's employment
terminates within two years after a change of control of the Company, his lump
sum payment will be equal to two times his annual base salary and bonus target
on the date of termination plus certain continued medical, dental, vision and
life insurance coverages as well as retiree medical benefits.
32
Effective April 9, 1999, the Company entered into an Employment Agreement
with Mr. Pontin which provides for the employment and retention of Mr. Pontin
for a two year term commencing April 9, 1999, subject to automatic one year
extensions unless terminated prior to the beginning of each subsequent
anniversary of April 9. The other terms and provisions of the Employment
Agreement are substantially similar to those contained in Mr. Ellenberger's
Employment Agreement, except that Mr. Pontin's Employment Agreement provides
for: a minimum base salary of $260,000 per year; a minimum bonus target of
$130,000 per year; a grant of options to purchase 99,500 Common Shares, which
options become exercisable as to 24,875 shares on each of April 9, 2000 and
April 9, 2001 and 49,750 shares on April 9, 2002; a restricted stock award of
53,500 shares which vest as to one-fourth of those shares on April 9 of each of
2000, 2001, 2002 and 2003; and if Mr. Pontin's employment terminates within two
years after a change in control, his lump sum payment will be equal to two times
his annual base salary and bonus target plus continued medical, dental, vision
and life insurance coverages as well as retiree medical benefits.
Effective January 1, 1999 the Company entered into an Employment Agreement
with Mr. Taylor containing substantially similar terms to those contained in
Mr. Ellenberger's Employment Agreement, except that it provides for: a minimum
base salary of $205,000 per year; a minimum bonus target of $85,000 per year; a
grant of options to purchase 30,000 Common Shares for 1999 and an amount to be
determined each year for subsequent years; a restricted stock award of 50,000
Common Shares which will vest on December 31, 2002; and annual grants of long
term incentives with a present value of not less than $105,000.
VII. EXECUTIVE DEFERRED COMPENSATION PLAN
The Executive Deferred Compensation Plan permits, for any calendar year,
each employee whose base pay and targeted bonus for the immediately preceding
calendar year was at least $150,000 (a "key employee") to defer receipt of up to
75% of his or her base salary, up to 100% of his or her cash bonuses (including
annual incentive awards and cash awards under the Long Term Incentive Plan) and
up to 100% of any Common Share awards (not including awards of stock options or
restricted stock) provided him or her under the Long Term Incentive Plan. In
addition, any key employee who has received a restricted stock award under the
Long Term Incentive Plan may generally elect to surrender any of the restricted
shares of such award as long as such surrender is at least six months prior to
the date on which the restrictions applicable to such shares would otherwise
have lapsed.
For all key employees who participate in the Executive Deferred Compensation
Plan, there is also a Company "match" on the amount of base salary and cash
bonuses deferred under the plan for any calendar year. In general, to the extent
a participating key employee's base salary and cash bonuses for the applicable
year do not exceed a certain annual compensation limit prescribed by the Code
for tax-qualified plans (which limit is $160,000 for 1999 and $170,000 for
2000), the match is 4% of the base salary and cash bonuses deferred by the
employee under the plan. To the extent a participating key employee's base
salary and cash bonuses for the applicable year exceed the appropriate annual
compensation limit, the match is generally equal to the lesser of 66 2/3% of the
base salary and cash bonuses deferred by the key employee under the plan or 4%
of the key employee's base salary and cash bonuses for the applicable year that
are in excess of such annual compensation limit.
Amounts deferred or surrendered by any participating key employee under the
Executive Deferred Compensation Plan and any related Company "match" are
credited to the account of the participant under the plan and are assumed to be
invested in various mutual funds or other investments (including Common Shares)
as designated by the participant; except that any restricted stock that is
surrendered under the plan is generally assumed to be invested in Common Shares
until at least six months after the date on which the restrictions applicable to
such shares would otherwise have lapsed and that any Common Share awards that
are deferred under the plan are assumed to be invested in Common Shares.
The accounts under the Executive Deferred Compensation Plan are not funded,
and benefits are paid from the general assets of the Company and its
subsidiaries.
Upon the termination of employment of any participant under the Executive
Deferred Compensation Plan, the amounts then credited to the participant's
account are generally distributed in two to ten annual
33
installments (in cash and/or Common Shares); except that any amounts credited to
his or her account under the plan that are attributable to his or her surrender
of restricted stock (not including amounts that were credited to such account as
assumed cash dividends on such stock) are forfeited if the restricted stock
would have been forfeited at the time of the participant's termination of
employment had such stock not been surrendered under the plan. In addition, as a
special rule, in the event of a change in control of the Company, all of the
amounts then credited under the plan to a participant's account under the plan
are generally paid in a lump sum on the day after the change in control.
The 1999 "match" for Messrs. Pontin and Taylor under the Executive Deferred
Compensation Plan is reflected in the Summary Compensation Table under the "All
Other Compensation" column. Messrs. Ellenberger, Mooney and Cassidy did not
participate in the Executive Deferred Compensation Plan during 1999.
VIII. EFFECT OF CHANGE IN CONTROL ON CERTAIN EXECUTIVE COMPENSATION PLANS
Under the Long Term Incentive Plan, in the event of a change in control, all
outstanding stock options will become immediately exercisable, all restrictions
applicable to restricted stock awards will lapse and a pro rata portion of all
accrued incentive awards will be paid in cash. Under the Executive Deferred
Compensation Plan, the present value of all deferred amounts will be paid in
cash in the event of a change in control. The present values of all accrued
unfunded benefits under the Management Pension Plan and the Pension Program will
be funded within five days after a change in control.
34
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change of the
cumulative total shareholder return on the Company's Common Shares with the
cumulative total return, assuming reinvestment of dividends, of (i) the S&P
500-Registered Trademark- Stock Index, (ii) the Telephone Peer Group (the "Old
Peer Group") and (iii) the Network/Telephone Peer Group (the "New Peer Group").
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on
December 31, 1994
with dividends reinvested
Broadwing Inc. S&P 500-Registered Trademark- Network/Telephone Peer Group
Dec-94 $100 $100 $100
Dec-95 $211 $138 $151
Dec-96 $378 $169 $154
Dec-97 $386 $226 $216
Dec-98 $477 $290 $328
Dec-99 $1076 $351 $390
SOURCE: GEORGESON SHAREHOLDER COMMUNICATIONS INC.
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on
December 31, 1994
with dividends reinvested
Telephone Peer Group
Dec-94 $100
Dec-95 $151
Dec-96 $154
Dec-97 $214
Dec-98 $319
Dec-99 $353
SOURCE: GEORGESON SHAREHOLDER COMMUNICATIONS INC.
The Old Peer Group consists of ALLTEL Corp., Ameritech Corp. (through 3Q99),
Bell Atlantic Corp., BellSouth Corp., Frontier Corp., GTE Corp., NYNEX Corp.
(through 2Q97), Pacific Telesys Group (through 1Q97), SBC Communications Inc.,
Southern New England Telecommunications Corp. (through 3Q98), Sprint Corp. and U
S West Inc.--Communications.
The New Peer Group consists of the Old Peer Group with the addition of
Global Crossing Ltd. (since 4Q98), Level 3 Communications, Inc., Qwest
Communications (since 3Q97) and Williams Communications Group. The additional
companies are all constructing and operating material fiber networks designed
for data and Internet traffic. With the Company's transformation from a local
exchange company into a national carrier of data and Internet traffic, the New
Peer Group should provide a more meaningful comparison between the Company's
performance and that of its peers.
OTHER MATTERS
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of
35
ownership and changes in ownership with the Securities and Exchange Commission
and the New York and Cincinnati Stock Exchanges. Officers, directors and greater
than 10% shareholders are required by regulations of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it, the
Company believes that, during the period commencing January 1, 1999 and ending
December 31, 1999, all such persons complied on a timely basis with the filing
requirements of Section 16(a), with the exception of Mr. Pontin, who reported
one transaction on his Form 5 for fiscal 1999 which should have been reported
earlier on a Form 4, and Messrs. Kiggen and Cox, who reported one transaction
each on their Form 4 filed in March 2000 which should have been reported earlier
on their Form 5 for fiscal 1999.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Shareholder proposals intended for inclusion in next year's Proxy Statement
should be sent to Thomas E. Taylor, Secretary, Broadwing Inc., 201 East Fourth
Street, P.O. Box 2301, Cincinnati, Ohio 45201, and must be received by
November 24, 2000. Any such proposal must comply with Rule 14a-8 promulgated by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended. Any shareholder who intends to propose any other matter to
be acted upon at the 2001 Annual Meeting of Shareholders must inform the Company
no later than February 7, 2001. If notice is not provided by that date, the
persons named in the Company's proxy for the 2001 Annual Meeting will be allowed
to exercise their discretionary authority to vote upon any such proposal without
the matter having been discussed in the proxy statement for the 2001 Annual
Meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
At the time this Proxy Statement was released for printing on March 9, 2000,
the Company knew of no other matters which might be presented for action at the
meeting. If any other matters properly come before the meeting, it is intended
that the Common Shares represented by proxies will be voted with respect thereto
in accordance with the judgment of the persons voting them.
The Company will pay the costs of soliciting proxies. We expect to solicit
proxies mainly by mail. Some directors, officers and regular employees of the
Company may also solicit proxies in person or by telephone, make additional
requests for the return of proxies and may receive proxies on behalf of the
Company. We will reimburse brokers, nominees, fiduciaries and other custodians
for their reasonable expenses incurred to forward soliciting material to the
beneficial owners of Common Shares. The Company also has hired Georgeson
Shareholders Communications to help it solicit proxies. The Company will pay
Georgeson Shareholders Communications an estimated fee of $10,000 plus
reimbursement of out-of-pocket expenses for its services.
36
FINANCIAL STATEMENTS AVAILABLE
The 1999 Joint Annual Report to shareholders and Form 10-K of the Company
includes the financial statements for the Company and its subsidiaries. If you
would like a copy of the Company's 1999 Annual Report on Form 10-K as filed with
the Securities and Exchange Commission, please write to Thomas E. Taylor,
Secretary, Broadwing Inc., 201 East Fourth Street, P.O. Box 2301, Cincinnati,
Ohio 45201, and the Company will send you one free of charge.
