<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1996
REGISTRATION STATEMENT NO. 333-13699
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Amendment No. 2
to
Form S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------
CINCINNATI BELL INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 31-1056105
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>
201 EAST FOURTH STREET, CINCINNATI, OHIO 45202 (513) 397-9900
(Address, including zip code and telephone number, including area code, of
registrant's principal executive office)
------------------------------------
WILLIAM H. ZIMMER III, SECRETARY AND TREASURER, CINCINNATI BELL INC., 201 EAST
FOURTH STREET,
CINCINNATI, OHIO 45202 (513)397-9900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------
Please send copies of all communications to:
<TABLE>
<S> <C>
WILLIAM D. BASKETT III, ESQ. ALLAN G. SPERLING, ESQ.
Frost & Jacobs Cleary, Gottlieb, Steen & Hamilton
201 East Fifth Street One Liberty Plaza
Cincinnati, Ohio 45202 New York, New York 10006-1470
(513) 651-6800 (212) 225-2000
</TABLE>
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of the Registration Statement as determined by
market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (1) a
prospectus relating to the delivery by Salomon Inc ("Salomon"), pursuant to the
% Exchangeable Notes Due February 1, 2001 (the "DECS") of Salomon, of Common
Shares of the Registrant that Salomon may receive from Waslic Company II
("Waslic"), a wholly owned subsidiary of The Western and Southern Life Insurance
Company, pursuant to the terms of certain exchangeable notes of Waslic; and (2)
a prospectus relating to the offer by Bankers Trust Company as Trustee under the
Cincinnati Bell Pension Plans Trust of Common Shares of the Registrant (the
"Pension Trust Prospectus"). The alternate pages for the Pension Trust
Prospectus are marked "Pension Trust Prospectus."
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
NOVEMBER 13, 1996
PROSPECTUS
LOGO
3,000,000 SHARES
CINCINNATI BELL INC.
COMMON SHARES
($1.00 PAR VALUE)
Pursuant to the terms of the % Exchangeable Notes Due February 1, 2001 (the
"Debt Exchangeable for Common StockSM" or "DECSSM") of Salomon Inc, a Delaware
corporation ("Salomon"), Salomon may deliver to the holders of the DECS common
shares, par value $1.00 per share (the "Common Shares"), of Cincinnati Bell Inc.
("Cincinnati Bell"). This Prospectus relates to the delivery by Salomon pursuant
to the DECS of up to 3,000,000 Common Shares, plus up to an additional 450,000
Common Shares with respect to DECS solely to cover over-allotments, that Salomon
may receive from Waslic Company II ("Waslic"), a Delaware corporation and a
wholly owned subsidiary of The Western and Southern Life Insurance Company
("Western & Southern"), under the terms of certain exchangeable notes of Waslic
(the "Waslic DECS") issued to Salomon. This Prospectus accompanies a Prospectus
Supplement and Prospectus of Salomon (together, the "DECS Prospectus") relating
to the sale of 3,000,000 DECS, plus up to an additional 450,000 DECS solely to
cover over-allotments (the "DECS Offering"). Cincinnati Bell will not receive
any of the proceeds from the sale of the DECS or delivery thereunder of the
Common Shares to which this Prospectus relates. Cincinnati Bell takes no
responsibility for any information included in or omitted from the DECS
Prospectus. The DECS Prospectus does not constitute a part of this Prospectus
nor is it incorporated by reference herein.
The Registration Statement of which this Prospectus forms a part also includes a
Prospectus relating to the offering (the "Pension Trust Offering") of up to
2,000,000 Common Shares by Bankers Trust Company as Trustee under the Cincinnati
Bell Pension Plans Trust (the "Cincinnati Bell Pension Plans Trust"), plus up to
an additional 300,000 Common Shares solely to cover over-allotments.
Cincinnati Bell, Waslic and Western & Southern have agreed, subject to certain
exceptions, not to sell, without the prior written consent of Salomon Brothers
Inc ("Salomon Brothers") and Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), any Common Shares or any securities convertible into or exercisable
or exchangeable for Common Shares for a period of 90 days after the date of this
Prospectus. See "Plan of Distribution."
The Common Shares are listed for trading on the New York Stock Exchange, Inc.
(the "NYSE") and the Cincinnati Stock Exchange (the "CSE") under the symbol
"CSN." On November 13, 1996, the last reported sale price of the Common Shares
on the NYSE Composite Tape was $55.75 per share. See "Price Range of Common
Shares and Dividends."