By Order of the Board of Directors
Thomas E. Taylor
Secretary
March 17, 2000
37
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF CINCINNATI BELL INC.
MISSION
The Audit Committee shall act on behalf of the Board of Directors to oversee
the Company's financial reporting process; to evaluate the adequacy of the
Company's internal controls; to review the Company's compliance with federal,
state and local laws and regulations; and to monitor the legal and ethical
conduct of Company management and employees.
The Committee shall provide an avenue for the flow of information between
management, the internal and external auditors, and the Board of Directors. In
fulfilling its responsibilities, the Committee shall protect the quality of the
Company's financial reporting and the interests of the shareholders.
COMPOSITION
The Audit Committee shall consist of three or more independent members of
the Board of Directors who are appointed by the Board and serve at the pleasure
of the Board. The Chairman of the Board of Directors shall name one of those
members to serve as Chairman of the Committee. Each member should be free of any
relationship with the Company that could interfere with the exercise of his or
her independence from management and the corporation. No officer or employee of
the Company (or of any subsidiary or related company) shall be a member of the
Committee. Each member should possess integrity, an understanding of the
Company's business and services, the ability to ask probing questions and to
evaluate answers, the ability to read and understand fundamental financial
statements, and the dedication to commit the time and energy necessary to
prepare for and attend Committee meetings. At least one member should have
accounting or related financial management expertise.
MEETINGS
The Committee shall meet at least four times a year, and may meet more
frequently as circumstances require. In advance of each meeting, a detailed
written agenda shall be prepared and distributed to Committee members, along
with any other relevant information. In addition to the Committee members,
participants at the meeting shall usually include the director of internal
audit, the external auditor, the Chief Financial Officer of the Company, and
such other management representatives as are familiar with or responsible for
the topics on the agenda.
To promote the free flow of information, the Committee also shall meet at
least four times per year with the director of internal audit and with the
external auditor in separate executive sessions. All groups (including
management, internal and external auditors, and employees) shall have direct
access to the Committee.
RESPONSIBILITIES
In addition to other obligations that may be placed upon it by law, the
Company's charter or bylaws, or the Board of Directors, the responsibilities of
the Audit Committee shall include:
- REVIEW OF THE ADEQUACY OF THE COMPANY'S INTERNAL CONTROLS
The Committee has oversight responsibility for the Company's internal
controls, which are designed to promote efficiency in operations,
reliability in financial reporting, and compliance with laws and
regulations. Through reports from and discussions with management and with
the external and internal auditors, the Committee shall gain an
understanding of the effectiveness of internal controls, the extent to
which controls are reviewed by the auditors, and the degree to which
internal
38
control recommendations are implemented by management. The review shall
include the monitoring of computer systems security and contingency plans.
It shall also include an examination of policies and procedures (and the
extent to which they are observed) regarding officers' expense accounts,
perquisites, and use of corporate assets.
- REVIEW OF FINANCIAL STATEMENTS AND AUDIT RESULTS
The Committee is responsible for reviewing the Company's annual financial
statements and for assessing their completeness, reliability, and
consistency with appropriate accounting principles. Timely reviews of
interim financial information and ongoing communication with external
auditors and the Chief Financial Officer provide a foundation for the
understanding that is necessary in fulfilling this responsibility.
Particular attention shall be given to unusual transactions and to areas
involving judgment where different assumptions or philosophies could
significantly affect financial statements. The Committee should require
management to advise it of any instance in which it has sought a second
opinion from an accounting firm other than its external auditor. Prior to
the filing of the Form 10-Q (and before public announcement of financial
results), the external auditor should discuss with the Committee and a
representative of financial management significant adjustments, management
judgments and accounting estimates, significant new accounting policies,
and any disagreements with management. The discussion should include issues
such as the clarity of the financial disclosures and the degree of
aggressiveness or conservatism in the accounting principles and estimates
employed by the Company.
- REVIEW OF THE PROCESS FOR MONITORING COMPLIANCE WITH LAWS AND REGULATIONS
The Committee is responsible for overseeing the Company's process for
monitoring compliance with federal, state, and local laws and regulations.
To satisfy its responsibility in this area, the Committee must maintain
effective ongoing communication with the management personnel responsible
for compliance, the general counsel, and the external and internal
auditors. It must be satisfied that all regulatory compliance matters have
been considered in the preparation of the financial statements and that
appropriate and effective measures have been taken to protect against any
fraudulent and/or illegal acts.
- REVIEW OF COMPLIANCE WITH THE CORPORATE CODE OF CONDUCT
The Committee shall ensure that a Code of Conduct is formalized in writing
and distributed to all employees in a manner that clearly signals the
importance that management and the Board place upon ethical standards and
appropriate business conduct. The Committee shall review the Code
periodically and shall update it as often as seems appropriate. Through
reports from management, the general counsel, auditors, and/or others, the
Committee shall monitor compliance.
- REPORTS TO THE SHAREHOLDERS
A report of the Committee, appearing over the printed names of each member
of the Committee, shall be included in the Proxy Statement of the Company.
The report shall state whether the Committee has: (i) reviewed and
discussed the audited financial statements with management; (ii) discussed
with the independent auditors the matters required to be disclosed by
Statement on Auditing Standards No. 61, as may be modified or supplemented;
and (iii) received from the auditors disclosures regarding the auditors'
independence as required by Independent Standards Board Standard No. 1, as
may be modified or supplemented, and discussed with the auditors the
auditors' independence. In the report, the Committee must also state
whether, based on the review and discussions referred to in the immediately
preceding sentence, it has recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on
Form 10-K for the last fiscal year for filing with the Commission.
- REPORTS AND RECOMMENDATIONS TO THE BOARD OF DIRECTORS
The Committee shall report Committee activities, actions, and deliberations
to the Board of Directors on an ongoing basis, and shall make such
recommendations to the Board as it deems appropriate.
39
The Committee shall review the recommendation of management as to the
appointment of the external auditor and shall make a recommendation to the Board
as to the firm that is to be proposed in the proxy statement for shareholder
approval. The external auditor is ultimately accountable to the Board of
Directors and the Audit Committee as representatives of the shareholders. The
Audit Committee is responsible for ensuring that it receives from the external
auditor a formal written statement describing all relationships between the
auditor and the Company, for actively engaging in a dialogue with the auditor
regarding any disclosed relationships or services that may have an impact on the
objectivity or independence of the auditor, and for taking (or recommending that
the Board take) appropriate action to ensure the independence of the external
auditor. The audit and non-audit fees of the external auditor shall be subject
to review by the Committee and to approval by the Board.
The Committee annually shall review its charter, make such changes as it
deems appropriate, and submit it for ratification by the full Board of
Directors.
RESOURCES
The Committee shall have administrative support from the Company and shall
have access to such additional resources as may be required by specific
circumstances. It may conduct or commission investigations into any matters
within its scope of authority, and may retain independent counsel, accountants,
or others to assist it in the conduct of any investigation.
40
APPENDIX B
BROADWING INC.
1997 LONG TERM INCENTIVE PLAN
(As amended and restated effective as of January 1, 2000)
1. PURPOSE.
1.1 The purpose of this plan, which shall be named the Broadwing Inc. 1997
Long Term Incentive Plan (the "Plan") and the sponsor of which is the Company
(as defined in subsection 1.3 below), is to further the long term growth of the
Company by offering competitive incentive compensation related to long term
performance goals to those salaried employees of the Company and its
Subsidiaries (as defined in subsection 1.3 below) who will be largely
responsible for planning and directing such growth.
1.2 The Plan is also intended as a means of reinforcing a commonality of
interest between the Company's shareholders and the employees who are
participating in the Plan and as an aid to the Company and its Subsidiaries in
attracting and retaining employees of outstanding abilities and specialized
skills.
1.3 For purposes of the Plan, "Company" refers to Cincinnati Bell Inc.
(doing business as Broadwing Inc.) or, if applicable, any corporate successor to
Cincinnati Bell Inc. that results from a merger or similar transaction. Also,
for purposes of the Plan, a "Subsidiary" refers to any corporation which is part
of an unbroken chain of corporations that begins with the Company and in which
each corporation in such chain, other than the Company, has at least 80% of the
total combined voting power of all classes of its stock owned by the Company or
one of the other corporations in such chain. In addition, for purposes of the
Plan, the Company's "Subsidiaries" refers to each and every Subsidiary in the
aggregate.
1.4 This document amends and restates the plan that was named the
Cincinnati Bell Inc. 1997 Long Term Incentive Plan (the "Prior Plan") effective
as of January 1, 2000 (the "Effective Amendment Date") and does not affect any
awards granted under the Prior Plan prior to such date. For all purposes hereof,
however, where the context permits, any reference to the Plan contained herein
refers to the Plan both as amended and restated by this document and to the
Prior Plan as it was in effect prior to the Effective Amendment Date.
1.5 Further, this document makes certain technical, administrative, and
clarifying changes to the terms of the Plan document that both was signed prior
to the date this document is signed and indicated by its terms that it amended
and restated the Prior Plan as of January 1, 2000 (the "Initial January 1, 2000
Amended Plan"), and hence this document constitutes an amendment and restatement
of the Initial January 1, 2000 Amended Plan and shall for all purposes be deemed
to be substituted for (and as if it had always been) the Initial January 1, 2000
Amended Plan.
1.6 Notwithstanding any other provision of the Plan to the contrary, no
amount may be paid by reason of any award granted under the Plan on or after the
Effective Amendment Date unless and until the Plan, as amended and restated
effective as of January 1, 2000, has been approved by the favorable vote of a
majority of the outstanding stock of the Company present, or represented, and
entitled to vote at a meeting duly held in accordance with the laws of the state
in which the Company is incorporated (including abstentions to the extent
abstentions are counted as voting under the applicable state law).
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"). The Committee
shall consist of at least three members of the Board (a) who are neither
officers nor employees of the Company, (b) who are "Non-Employee Directors"
within the meaning of Rule 16b-3 (as in effect on the Effective Amendment Date
or as it may thereafter be amended or renumbered) as issued pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and (c) who are
"outside directors" within the meaning of Section 162(m)(4)(C) (as in effect on
the Effective Amendment Date or as it may thereafter be amended or renumbered)
of the Internal Revenue Code of 1986, as amended (the "Code").
41
2.2 Subject to the limitations and other provisions of the Plan, the
Committee shall have the sole and complete authority (a) to select, from the
employees of the Company and its Subsidiaries who are part of the class of
employees eligible for awards under the Plan, those employees who shall
participate in the Plan (the "Participants"), (b) to make awards to each and any
Participant in such forms and amounts as it shall determine and to cancel,
suspend, or amend any such awards (except that it may not amend any award that
without such amendment would not be subject to the deduction limits of
Section 162(m)(1) (as in effect on the Effective Amendment Date or as it may
thereafter be amended or renumbered) of the Code if such amendment would cause
such award to be subject to such deduction limits), (c) to impose such
limitations, restrictions, and conditions upon awards as it shall deem
appropriate, (d) to interpret the Plan and to adopt, amend, and rescind
administrative guidelines and other rules and regulations relating to the Plan,
(e) to appoint certain employees of the Company and its Subsidiaries to act on
its behalf as its representatives (including for purposes of signing agreements
which reflect awards granted under the Plan), and (f) to make all other
determinations and to take all other actions necessary or advisable for the
proper administration of the Plan. The Committee's determinations on any matter
within its authority shall be conclusive and binding on the Company, its
Subsidiaries, all Participants, and all other parties.
2.3 Notwithstanding any other provision of the Plan which may be read to
the contrary, the Committee may set different terms and conditions applicable to
each and any award granted under the Plan, even when such awards are of the same
type and even when issued to the same Participant. In addition, and also
notwithstanding any other provision of the Plan which may be read to the
contrary, the Committee may grant to any Participant for any period any specific
type of award available under the Plan without being required to grant to the
Participant for such period any other type of award that may be available under
the Plan.
2.4 The Committee may delegate to one or more Senior Managers of the
Company and its Subsidiaries or to one or more committees of Senior Managers of
the Company and its Subsidiaries its right to make awards to employees who are
part of the class of employees eligible for awards under the Plan but who are
not officers or directors of the Company, are not otherwise considered by the
Company to be "officers" of the Company within the meaning of Section 16 (as in
effect on the Effective Amendment Date or as it may thereafter be amended or
renumbered) of the 1934 Act (or other persons who are subject to the
requirements of such Section 16 of the 1934 Act), and are not "covered
employees" within the meaning of Section 162(m)(3) (as in effect on the
Effective Amendment Date or as it may thereafter be amended or renumbered) of
the Code. To the extent the Committee's right to make awards to such employees
is so delegated, then any reference to the Committee in the other provisions of
the Plan that concern the making of awards to such employees, the terms of such
awards, and the verification that all conditions applicable to the payment under
or the exercise of such awards have been met shall be read to refer to the
Senior Managers or committees of Senior Managers to whom the authority to make
such awards is delegated as if they were the Committee.
3. CLASS OF EMPLOYEES ELIGIBLE FOR PLAN.
Awards may be granted under the Plan to, and only to, salaried employees.
For purposes of the Plan, a "salaried employee" refers to any person who is
employed and classified as an employee by the Company or a Subsidiary of the
Company, whose pay is based on a monthly or annual rate, and whose position is
not subject to automatic wage progression. As is indicated in Section 2 above,
the specific salaried employees to whom awards will be granted under the Plan,
and who thereby will be considered Participants under the Plan, shall be chosen
by the Committee in its sole discretion (or, with respect to salaried employees
who are not officers or directors of the Company and as to whom the right to
grant awards to under the Plan may be delegated to any Senior Managers or
committees of Senior Managers under the provisions of subsection 2.4 above, by
any Senior Managers or committees of Senior Managers who are delegated by the
Committee the right to select such persons for Plan awards).
4. TYPES OF AWARDS.
4.1 Awards under the Plan may be granted in any one or more of the
following forms, all of which shall be based on common shares of the Company,
$0.01 par value ("Common Shares"): (a) stock options,
42
including incentive stock options within the meaning of Section 422 (as in
effect on the Effective Amendment Date or as it may thereafter be amended or
renumbered) of the Code ("ISOs"), (b) stock appreciation rights ("SARs"),
(c) restricted stock, and (d) performance shares and/or performance units. The
subsequent provisions of the Plan provide certain rules and conditions that
apply to each of such award forms.
4.2 For purposes hereof, an award granted under the Plan shall be deemed to
be based on Common Shares if, and only if, the award provides for a payment
(upon, if applicable, its exercise or the meeting of certain performance goals
or other criteria or conditions) of a certain number of Common Shares or of an
amount determined with reference to the fair market value (or the change in fair
market value over a period of time) of Common Shares.
4.3 Further, in the discretion of the Committee, payments may also be made
in connection with any award granted under the Plan of dividends payable with
respect to the Common Shares on which the award is based, of an amount
equivalent to such dividends, or of an amount determined by applying an interest
rate or rates to the principal amount of the award.
4.4 No awards shall be granted under the Plan after April 27, 2007 (the
"Plan's Grant Termination Date"), which is the last day of the ten year period
that began on the date that the Plan was originally approved by the shareholders
of the Company.
5. SHARES SUBJECT TO PLAN AWARDS.
5.1 Subject to the provisions of subsections 5.2 through 5.5 below and
Section 14 below, the following limits shall apply to the grant of awards under
the Plan:
(a) The maximum number of Common Shares on which awards granted under
the Plan to all Participants during the period (the "Remaining Period of the
Plan") which begins on the Effective Amendment Date and ends on the Plan's
Grant Termination Date may be based shall be equal to 50,000,000 Common
Shares (which number of shares is substantially equal to the limit on the
maximum number of Common Shares that would apply during the Remaining Period
of the Plan if both the terms of the Plan as originally adopted and the
number of the Common Shares outstanding as of the Effective Amendment Date
never changed);
(b) The maximum number of Common Shares on which awards granted under
the Plan to all Participants during each calendar year that begins in the
Remaining Period of the Plan may be based shall be equal to the sum of:
(1) 4,200,000 (which number is approximately equal to 2% of the number of
Common Shares which are outstanding as of the Effective Amendment Date); and
(2) the difference between the maximum number of Common Shares on which
awards could have been granted in the immediately preceding calendar year
under the terms of the Plan then in effect and the number of Common Shares
on which awards are actually granted in such immediately preceding calendar
year under the Plan;
(c) The maximum number of Common Shares on which awards under the Plan
to any Participant during each and any calendar year that begins in the
Remaining Period of the Plan may be based shall be 1,000,000 Common Shares;
and
(d) The maximum number of Common Shares on which ISOs granted under the
Plan to all Participants during the Remaining Period of the Plan may be
based shall be equal to 12,500,000 Common Shares (which number is equal to
25% of the maximum number of Common Shares on which awards granted under the
Plan to all Participants during the Remaining Period of the Plan may be
based).
5.2 Any limit on the maximum number of Common Shares on which awards
granted under the Plan may be based that is set forth in subsection 5.1 above or
elsewhere in the Plan, regardless of whether it is a limit applicable to all
Participants or a limit as to any Participant and regardless of whether it is a
limit applicable to the Remaining Period of the Plan or a limit as to a more
limited period, shall apply both (a) to each specific form of award available
under the Plan and (b) also in the aggregate to all possible forms of
43
awards that can be granted under the Plan, except to the extent the provision of
the Plan that sets forth such limit expressly indicates that it applies to a
specific form of award. (For example, the limit set forth in subsection 5.1(c)
above as to the maximum number of Common Shares on the basis of which awards may
be granted under the Plan to any Participant during any calendar year that
begins in the Remaining Period of the Plan shall be a limit that applies to any
specific form of award that may be granted under the Plan to a Participant as
well as an aggregate limit on all forms of awards that may be granted to the
Participant under the Plan.)
5.3 Any Common Shares that are deliverable under any award granted under
the Plan may consist, in whole or in part, of Common Shares that are authorized
but unissued or Common Shares that are treasury shares.
5.4 If any award or portion of an award granted under the Plan on or after
the Effective Amendment Date is forfeited, expires, or in any other manner
terminates without the payment of Common Shares or any other amount or
consideration, the Common Shares on which such award or portion of an award was
based shall again be available to be the basis on which other awards may be
granted under the Plan but shall be counted only once in determining whether any
of the limits set forth in subsection 5.1 above (except for the limit set forth
in paragraph (c) of subsection 5.1 above) is met. However, if any award or
portion of an award granted under the Plan prior to the Effective Amendment Date
is forfeited, expires, or otherwise terminates on or after the Effective
Amendment Date without the payment of Common Shares or any other amount or
consideration, the Common Shares on which such award or portion of an award was
based shall not again be available to be the basis on which other awards may be
granted under the Plan.
5.5 If, after the Effective Amendment Date, any corporation is acquired by
the Company and the Company assumes certain stock-based awards previously
granted by such acquired corporation or issues new awards in substitution for
such previously-granted awards of the acquired corporation, then, except to the
extent expressly provided by action of the Board, the awards so assumed or
issued by the Company shall not be deemed to be granted under the Plan and any
Common Shares that are the basis of such assumed or substituted awards shall not
affect the number of Common Shares on which awards granted under the Plan can be
based.
6. STOCK OPTION AWARDS.
Any awards granted under the Plan in the form of stock options shall be
subject to the following terms and conditions:
6.1 The Committee may, from time to time and subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe,
grant to any Participant options to purchase Common Shares, which options may be
ISOs, options that are not ISOs, or both ISOs and options that are not ISOs.
6.2 Subject to the other provisions of this Section 6, the terms and
conditions of any stock option granted under the Plan shall be determined by the
Committee. The grant of an option shall be evidenced by a written agreement
signed by the Committee or a representative thereof, which agreement shall
contain the terms and conditions of the option (as set by the Committee).
6.3 The purchase price per Common Share under any stock option granted
under the Plan shall be determined by the Committee but shall not be less than
100% of the fair market value of a Common Share on the date the option is
granted.