"Debt Exchangeable for Common Stock" and "DECS" are service marks of Salomon
Brothers.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE> 4
IN CONNECTION WITH THE DECS OFFERING AND THE PENSION TRUST OFFERING, THE
RESPECTIVE UNDERWRITERS OF THE DECS AND THE COMMON SHARES MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS OR
THE COMMON SHARES OF CINCINNATI BELL AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
FORWARD-LOOKING STATEMENTS
Certain information incorporated by reference into this Prospectus under
the captions "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere include
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and is subject to the safe harbor created by that
Act. There are several important factors that could cause actual results to
differ materially from those anticipated by the forward-looking statements
contained in such discussions. Additional information on the risk factors which
could affect Cincinnati Bell's financial results is included in this Prospectus
and in other documents incorporated by reference herein.
AVAILABLE INFORMATION
Cincinnati Bell is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Cincinnati Bell may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Room 3190, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may be
obtained by mail from the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, material filed by Cincinnati Bell can be
inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New
York 10005. The Commission maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including Cincinnati
Bell.
Cincinnati Bell has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Common Shares offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed as a part thereof,
as permitted by the rules and regulations of the Commission. For further
information with respect to Cincinnati Bell and the Common Shares, reference is
hereby made to such Registration Statement, including the exhibits and schedules
filed as a part thereof. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made for a full
statement of the provisions thereof. The Registration Statement, including the
exhibits and schedules filed as a part thereof, may be inspected without charge
at the public reference facilities maintained by the Commission as set forth in
the preceding paragraph. Copies of these documents may be obtained at prescribed
rates from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
3
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Cincinnati Bell with the
Commission (File No. 1-8519) and are incorporated herein by reference:
1. Cincinnati Bell's Annual Report on Form 10-K for the year ended
December 31, 1995.
2. Cincinnati Bell's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996.
All documents filed by Cincinnati Bell pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing such documents.
Any statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document that is also incorporated or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. Subject to the foregoing, all information
appearing in this Prospectus is qualified in its entirety by the information
appearing in the documents incorporated by reference herein.
Cincinnati Bell will provide without charge, upon written or oral request,
to each person to whom a copy of this Prospectus is delivered, a copy of any or
all of the documents referred to above other than exhibits to such documents.
Requests for such copies should be directed to the Secretary of Cincinnati Bell
Inc., 201 East Fourth Street, Cincinnati, Ohio 45202, telephone number (513)
397-9900.
------------------------------------------------------
"Debt Exchangeable for Common Stock" and "DECS" are service marks of
Salomon Brothers Inc.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information and financial statements, including the notes thereto,
contained elsewhere or incorporated by reference in this Prospectus. Unless
otherwise indicated, the information contained in this Prospectus assumes no
exercise of the Underwriters' over-allotment option.
THE COMPANY
Cincinnati Bell is a major U.S. diversified telecommunications company with
principal businesses in three industry segments. The telephone operations
segment, Cincinnati Bell Telephone Company ("CBT"), provides telecommunications
services and products, which include local service, network access and toll
telephone services in the Greater Cincinnati area. The information systems
segment, Cincinnati Bell Information Systems Inc. ("CBIS"), provides data
processing and software development services primarily to the U.S.
telecommunications industry. The telephone marketing services segment, MATRIXX
Marketing Inc. ("MATRIXX"), provides telephone marketing, research, fulfillment,
database management, interactive voice response and Internet services primarily
to large corporations such as AT&T Corp. ("AT&T") and DIRECTV Inc.
("DIRECTV(R)"). Cincinnati Bell also provides long distance and directory
services, markets communications equipment and has a minority interest in a
partnership which operates cellular telephone systems.
Cincinnati Bell is a leader in each of its principal businesses. CBT is the
leading local telephone company in the Greater Cincinnati area; CBIS is the
leading provider of billing and customer care services to the wireless
telecommunications market in North America; and MATRIXX is the largest
independent provider of outsourced telephone marketing services based on annual
revenues.
Cincinnati Bell's revenues and operating income excluding special items for
1995 were approximately $1.3 billion and $225 million, respectively,
representing increases of 9% and 32% over 1994. Cincinnati Bell's revenues and
operating income excluding special items for the first nine months of 1996 were
$1,141.3 million and $207.6 million, respectively, representing increases of 15%
and 24% over the first nine months of 1995.
STRATEGY
The three principal businesses and other interests of Cincinnati Bell are
the products of a focused strategy first initiated in 1983 to expand from a
local exchange telecommunications company into a broader, more diversified
company providing value-added customer care services in high growth and
converging communications markets. By leveraging the combined knowledge,
capabilities and experience of its principal subsidiaries, Cincinnati Bell seeks
to take advantage of the opportunities arising from the growing communications
market and the growing trend of outsourcing information and telephone marketing
services. Cincinnati Bell's ability to provide unique insight into the customer
care requirements of outsourcing clients of both CBIS and MATRIXX is enhanced by
the knowledge and expertise developed by serving CBT, a full service
telecommunications provider.