6.4 Unless otherwise prescribed by the Committee, any stock option granted
under the Plan shall expire and no longer be exercisable ten years after the
date on which it is granted and shall be exercisable in whole or in part after
but not before the expiration of one year after the date on which it is granted.
6.5 Subject to the other provisions of the Plan, the Committee shall
establish procedures governing the exercise of stock options granted under the
Plan (and shall require under such procedures, with respect to each exercise of
a stock option, that written notice of the exercise be given and that the
purchase price for the Common Shares being purchased upon the exercise and any
taxes required to be withheld upon the
44
exercise be paid in full at the time of the exercise). As soon as
administratively practical after the receipt of the written notice and full
payment applicable to the exercise of any stock option granted under the Plan,
the Company shall deliver to the applicable Participant (or such other person
who is exercising the stock option) a certificate or certificates representing
the acquired Common Shares.
6.6 To the extent that the aggregate fair market value of Common Shares
with respect to which stock options intended to be ISOs are exercisable for the
first time by any Participant during any calendar year (under the Plan and all
other plans of the Company and its Subsidiaries) exceeds $100,000 (or, if such
limit amount is amended under Section 422 of the Code, such amended limit
amount), such stock options shall be treated as if they were not ISOs. The rule
set forth in the immediately preceding sentence shall be applied by taking
options into account in the order in which they were granted. Also, for purposes
of the rules of this subsection 6.6, the fair market value of any Common Shares
which are subject to a stock option shall be determined as of the date the
option is granted.
6.7 Notwithstanding any other provision of the Plan to the contrary, no
person shall be eligible for or granted an ISO under the Plan if, at the time
the applicable ISO is otherwise to be granted, the person owns more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its Subsidiaries. For purposes hereof, a person shall be considered as owning
the stock owned, directly or indirectly, by or for his or her brothers or
sisters (whether by the whole or half blood), spouse, ancestors, and lineal
descendants, and stock owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust shall be considered as being owned proportionately
by or for its shareholders, partners, or beneficiaries.
7. STOCK APPRECIATION RIGHT AWARDS.
Any awards granted under the Plan in the form of SARs shall be subject to
the following terms and conditions:
7.1 A SAR may be granted free-standing, in relation to a new stock option
being granted at the same time as the SAR is granted, or in relation to a stock
option both which is not an ISO and which has been granted prior to the grant of
the SAR. The SAR shall represent the right to receive payment of a sum not to
exceed the amount, if any, by which the fair market value (determined as of the
date on which the SAR is exercised) of the Common Shares with respect to which
the SAR is based exceeds the grant price of the SAR (as is determined under the
provisions of subsection 7.2 below).
7.2 The grant price of a SAR shall not be less than the fair market value
(determined as of the date on which the SAR is granted) of the Common Shares
with respect to which the SAR is based. Subject to the immediately preceding
sentence, the grant price, and the other terms and conditions of a SAR, shall be
determined by the Committee.
7.3 A SAR granted under the Plan shall be evidenced by a written agreement
signed by the Committee or a representative thereof, which agreement shall
contain the terms and conditions of the SAR (as set by the Committee).
7.4 Subject to the other provisions of the Plan, the Committee shall
establish procedures governing the exercise of SARs granted under the Plan (and
shall require under such procedures, with respect to each exercise of a SAR,
that written notice of the exercise be given and that any taxes required to be
withheld upon the exercise be paid in full at the time of the exercise). Payment
of the amount to which a Participant is entitled upon the exercise of a SAR
shall be made in cash, Common Shares or other property, or a combination
thereof, as the Committee shall determine and permit in its issuance of the
award. To the extent that payment is made in Common Shares or other property,
the Common Shares or other property shall be valued at its fair market value on
the date of exercise of the SAR.
7.5 Unless otherwise determined by the Committee, any stock option as to
which a SAR is related shall no longer be exercisable to the extent the SAR has
been exercised and the exercise of a stock option shall cancel any related SAR
to the extent of such exercise.
45
8. RESTRICTED STOCK AWARDS.
Any awards granted under the Plan in the form of restricted stock shall be
subject to the following terms and conditions:
8.1 Restricted stock shall constitute Common Shares that may not be
disposed of by the Participant to whom the restricted stock is granted until
certain restrictions and conditions established by the Committee lapse. Such
restrictions, and any other conditions of the restricted stock, shall be set
forth in a written agreement signed by the Committee or a representative
thereof, which agreement shall be referenced on the certificates representing
the Common Shares that constitute such restricted stock.
8.2 It is anticipated that the only restrictions to be set by the Committee
as to the ability of a Participant to dispose of any restricted stock granted to
him or her under the Plan (and/or as to any dividends or other rights issued
with respect to such stock) shall require the Participant to be an employee of
the Company and/or a Subsidiary of the Company for a specified continuous period
of time or to terminate employment with the Company and its Subsidiaries in
special circumstances (such as, as may be set by e Committee, the Participant's
retirement, disability, or death). However, the Committee may, in its sole
discretion, apply other types of restrictions as to the ability of the
Participant to dispose of any restricted stock granted to him or her under the
Plan (and/or as to any dividends or other rights issued with respect to such
stock), including but not limited to the meeting of certain performance goals.
8.3 Subject to the other provisions of the Plan, the Committee shall
establish procedures that require any taxes required to be withheld upon the
lapse of any restrictions applicable to any restricted stock granted under the
Plan (and, if applicable, any minimum purchase price for the restricted stock
that may be required by applicable law) to be paid in full.
8.4 Any Participant who has been granted restricted stock under the Plan
shall have, during the period in which restrictions on his or her ability to
dispose of such stock apply, all of the rights of a shareholder of the Company
with respect to the Common Shares awarded as restricted stock (other than the
right to dispose of such shares), including the right to vote the shares and the
right to receive any cash or stock dividends, unless the Committee shall
otherwise determine in the grant of the restricted stock and except as may
otherwise be provided in subsection 8.5 below.
8.5 Any Common Shares issued with respect to restricted stock as a result
of a stock split, stock dividend, or similar transaction shall be restricted to
the same extent as the applicable restricted stock, unless otherwise determined
by the Committee.
8.6 If a Participant to whom restricted stock has been granted under the
Plan terminates his or her employment with the Company and its Subsidiaries
during the period in which restrictions on his or her ability to dispose of such
stock apply (and prior to the satisfaction of the requirements applicable to
such restrictions), such restricted stock shall be forfeited (subject to such
exceptions, if any, as are authorized by the Committee as to a termination of
employment that reflects a retirement, disability, death, or other special
circumstances).
9. PERFORMANCE SHARE AND UNIT AWARDS.
Any awards granted under the Plan in the form of performance shares and/or
performance units (collectively, "Performance Awards") shall be subject to the
following terms and conditions:
9.1 Any award to a Participant of a performance share shall provide that he
or she will receive one Common Share if certain performance goals that are set
by the Committee (and any other conditions, which may include a requirement that
the Participant be an employee of the Company and/or a Subsidiary of the Company
for a specified continuous period of time, that are set by the Committee) are
met.
9.2 Any award to a Participant of a performance unit shall provide that he
or she will receive an amount that is equal to a percent, not more than 200%, of
the fair market value of one Common Share on the date such amount becomes
payable under the terms of the unit (or is equal to a percent, not more than
200%, of the increase in the fair market value of one Common Share from the date
of the grant of the unit to the date such amount becomes payable under the terms
of the unit) if certain performance goals that are
46
set by the Committee (and any other conditions, which may include a requirement
that the Participant be an employee of the Company and/or a Subsidiary of the
Company for a specified continuous period of time, that are set by the
Committee) are met.
9.3 The Committee may, in its discretion and on such conditions as the
Committee may determine, grant more than one performance share and/or
performance unit to any Participant under the same award and provide that the
satisfaction of certain but not all (or a certain level but not the highest
level) of the performance goals (and/or other conditions) set by the Committee
with respect to such award will permit the Participant to receive a portion, but
not the maximum amount, of the Common Shares or the amounts that would be
payable under such award if all (or the highest level) of the performance goals
(and/or the other conditions) applicable to such award had been met.
9.4 The Committee may also, in its discretion and on such conditions as the
Committee may determine, provide that any Performance Award may contain the
right to receive dividends payable with respect to the Common Shares on which
the award is based, an amount equivalent to such dividends, or an amount
determined by applying an interest rate or rates to the principal amount of the
award (and/or with respect to previously credited dividends, dividend equivalent
amounts, or interest amounts).
9.5 Each Performance Award granted under the Plan shall be evidenced by a
written agreement signed by the Committee or a representative thereof, which
agreement shall contain the terms and conditions of such award (as set by the
Committee).
9.6 Subject to the other provisions of the Plan, the Committee shall
establish procedures governing the payment of Performance Awards granted under
the Plan (and shall require under such procedures that any taxes required to be
withheld upon such payment be paid in full). Payment of any amount to which a
Participant is entitled under any Performance Award granted under the Plan may
be made in a lump sum or in installments, and, to the extent a performance unit
is involved, in cash, Common Shares or other property, or a combination thereof,
as the Committee shall determine in its issuance of the award. Payment of any
amount to which a Participant is entitled under any performance share shall be
made in Common Shares. To the extent that payment is made in Common Shares or
other property, the Common Shares or other property shall be valued at its fair
market value on the date as of which the payment is determined.
10. FAIR MARKET VALUE OF COMMON SHARES AND PERFORMANCE GOALS.
10.1 For purposes of the Plan, the fair market value of a Common Share on
any date (for purposes only of this subsection 10.1, the "subject date") shall
be deemed to be the average of the high and low per share sale prices of the
Common Shares on the New York Stock Exchange on the subject date (or, if the
Common Shares were not traded on such exchange on the subject date, the average
of the high and low per share sale prices of the Common Shares on the New York
Stock Exchange on the latest preceding date on which the Common Shares were
traded); except that, if the Common Shares are not listed on the New York Stock
Exchange on the subject date (or, if the subject date is not a business day of
such exchange, on the next preceding business day of such exchange), then the
fair market value of a Common Share on the subject date shall be determined by
the Committee in good faith pursuant to methods and procedures established by
the Committee.
10.2 To the extent the meeting of performance goals set by the Committee
may be a condition to the exercise of or payment under any award granted under
the Plan, the Committee may base such performance goals on, and only on, one or
more of the following criteria applicable to the Company and its Subsidiaries:
earnings before interest, taxes, depreciation, and amortization; earnings per
share; operating income; total shareholder returns; cash generation targets;
profit targets; revenue targets; profitability targets as measured by return
ratios; net income; return on sales; return on assets; return on equity; and
corporate performance indicators (indices based on the level of certain services
provided to customers). Any such performance criteria shall be measured or
determined on the basis of a period of such duration (a "Performance Period"),
which period may be of any length, as is set by the Committee either prior to
the start of such period or within its first 90 days (provided that the
performance criteria is not in any event set after 25% or more of the applicable
Performance Period has elapsed) and shall be criteria that will be able to be
objectively determined by the Committee. In addition, any such performance
criteria (a) may be
47
measured or determined for the Company, for any Subsidiary of the Company, for
the Company and all of the Company's Subsidiaries in the aggregate, or for any
group of corporations that are included in the entire group of the Company and
its Subsidiaries and (b) may be measured and determined in an absolute sense
and/or in comparison to the analogous performance criteria of other
publicly-traded companies (that are selected for such comparison purposes by the
Committee).
10.3 Further, to the extent any payment under, or any exercise of, an award
granted under the Plan requires the meeting of any performance goals and/or any
other conditions that have been set by the Committee, the Committee shall verify
that such performance goals and/or such other conditions have been met before
such payment or exercise is permitted.
11. NONASSIGNABILITY OF AWARDS.
Except as may be required by applicable law, no award granted under the Plan
may be assigned, transferred, pledged, or otherwise encumbered by a Participant
otherwise than by will, by designation of a beneficiary to take effect after the
Participant's death, or by the laws of descent and distribution. Each award
shall be exercisable during the Participant's lifetime only by the Participant
(or, if permissible under applicable law, by the Participant's guardian or legal
representative).
12. DEFERRALS OF AWARD PAYMENTS.
The Committee may, in its discretion, permit Participants to elect to defer
the payment otherwise required under all or part of any award granted under the
Plan in accordance with such terms and conditions as the Committee shall
establish.
13. PROVISIONS UPON CHANGE IN CONTROL.
In the event of a Change in Control (as defined in subsection 13.4 below)
occurring on or after the Effective Amendment Date, the provisions of this
Section 13 shall supersede any conflicting provisions of the Plan.
13.1 In the event of a Change in Control, all outstanding stock options and
SARs granted under the Plan shall become exercisable in full and the
restrictions still then in force and applicable to any Common Shares awarded as
restricted stock under the Plan shall lapse.
13.2 Further, unless the Committee shall revoke such an entitlement prior
to the occurrence of a Change in Control, a Participant who has been awarded a
stock option under the Plan and who is deemed by the Committee to be an officer
or other person subject to Section 16 (as in effect on the Effective Amendment
Date or as it may thereafter be amended or renumbered) of the 1934 Act at the
time of such Change in Control shall be entitled to receive, in lieu of the
exercise of any stock option or portion thereof to the extent that it is then
exercisable, a cash payment in an amount equal to the difference between:
(a) the aggregate fair market value, on the date immediately after the date on
which the Change in Control occurs, of the Common Shares that are subject to
such option or portion thereof (or, in the event the Change in Control is
effected by a tender offer or similar event, the final offer price per share
paid for Common Shares under the tender offer or similar event times the number
of Common Shares covered by such option or portion thereof); and (b) the
aggregate purchase price of the Common Shares that are subject to such option or
portion thereof. In the event the applicable Change in Control is effected by a
tender offer in which fewer than all of the Common Shares which are validly
tendered in compliance with such offer are purchased or exchanged, then only
that portion of the Common Shares covered by a stock option granted under the
Plan as results from multiplying such Common Shares by a fraction, the numerator
of which is the number of Common Shares acquired pursuant to the offer and the
denominator of which is the number of Common Shares tendered in compliance with
such offer, shall be used to determine the payment thereupon. To the extent that
all or any portion of a stock option granted under the Plan shall be affected by
this provision, all or such portion of the stock option shall be terminated.
13.3 In the event of a Change in Control, a pro rata portion of all still
then outstanding Performance Awards granted under the Plan shall be paid to each
Participant within five business days after the date of
48
such Change in Control. The pro rata portion of any such award to be paid shall
equal the full present value of such award (determined as of the first day of
the month in which such Change in Control occurs under such interest rate and
other actuarial assumptions as are reasonably adopted by the Committee)
multiplied by a ratio, the numerator of which shall equal the number of full and
partial months (including the month in which the Change in Control occurs) since
the date of the award and the denominator of which shall equal the number of
months in the longest Performance Period applicable to any performance goal on
which such award is conditioned.
13.4 For the purpose of this Section 13, a "Change in Control" of the
Company means and shall be deemed to have occurred if, on or after the Effective
Amendment Date:
(a) A tender offer shall be made and consummated for the ownership of
30% or more of the outstanding voting securities of the Company;
(b) The Company shall be merged or consolidated with another corporation
and as a result of such merger or consolidation less than 75% of the
outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the former shareholders of the Company,
other than affiliates (within the meaning of the 1934 Act) of any party to
such merger or consolidation, as the same shall have existed immediately
prior to such merger or consolidation;
(c) The Company shall sell substantially all of its assets to another
corporation which is not a Subsidiary whose stock is wholly owned by the
Company;
(d) A person within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the Effective Amendment Date) of the 1934
Act shall acquire 20% or more of the outstanding voting securities of the
Company (whether directly, indirectly, beneficially, or of record), or a
person within the meaning of Section 3(a)(9) or Section 13(d)(3) (as in
effect on the Effective Amendment Date) of the 1934 Act controls in any
manner the election of a majority of the directors of the Company; or
(e) Within any period of two consecutive years ending on or after the
Effective Amendment Date, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof, unless the election of each director on the Board who was not a
director on the Board at the beginning of such period has been approved in
advance by directors on the Board representing at least two-thirds of the
directors on the Board then in office who were directors on the Board at the
beginning of such period.
For purposes hereof, ownership of voting securities shall take into account
and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the Effective Amendment Date) issued
pursuant to the 1934 Act.
13.5 The provisions of this Section 13 may not be amended with respect to
any award granted to a Participant on or subsequent to the date such award is
granted if such amendment would be materially adverse to the Participant without
the consent of the Participant; provided, however, the Board may still then
make, without the Participant's consent, minor or administrative changes to this
Section 13 or changes to this Section 13 to conform to applicable legal
requirements that will apply to such award.
14. ADJUSTMENTS.
14.1 In the event of any change affecting the Common Shares by reason of
any stock dividend or split, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares, or other corporate change, or any
distributions to common shareholders other than cash dividends, the Committee
shall make such substitution or adjustment in the aggregate number or class of
shares which may be distributed under the Plan and in the number, class, and
purchase price, grant price, or other price of shares on which the outstanding
awards granted under the Plan are based as it reasonably determines to be
appropriate in order to maintain the purposes of the Plan and the then
outstanding awards.
14.2 The Committee shall be authorized to correct any defect, supply any
omission, or reconcile any inconsistency in the Plan or any award granted under
the Plan in the manner and to the extent it shall
49
determine is needed to reflect the intended provisions of the Plan or that award
or to meet any law that is applicable to the Plan (or the provisions of any law
which must be met in order for the normal tax consequences of the award to
apply).
15. RIGHTS OF BOARD OF DIRECTORS.
15.1 Notwithstanding any other provision hereof to the contrary, the Board
may amend, alter, or discontinue the Plan or any portion or provision thereof at
any time, provided that no such action shall materially impair the rights of a
Participant with respect to a previously granted Plan award without the
Participant's consent. Notwithstanding the foregoing, the Board may not in any
event, without the approval of the Company's shareholders, adopt an amendment to
the Plan which shall: (a) increase the total number of Common Shares reserved
for issuance during the Remaining Period of the Plan; (b) increase the total
number of Common Shares which may be subject to ISOs granted during the
Remaining Period of the Plan; (c) change the class of persons eligible to become
Participants under the Plan; (d) make any change in the Plan that is required by
Section 162(m) (as in effect on the Effective Amendment Date or as it may
thereafter be amended or renumbered) of the Code to be approved by the Company's
shareholders in order to permit the Committee the ability to have the amounts
payable pursuant to any awards granted by it under the Plan not be subject to
the deduction limits of Section 162(m)(1) (as in effect on the Effective
Amendment Date or as it may thereafter be amended or renumbered) of the Code by
reason of Section 162(m)(4)(C) (as in effect on the Effective Amendment Date or
as it may thereafter be amended or renumbered) of the Code; or (e) make any
other change in the Plan that is required by applicable law to be approved by
the Company's shareholders in order to be effective.
15.2 If approval of the Company's shareholders is required to a Plan
amendment pursuant to the provisions of subsection 15.1 above, then such
approval must be by the favorable vote of a majority of the outstanding stock of
the Company present, or represented, and entitled to vote at a meeting duly held
in accordance with the laws of the state in which the Company is incorporated
(or, to the extent applicable law requires a greater degree or level of approval
by the Company's shareholders in order for such amendment to become effective,
such approval must comply with such required degree or level of approval).
16. PROCEDURES FOR SATISFYING PAYMENT AND WITHHOLDING REQUIREMENTS.
16.1 Subsections 6.5, 7.4, 8.3, and 9.6 above demand that the Committee
establish procedures governing the exercise of, lapse of restrictions under,
and/or payment of any award granted under the Plan and to compel under such
procedures that, to the extent applicable under such award, any purchase price
for Common Shares being obtained under such award and/or taxes required to be
withheld by the terms of such award or under applicable law (with any such
purchase price and/or tax withholding requirements being referred to in this
Section 16 as the "payment/withholding requirements") be paid in full. The
Committee may provide for different rules as to the satisfying of the
payment/withholding requirements with respect to each type of award granted
under the Plan and even among awards of the same type that are granted under the
Plan. If any Participant (or other person) who is responsible for satisfying any
payment/ withholding requirements that apply to an award granted under the Plan
otherwise fails to satisfy such payment/withholding requirements, the Company
shall have the right to retain from such award or the payment thereof (or from
any other amount that is payable as compensation to the Participant or such
other person), as appropriate, a sufficient number of Common Shares or cash
otherwise applicable to the award (or otherwise applicable to such other
compensation amount) in order to satisfy such payment/ withholding requirements.