In addition to the growth opportunities and synergies created by working
together, each business -- CBT, CBIS and MATRIXX -- has growth strategies in its
respective markets. CBT's strategy is to leverage off its well regarded brand
name, excellent service record and tradition of quality to be a full service
provider of bundled communications, information and entertainment services.
CBIS's strategy is to utilize the scale of its data processing operations and
its extensive industry knowledge and experience to be the leading provider of
customer care and billing services and network provisioning and management
systems to the communications industry. MATRIXX's strategy is to focus on
developing long-term strategic outsourcing relationships for telephone marketing
support of large clients in the telecommunications, technology, financial
services, consumer products and direct response industries.
Cincinnati Bell's principal executive offices are located at 201 East
Fourth Street, Cincinnati, Ohio 45202. The telephone number is (513) 397-9900.
5
<PAGE> 7
THE OFFERINGS
The DECS are being offered by Salomon in the DECS Offering pursuant to the
DECS Prospectus. Pursuant to the terms of the DECS, Salomon may deliver Common
Shares to the holders of the DECS at maturity thereof. This Prospectus relates
to the delivery by Salomon pursuant to the DECS of up to 3,000,000 Common
Shares, plus up to an additional 450,000 Common Shares with respect to DECS
solely to cover over-allotments, that Salomon may receive from Waslic under the
terms of the Waslic DECS. For a description of certain relationships among
Waslic, Western & Southern and Cincinnati Bell, see "Certain Relationships."
The Cincinnati Bell Pension Plans Trust is also offering for sale in the
Pension Trust Offering 2,000,000 Common Shares, plus up to an additional 300,000
Common Shares solely to cover over-allotments.
6
<PAGE> 8
SUMMARY FINANCIAL INFORMATION OF CINCINNATI BELL INC.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues........................... $1,141.3 $ 992.9 $1,336.1 $1,228.2 $1,096.2 $1,101.4 $1,064.7
Costs and expenses (excluding
special items)................... 933.7 825.4 1,110.7 1,057.1 982.0 990.8 920.0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (excluding special
items)........................... 207.6 167.5 225.4 171.1 114.2 110.6 144.7
Special items...................... (14.4) 134.5 178.7 5.7 132.9 19.4 26.8
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)............ 222.0 33.0 46.7 165.4 (18.7) 91.2 117.9
Other income (expense), net........ 9.4 0.7 (13.5) 1.7 9.4 10.9 4.2
Interest expense................... 25.1 39.8 52.8 49.5 45.8 46.2 52.8
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes,
extraordinary charges and
cumulative effect of change in
accounting principle............. 206.3 (6.1) (19.6) 117.6 (55.1) 55.9 69.3
Income taxes....................... 72.9 (2.3) 5.7 42.1 1.7 17.0 26.6
Extraordinary charges and
cumulative effect of change
in accounting principle.......... -- -- (7.0) (2.9) -- (3.7) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).................. $ 133.4 $ (3.8) $ (32.3) $ 72.6 $ (56.8) $ 35.2 $ 42.7
=========== =========== =========== =========== =========== =========== ===========
Earnings (loss) per common share... $ 1.94 $ (.06) $ (.49) $ 1.11 $ (.93) $ .50 $ .63
Dividends declared per common
share............................ $ .60 $ .60 $ .80 $ .80 $ .80 $ .80 $ .80
Weighted average common shares
outstanding (000)................ 68,645 66,204 66,271 65,443 63,296 61,914 61,334
Operating margin (excluding special
items)........................... 18.2% 16.9% 16.9% 13.9% 10.4% 10.0% 13.6%
FINANCIAL POSITION
Total assets....................... $1,631.3 $1,743.5 $1,591.7 $1,723.4 $1,664.1 $1,632.5 $1,743.1
Long-term debt..................... $ 381.3 $ 491.1 $ 386.8 $ 528.3 $ 522.9 $ 350.1 $ 445.2
Total debt......................... $ 517.4 $ 605.2 $ 512.9 $ 597.0 $ 634.9 $ 543.0 $ 618.1
Common shareowners' equity......... $ 585.4 $ 516.8 $ 478.1 $ 552.4 $ 515.6 $ 568.9 $ 581.6
</TABLE>
7
<PAGE> 9
RISK FACTORS
The following factors should be considered in connection with an investment
in Cincinnati Bell Common Shares. Any one or more of such factors may cause
Cincinnati Bell's actual results for various financial reporting periods to
differ materially from those expressed in any forward-looking statements made by
or on behalf of Cincinnati Bell.