16.2 Without limiting the generality of the provisions of subsection 16.1
above, the following provisions may apply in connection with the Committee's
establishment of procedures governing the meeting of any payment/withholding
requirements that apply to an award granted under the Plan:
(a) The Committee may, in its discretion and pursuant to such conditions
as the Committee decides to impose, provide that the Participant to whom an
award under the Plan is granted (or, if applicable, such other person who is
exercising or receiving a payment under the award) may, in his or her sole
discretion, satisfy the payment/withholding requirements that apply to such
award by using
50
any one or more of the following methods or any combination of the following
methods: (1) by making a payment to the Company of an amount in cash (which,
for purposes of the Plan, shall be deemed to include payment in U.S.
currency or by personal check, certified check, bank draft, cashier's check,
or money order) equal to the amount of such payment/withholding
requirements, (2) by making a payment to the Company in Common Shares which
are previously owned by the Participant (or such other person) and have a
fair market value on the date of payment equal to the amount of such
payment/withholding requirements, (3) by having the Company retain Common
Shares which are being purchased under the award and have a fair market
value on the date of payment equal to the amount of such payment/withholding
requirements, (4) by having the Company retain an amount of cash that is
payable under the award and equal to the amount of such payment/withholding
requirements, and/or (5) by having the Company retain an amount of cash that
is payable under any other compensation applicable to the Participant (or
such other person) and equal to the amount of such payment/withholding
requirements.
(b) Notwithstanding the provisions of paragraph (a) immediately above,
Common Shares may not be used in payment by the Participant for satisfying
any payment/withholding requirements that apply to an award granted under
the Plan either (1) if the Common Shares being used in payment either are
being purchased upon exercise of the applicable award and the award is an
ISO or (2) if the Common Shares being used in payment both were previously
acquired by the Participant through the exercise of a prior ISO and have
been held by the Participant for less than two years from the date of grant
of the prior ISO or less than one year from the date of the prior transfer
of such Common Shares to him or her.
(c) Further, the procedures applicable to the satisfaction of any
payment/withholding requirements that apply to an award granted under the
Plan that are established by the Committee may, in the discretion of the
Company, include commonly accepted electronic or telephonic notices given
via the internet or an interactive voice response system to a third party
broker which is designated by the Company to facilitate and/or administer
the exercise or payment of any awards granted under the Plan.
17. MISCELLANEOUS.
17.1 Nothing contained in the Plan or any award granted under the Plan
shall confer on any Participant any right to be continued in the employment of
the Company or any Subsidiary of the Company or interfere in any way with the
right of the Company or any Subsidiary to terminate the Participant's employment
at any time and in the same manner as though the Plan and any awards granted
under the Plan were not in effect.
17.2 All payments required to be made under awards granted under the Plan
shall be made by the Company out of its general assets. In this regard, the Plan
shall not be funded and the Company shall not be required to segregate any
assets to reflect any awards granted under the Plan. Any liability of the
Company to any person with respect to any award granted under the Plan shall be
based solely upon the contractual obligations that apply to such award, and no
such liability shall be deemed to be secured by any pledge of or other lien or
encumbrance on any property of the Company.
17.3 Any payments or other benefits provided to a Participant with respect
to an award granted under the Plan shall not be deemed a part of the
Participant's compensation for purposes of any termination or severance pay
plan, or any other pension, profit sharing, or other benefit plan, of the
Company or any Subsidiary of the Company unless such plan expressly or clearly
indicates that the payments or other benefits provided under an award granted
under the Plan shall be considered part of the Participant's compensation for
purposes of such plan or unless applicable law otherwise requires.
17.4 In no event shall the Company be obligated to issue or deliver any
Common Shares if and to the extent the Committee determines that such issuance
or delivery constitutes a violation of the provisions of any applicable law (or
regulation issued under such law) or the rules of any securities exchange on
which Common Shares are listed.
51
17.5 Except to the extent preempted by any applicable Federal law, the Plan
shall be subject to and construed in accordance with the laws of the State of
Ohio.
IN ORDER TO EFFECT THE PROVISIONS OF THIS PLAN DOCUMENT, Cincinnati
Bell Inc. (doing business as Broadwing Inc.), the sponsor of the Plan, has
caused its name to be subscribed to this Plan document this day of
, 2000, to be effective as of January 1, 2000.
CINCINNATI BELL INC.
(DOING BUSINESS AS BROADWING INC.)
By:
-----------------------------------
Title:
---------------------------------
52
APPENDIX C
BROADWING INC.
SHORT TERM INCENTIVE PLAN
(As amended and restated effective as of January 1, 2000)
1. PURPOSE.
1.1 The purpose of this plan, which shall be named the Broadwing Inc. Short
Term Incentive Plan (the "Plan") and the sponsor of which is the Company (as
defined in subsection 1.2 below), is to provide key executives of the Company
and its Subsidiaries (as defined in subsection 1.2 below) with incentive
compensation based upon the achievement of specific short term performance
goals.
1.2 For purposes of the Plan, "Company" refers to Cincinnati Bell Inc.
(doing business as Broadwing Inc.) or, if applicable, any corporate successor to
Cincinnati Bell Inc. that results from a merger or similar transaction. Also,
for purposes of the Plan, a "Subsidiary" refers to any corporation which is part
of an unbroken chain of corporations that begins with the Company and in which
each corporation in such chain, other than the Company, has at least 80% of the
total combined voting power of all classes of its stock owned by the Company or
one of the other corporations in such chain. In addition, for purposes of the
Plan, the Company's "Subsidiaries" refers to each and every Subsidiary in the
aggregate.
1.3 This document amends and restates the plan that was named the
Cincinnati Bell Inc. 1997 Short Term Incentive Plan (the "Prior Plan") effective
as of January 1, 2000 (the "Effective Amendment Date") and does not affect any
awards granted under the Prior Plan prior to such date. For all purposes hereof,
however, where the context permits, any reference to the Plan contained herein
refers to the Plan both as amended and restated by this document and to the
Prior Plan as it was in effect prior to the Effective Amendment Date.
1.4 Further, this document makes certain technical, administrative, and
clarifying changes to the terms of the Plan document that both was signed prior
to the date this document is signed and indicated by its terms that it amended
and restated the Prior Plan as of January 1, 2000 (the "Initial January 1, 2000
Amended Plan"), and hence this document constitutes an amendment and restatement
of the Initial January 1, 2000 Amended Plan and shall for all purposes be deemed
to be substituted for (and as if it had always been) the Initial January 1, 2000
Amended Plan.
1.5 Notwithstanding any other provision of the Plan to the contrary, no
amount may be paid by reason of any award granted under the Plan on or after the
Effective Amendment Date unless and until the Plan, as amended and restated
effective as of January 1, 2000, has been approved by the favorable vote of a
majority of the outstanding stock of the Company present, or represented, and
entitled to vote at a meeting duly held in accordance with the laws of the state
in which the Company is incorporated (including abstentions to the extent
abstentions are counted as voting under the applicable state law).
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"). The Committee
shall consist of at least three members of the Board (a) who are neither
officers nor employees of the Company and (b) who are "outside directors" within
the meaning of Section 162(m)(4)(C) (as in effect on the Effective Amendment
Date or as it may thereafter be amended or renumbered) of the Internal Revenue
Code of 1986, as amended (the "Code").
2.2 Subject to the limitations and other provisions of the Plan, the
Committee shall have the sole and complete authority (a) to select, from the
employees of the Company and its Subsidiaries who are part of the class of
employees eligible for awards under the Plan, those employees who shall
participate in the Plan (the "Participants"), (b) to make awards to each and any
Participant in such amounts as it shall determine and to cancel, suspend, or
amend any such awards (except that it may not amend any award that without such
amendment would not be subject to the deduction limits of
Section 162(m)(1) (as in effect on the Effective Amendment Date or as it may
thereafter be amended or renumbered) of the Code if such amendment would cause
such award to be subject to such deduction limits), (c) to impose such
limitations,
53
restrictions, and conditions upon awards as it shall deem appropriate, (d) to
interpret the Plan and to adopt, amend, and rescind administrative guidelines
and other rules and regulations relating to the Plan, (e) to appoint certain
employees of the Company and the Subsidiaries to act on its behalf as its
representatives (including for purposes of signing agreements which reflect
awards granted under the Plan), and (f) to make all other determinations and to
take all other actions necessary or advisable for the proper administration of
the Plan. The Committee's determinations on any matter within its authority
shall be conclusive and binding on the Company, its Subsidiaries, all
Participants, and all other parties.
2.3 Notwithstanding any other provision of the Plan which may be read to
the contrary, the Committee may set different terms and conditions applicable to
each and any award granted under the Plan, and there is no obligation that the
awards made with respect to any calendar year must contain the same terms and
conditions for all Participants or any group of Participants.
3. CLASS OF EMPLOYEES ELIGIBLE FOR PLAN.
Awards may be granted under the Plan with respect to any calendar year to,
and only to, key executives. For purposes of the Plan, a "key executive" refers,
with respect to any calendar year, to any person who during such year is
employed and classified as an employee by the Company or a Subsidiary of the
Company and whose regular and incentive compensation for such year is
principally established by the Committee under the policies of the Company and
its Subsidiaries. A key executive may but is not required to be a member of the
Board or the board of directors of any Subsidiary of the Company. As is
indicated in Section 2 above, the specific key executives to whom awards will be
granted under the Plan, and who thereby will be considered Participants under
the Plan, shall be chosen by the Committee in its sole discretion.
4. AWARDS.
4.1 Any award granted under the Plan to a Participant shall be made with
respect to a specific calendar year (the award's "Award Year") and shall, if
certain performance goals that are made applicable to the award by the Committee
are met, provide for the payment to the Participant of a lump sum cash amount in
the first quarter of the next following calendar year (the award's "Payment
Year"). No more than one award may be granted to a Participant under the Plan
with respect to any calendar year. Also, the grant of any award to a Participant
under the Plan with respect to any calendar year shall not entitle the
Participant to an award for any subsequent calendar year.
4.2 Subject to the other provisions of this Section 4, any award granted
under the Plan to a Participant shall specify a standard payment amount (the
award's "Standard Award Level") if certain but not all (or a certain level but
not the highest level) of the performance goals applicable to the award are met
and will also specify payment amounts more or less than the Standard Award Level
if additional or fewer (or if a higher or lower level) of the performance goals
applicable to the award are met. In no event may the amount of the award exceed
200% of the award's Standard Award Level (or, if less, $3,000,000).
4.3 The performance goals to be set by the Committee with respect to any
award granted under the Plan to a Participant may be based on, and only on, one
or more of the following criteria applicable to the Company and its
Subsidiaries: earnings before interest, taxes, depreciation, and amortization;
earnings per share; operating income; total shareholder returns; cash generation
targets; profit targets; revenue targets; profitability targets as measured by
return ratios; net income; return on sales; return on assets; return on equity;
and corporate performance indicators (indices based on the level of certain
services provided to customers). The performance criteria that shall apply to
any award granted under the Plan to a Participant shall be criteria that will be
able to be objectively determined by the Committee, shall be measured or
determined on the basis of the award's Award Year, and shall be set by the
Committee either prior to the start of the award's Award Year or within the
first 90 days of the award's Award Year. In addition, any such performance
criteria (a) may be measured or determined for the Company, for any Subsidiary
of the Company, for the Company and all of the Company's Subsidiaries in the
aggregate, or for any group of
54
corporations that are included in the entire group of the Company and its
Subsidiaries and (b) may be measured and determined in an absolute sense and/or
in comparison to the analogous performance criteria of other publicly-traded
companies (that are selected for such comparison purposes by the Committee).
4.4 The Committee shall verify that the performance goals that must be met
for any specific payment to be made under an award granted under the Plan have
been met before such payment is permitted.
4.5 Notwithstanding the foregoing subsections of this Section 4 and
principally in order to permit the Committee to take into account, before the
amount otherwise payable under any award granted under the Plan is finalized,
its determination as to whether the Participant has met certain individual goals
that may have been set for him or her by the Committee or his or her managers
and its determination as to whether any extraordinary or nonrecurring events in
the operations of the Company and its Subsidiaries have unduly affected the
performance goals applicable to the award, the Committee may, in its sole and
unrestricted discretion, reduce the amount payable under any award granted under
the Plan below the amount that would otherwise be payable under the award based
solely on the performance goals that are set by the Committee for the award
pursuant to the provisions of subsections 4.2 and 4.3 above. The discretion
granted the Committee under this subsection 4.5 shall not, however, allow the
Committee to increase the amount that would otherwise be payable under any award
granted under the Plan based solely on the performance goals that are set by the
Committee for the award pursuant to the provisions of subsections 4.2 and 4.3
above.
4.6 In addition, and notwithstanding the foregoing subsections of this
Section 4, if a situation that is described in any of the following paragraphs
of this subsection 4.6 applies to a Participant to whom an award is granted
under the Plan, then the amount that is payable under the award shall be deemed
to be equal to the product obtained by multiplying (a) the amount that would
otherwise be payable under the award based on all of the foregoing subsections
of this Section 4 (without regard to the provisions of this subsection 4.6) by
(b) a fraction, the numerator of which is equal to the difference between the
total number of days in the award's Award Year and the number of days that are
to be excluded from such fraction's numerator pursuant to whichever of the
following paragraphs of this subsection 4.6 are applicable to the Participant
and the denominator of which is the total number of days in such Award Year.
(a) If the Participant becomes a key executive during but after the
first day of the award's Award Year, and/or if the Participant ceases to be
a key executive during but prior to the last day of the award's Award Year
because of his or her retirement or death, then the numerator of the
fraction referred to above shall exclude the number of the days in such
Award Year on which the Participant is not a key executive. For purposes of
the Plan, a Participant's "retirement" shall be deemed to have occurred only
if the Participant ceases to be an employee of the Company and its
Subsidiaries after either (a) both attaining age 60 and completing at least
ten years of continuous service as an employee with the Company and its
Subsidiaries or (b) completing at least 30 years of continuous service as an
employee with the Company and its Subsidiaries.
(b) If the Participant receives disability benefits under the Company's
Sickness and Accident Disability Benefits Plan, or any similar type of
disability plan of a Subsidiary of the Company, for more than three months
of the award's Award Year, the numerator of the fraction referred to above
shall exclude the number of the days in the period of such Award Year for
which benefits are payable to the Participant under such plan.
(c) If the Participant is on a leave of absence (approved by the Company
or a Subsidiary of the Company) for more than three months of the award's
Award Year, the numerator of the fraction referred to above shall exclude
the number of the days in such Award Year on which the Participant is on
such leave of absence.
4.7 Further, and notwithstanding the foregoing subsections of this
Section 4, a Participant to whom an award has been granted under the Plan shall
not in any event be entitled to receive any amount by reason of the award unless
he or she both: (a) either (i) is an employee of the Company or a Subsidiary of
the Company on the last day of the award's Award Year or (ii) terminated his or
her employment with the Company and its Subsidiaries because of his or her
disability (for which the Participant will be entitled to
55
receive or has received disability benefits under the Company's Sickness and
Accident Disability Benefits Plan or any similar type of disability plan of a
Subsidiary of the Company), his or her retirement (as defined in subsection 4.6
above), or his or her death; and (b) has had at least three months of active
service for the Company and its Subsidiaries during the award's Award Year (not
including any time the Participant was absent from active service during such
Award Year by reason of any leave of absence or for any other reason, including
an absence on account of disability).
4.8 As is noted in subsection 4.2 above and notwithstanding any other
provision of the Plan to the contrary, the amount to be received by a
Participant by reason of any award that is granted to the Participant under the
Plan with respect to any calendar year shall not in any event exceed $3,000,000.
4.9 Each award granted under the Plan shall be evidenced by a written
agreement, notice, or similar document that is provided in any manner by the
Committee or a representative thereof (including, if the Committee so determines
in its discretion, by a commonly accepted electronic notice), which agreement,
notice, or other document shall contain the terms and conditions of such award
(as set by the Committee).
4.10 If a Participant is entitled to receive a payment under any award
granted to him or her under the Plan by reason of the foregoing subsections of
this Section 4, but he or she dies before such payment is made to him or her,
then such payment shall be made to the Participant's beneficiary (as determined
under the provisions of subsection 4.11 below) at the same time as such payment
would be made if the Participant had not died. No beneficiary of a Participant
shall be entitled to any amount under the Plan that is greater than the amount
to which the Participant is entitled under the foregoing subsections of this
Section 4.
4.11 For purposes of the Plan, a Participant's "beneficiary" shall mean the
person(s), trust(s), and/or other entity(ies) which the Participant designates
as his or her beneficiary for the purposes of the Plan in any writing or form
which is signed by the Participant and acceptable to the Committee, provided
that such writing or form is filed with the Committee prior to the Participant's
death. The determination of a Participant's beneficiary under the Plan shall
also be subject to the following paragraphs of this subsection 4.11:
(a) If the Participant names more than one person, trust, and/or other
entity as part of his or her beneficiary with respect to the Plan, each
person, trust, and other entity designated as part of the Participant's
beneficiary shall be entitled to an equal share of any amount payable to the
Participant's beneficiary under any award granted under the Plan (unless the
Participant otherwise designates in the writing or form by which he or she
names his or her beneficiary for purposes of the Plan).
(b) The Participant may revoke or change his or her beneficiary
designation by signing and filing with the Committee at any time prior to
his or her death a new writing or form acceptable to the Committee.
(c) Notwithstanding the foregoing provisions of this subsection 4.11, if
no beneficiary designation of the Participant has been filed with the
Committee prior to his or her death, or if the Committee in good faith
determines either that any beneficiary designation made by the Participant
prior to his or her death is for any reason not valid or enforceable under
applicable law or that there is a valid question as to the legal right of
the designated beneficiary to receive the applicable payment, then the
applicable payment shall be paid to the estate of the Participant (in which
case none of the Company, any of its Subsidiaries, the Committee, or any of
their personnel, agents, or representatives shall have any further liability
to anyone with respect to such payment).
5. NONASSIGNABILITY OF AWARDS.
Except as may be required by applicable law, no award granted under the Plan
may be assigned, transferred, pledged, or otherwise encumbered by a Participant
otherwise than by designation of a beneficiary under the provisions of
subsections 4.10 and 4.11 above.
56
6. DEFERRALS OF AWARD PAYMENTS.
The Committee may, in its discretion, permit Participants to elect to defer
the payment otherwise required under any award granted under the Plan in
accordance with such terms and conditions as the Committee shall establish.
7. PROVISIONS UPON CHANGE IN CONTROL.
In the event of a Change in Control (as defined in subsection 7.2 below)
occurring on or after the Effective Amendment Date, the provisions of this
Section 7 shall supersede any conflicting provisions of the Plan.
7.1 In the event of a Change in Control, the amount payable under any award
that was granted under the Plan with respect to the calendar year that
immediately precedes the calendar year in which the Change in Control occurs
shall, if such amount has not yet been paid (or if such amount has not been
determined by the Committee) by the date of the Change in Control, be paid
within five business days after the date of such Change in Control (and, if the
amount of such award has not yet been determined by the Committee by the date of
the Change in Control, its amount shall be deemed to be equal to the award's
Standard Award Level). Further, in the event of a Change in Control, a pro rata
portion of any award granted under the Plan with respect to the calendar year in
which the Change in Control occurs shall be paid within five business days after
the date of the Change in Control, with the pro rata portion of such award being
deemed to be equal to the full present value of such award's Standard Award
Level (determined as of the date of payment under such interest rate and other
actuarial assumptions as are reasonably adopted by the Committee) multiplied by
a fraction, the numerator of which shall equal the number of full and partial
months (including the month in which the Change in Control occurs) since the
first day of the calendar year in which the Change in Control occurs and the
denominator of which shall equal twelve.
7.2 For the purpose of this Section 7, a "Change in Control" of the Company
means and shall be deemed to have occurred if, on or after the Effective
Amendment Date:
(a) A tender offer shall be made and consummated for the ownership of
30% or more of the outstanding voting securities of the Company;
(b) The Company shall be merged or consolidated with another corporation
and as a result of such merger or consolidation less than 75% of the
outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the former shareholders of the Company,
other than affiliates (within the meaning of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of any party to such merger or
consolidation, as the same shall have existed immediately prior to such
merger or consolidation;
(c) The Company shall sell substantially all of its assets to another
corporation which is not a Subsidiary whose stock is wholly owned by the
Company;
(d) A person within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the Effective Amendment Date) of the 1934
Act shall acquire 20% or more of the outstanding voting securities of the
Company (whether directly, indirectly, beneficially, or of record), or a
person within the meaning of Section 3(a)(9) or Section 13(d)(3) (as in
effect on the Effective Amendment Date) of the 1934 Act controls in any
manner the election of a majority of the directors of the Company; or
(e) Within any period of two consecutive years ending on or after the
Effective Amendment Date, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof, unless the election of each director on the Board who was not a
director on the Board at the beginning of such period has been approved in
advance by directors on the Board representing at least two-thirds of the
directors on the Board then in office who were directors on the Board at the
beginning of such period.
For purposes hereof, ownership of voting securities shall take into account and
shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the Effective Amendment Date) issued
pursuant to the 1934 Act.
57
7.3 The provisions of this Section 7 may not be amended with respect to any
award granted to a Participant on or subsequent to the date such award is
granted if such amendment would be materially adverse to any Participant without
the consent of such Participant; provided, however, the Board may still then
make, without the Participant's consent, minor or administrative changes to this
Section 7 or changes to this Section 7 to conform to applicable legal
requirements that will apply to such award.
8. ADJUSTMENTS.
The Committee shall be authorized to correct any defect, supply any
omission, or reconcile any inconsistency in the Plan or any award granted under
the Plan in the manner and to the extent it shall determine is needed to reflect
the intended provisions of the Plan or that award or to meet any law that is
applicable to the Plan.
9. RIGHTS OF BOARD OF DIRECTORS.
9.1 Notwithstanding any other provision hereof to the contrary, the Board
may amend, alter, or discontinue the Plan or any portion or provision thereof at
any time, provided that no such action shall materially impair the rights of a
Participant with respect to a previously granted Plan award without the
Participant's consent. Notwithstanding the foregoing, the Board may not in any
event, without the approval of the Company's shareholders, adopt an amendment to
the Plan which shall: (a) change the class of persons eligible to become
Participants under the Plan; (b) make any change in the Plan that is required by
Section 162(m) (as in effect on the Effective Amendment Date or as it may
thereafter be amended or renumbered) of the Code to be approved by the Company's
shareholders in order to permit the Committee the ability to have the amounts
payable pursuant to any awards granted by it under the Plan not be subject to
the deduction limits of Section 162(m)(1) (as in effect on the Effective
Amendment Date or as it may thereafter be amended or renumbered) of the Code by
reason of Section 162(m)(4)(C) (as in effect on the Effective Amendment Date or
as it may thereafter be amended or renumbered) of the Code; or (c) make any
other change in the Plan that is required by applicable law to be approved by
the Company's shareholders in order to be effective.
9.2 If approval of the Company's shareholders is required to a Plan
amendment pursuant to the provisions of subsection 9.1 above, then such approval
must be by the favorable vote of a majority of the outstanding stock of the
Company present, or represented, and entitled to vote at a meeting duly held in
accordance with the laws of the state in which the Company is incorporated (or,
to the extent applicable law requires a greater degree or level of approval by
the Company's shareholders in order for such amendment to become effective, such
approval must comply with such required degree or level of approval).
10. WITHHOLDING.
The Company shall retain from the payment of any award granted under the
Plan a sufficient amount of cash applicable to the award to satisfy all
withholding tax obligations that apply to the payment.
11. MISCELLANEOUS.
11.1 Nothing contained in the Plan or any award granted under the Plan
shall confer on any Participant any right to be continued in the employment of
the Company or any Subsidiary of the Company or interfere in any way with the
right of the Company or any Subsidiary to terminate the Participant's employment
at any time and in the same manner as though the Plan and any awards granted
under the Plan were not in effect.
11.2 All payments required to be made under awards granted under the Plan
shall be made by the Company out of its general assets. In this regard, the Plan
shall not be funded, and the Company shall not be required to segregate any
assets to reflect any awards granted under the Plan. Any liability of the
Company to any person with respect to any award granted under the Plan shall be
based solely upon the contractual obligations that apply to such award, and no
such liability shall be deemed to be secured by any pledge of or other lien or
encumbrance on any property of the Company.
58
11.3 Any payments or other benefits provided to a Participant with respect
to an award granted under the Plan shall not be deemed a part of the
Participant's compensation for purposes of any termination or severance pay
plan, or any other pension, profit sharing, or other benefit plan, of the
Company or any Subsidiary of the Company unless such plan expressly or clearly
indicates that the payments or other benefits provided under an award granted
under the Plan shall be considered part of the Participant's compensation for
purposes of such plan or unless applicable law otherwise requires.
11.4 The Plan shall be subject to and construed in accordance with the laws
of the State of Ohio.
IN ORDER TO EFFECT THE PROVISIONS OF THIS PLAN DOCUMENT, Cincinnati
Bell Inc. (doing business as Broadwing Inc.), the sponsor of the Plan, has
caused its name to be subscribed to this Plan document this day of
, 2000, to be effective as of January 1, 2000.
CINCINNATI BELL INC.
(DOING BUSINESS AS BROADWING INC.)
By:
-----------------------------------
Title:
---------------------------------
59
[LOGOS]
PRINTED ON RECYCLED PAPER
[LOGO]
VOTE BY TELEPHONE Have your proxy card available when you call the TOLL-FREE
number 1-800-250-9081 using a touch-tone phone. You will be prompted to enter
your control number found on the reverse side and then you can follow the
simple prompts that will be presented to you to record your vote.
VOTE BY INTERNET
Have your proxy card available when you access the WEBSITE
http://www.broadwing.votefast.com. You will be prompted to enter your Control
Number found on the reverse side and then you can follow the simple prompts
that will be presented to you to record your vote.
VOTE BY MAIL
Please mark, sign and date your proxy card and return it in the postage paid
envelope provided or return it to: Corporate Trust Services, P.O. Box 535800,
Pittsburgh, Pennsylvania 15253.
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VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy
touch-tone phone cast your vote in the POSTAGE-PAID
1-800-250-9081 http://www.broadwing.votefast.com envelope provided
- -------------------------------------------------------------------------------
Vote 24 hours a day, 7 days a week!
Your telephone and internet vote must be received by 11:59 P.M. Eastern
Daylight Time on April 18, 2000 to be counted in the final tabulation. If you
vote by telephone or internet, please do not send your proxy by mail.
Your Control Number is printed on the reverse side.
CINCINNATI BELL INC. d/b/a/ BROADWING INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 19, 2000
The undersigned hereby appoints Daniel J. Meyer, Mary D. Nelson and David B.
Sharrock, and each or any of them, proxies, with full power of substitution, to
represent and to vote all common shares and preferred shares of Cincinnati Bell
Inc. d/b/a Broadwing Inc. held of record by the undersigned on February 25,
2000, at the annual meeting of shareholders to be held on April 19, 2000, at
11:30 A.M. at the Cincinnati Museum Center at Union Terminal in Cincinnati,
Ohio, and at any adjournment thereof, notice of which meeting together with the
related proxy statement has been received. The proxies are directed to vote the
shares the undersigned would be entitled to vote if personally present.
THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR ITEMS 1-5.
ITEM 1 Authority to vote for FOR / / WITHHELD / /
the election of Class 1 ALL NOMINEES LISTED AUTHORITY
directors whose terms (EXCEPT AS MARKED TO VOTE
expire in 2003: TO THE CONTRARY BELOW)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
Richard G. Ellenberger Karen M. Hoguet David B. Sharrock
ITEM 2 To Amend Article First of the Company's Amended Articles of
Incorporation. FOR / / AGAINST / / ABSTAIN / /
ITEM 3 To approve the amended Broadwing Inc. 1997 Long Term Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
ITEM 4 To approve the amended Broadwing Inc. Short Term Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
P.02
ITEM 5 To approve the appointment of PricewaterhouseCoopers LLP as
independent accountants to examine the financial statements of the
Company for the year 2000. FOR / / AGAINST / / ABSTAIN / /
(CONTINUED ON REVERSE SIDE)
P.03
CINCINNATI BELL INC. d/b/a BROADWING INC.
C/O CORPORATE TRUST SERVICES
MAIL DROP 10AT66--4129
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45263
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- -------------------------------------------------------------------------------
YOUR CONTROL NUMBER IS:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You are now able to cast your vote by using a touch-tone telephone or by
using the internet. Instructions for voting are on the reverse side. Your
Control Number for voting is noted above.
FOLD AND DETACH HERE
...............................................................................
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 6.
ITEM 6 To vote on a shareholder proposal if properly presented.
FOR / / AGAINST / / ABSTAIN / /
Please vote, date and sign below and return this proxy form promptly in the
enclosed envelope. If you attend the meeting and wish to change your vote, you
may do so by revoking your proxy in open meeting and voting in person. This
proxy form, when properly executed, will be voted in accordance with the
directions given by the shareholder. If no directions are given hereon, the
proxy form will be voted FOR the election of directors, FOR the amendment to
Article First of the Amended Articles of Incorporation, FOR the approval of the
amended Broadwing Inc. 1997 Long Term Incentive Plan, FOR the approval of the
amended Broadwing Inc. Short Term Incentive Plan, FOR the approval of the
independent accountants and AGAINST the shareholder proposal. This proxy
delegates discretionary authority with respect to any other matters which may
come before the meeting.
Dated ___________________________, 2000
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SIGNATURE
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SIGNATURE IF SHARES HELD JOINTLY
Please sign exactly as name appears
opposite. Executors, trustees,
administrators and other fiduciaries
should so indicate.
P.04