REGULATORY AND COMPETITIVE TRENDS
Recently enacted and future legislative and regulatory initiatives will
have an impact on CBT and other incumbent local exchange carriers ("LECs"),
including the Regional Bell Operating Companies ("RBOCs") and other independent
telephone companies. The extent of that impact will not be known until the
initiatives are fully implemented. The basic thrust of these initiatives is to
encourage and accelerate the development of competition in the
telecommunications industry by removing legal barriers to competition across
major segments of that industry. Under the initiatives, companies that today are
limited to one or more of those segments, including local exchange, long
distance, wireless, cable television and information services, could enter the
other segments to compete with the incumbent providers and other new entrants.
Today's technology makes it possible to interconnect facilities of
competing telecommunications carriers and to provide the service offerings of
multiple competitors through the network facilities of one or more incumbents.
At the federal level, the Telecommunications Act of 1996 (the "Act") passed in
February 1996 requires incumbent LECs like CBT to interconnect with the networks
of other service providers, unbundle certain network elements and make them
available to competing providers at wholesale rates. Additionally, the Act
requires the removal of other perceived barriers to competitive entry by
alternative providers of local exchange services. Although the Act clearly
states these mandates, it does so in general terms and leaves the implementation
of these mandates to the Federal Communications Commission ("FCC") and the state
regulatory agencies.
On August 8, 1996, the FCC issued an order establishing regulations to
implement the "local competition" provisions of the Act. These regulations
essentially establish parameters under which a LEC must allow other
telecommunications carriers to interconnect with its network, including the
compensation that a LEC would receive for terminating calls originating from the
networks of the other carriers. The FCC's regulations also establish parameters
under which LECs must unbundle network elements and offer them to other
telecommunications carriers. The prices for interconnection and unbundled
elements either are to be negotiated between the parties (and approved by the
relevant state commission) or, if the parties fail to reach an agreement, the
rates are to be set by the relevant state commission based on guidelines
established by the Act and implemented by the FCC. Under the Act, these rates
must be based on the cost of providing the interconnection or unbundled
elements, be nondiscriminatory and include a reasonable profit. The FCC has
determined that the prices for these unbundled elements and interconnection are
to be based on a methodology governed by forward-looking, long-run incremental
costs. The Act also requires LECs to offer to other telecommunications carriers,
at wholesale rates, any retail telecommunications service offered by the LEC to
end-users. The FCC has determined that the wholesale rates are to be based on
the LEC's retail rates, less the costs avoided by the LEC in offering its
services for resale.
CBT and several other LECs believe the FCC's regulations with respect to
interconnection, unbundling and resale unlawfully exceed the requirements of the
Act. Accordingly, they have sought review of the FCC's order in the United
States Court of Appeals. The primary objections raised by CBT and the other LECs
are that the pricing rules and standards for interconnection, unbundling and
resale, and the rules allowing interconnecting carriers to "pick and choose"
from various unbundled elements and services, along with their prices, being
provided by LECs pursuant to pre-approved contracts with other carriers, will
not provide the LECs with adequate compensation. On October 15, 1996, the United
States Court of Appeals for the Eighth Circuit stayed the effectiveness of the
portions of the FCC order establishing the pricing standards and the "pick and
choose" rules. A petition to vacate the Eighth Circuit's stay of these rules is
pending before the United States Supreme Court, but one Justice on the Supreme
Court has already denied a petition to lift the stay. As a result of the stay,
these rules are suspended, pending a final decision on the merits of the
petition for
8
<PAGE> 10
review of these rules. The appeal is scheduled for argument the week of January
13, 1997. The FCC regulations requiring LECs to negotiate with new entrants,
unbundle and resell still exist; however, pending a decision on the appeal,
pricing will be determined by private negotiations as approved by state
regulatory authorities or by state arbitrations.
If the FCC's order were implemented as written, and if CBT were unable to
obtain waivers to certain requirements or to replace its lost revenues,
Cincinnati Bell believes that the result would have a material adverse impact on
its revenues and earnings. The material impact would result from the elimination
of certain revenues designed to subsidize residential telephone service and
increased costs to develop or modify systems to allow number portability and
interconnection. CBT also believes that implementation of the FCC order would
significantly enhance the position of its competitors, which would have an
additional adverse impact on CBT's revenues and earnings from operations within
its territory.
The outcome of three separate, but related, FCC proceedings could be
significant for CBT. In the first of these proceedings, the FCC will be
implementing a universal service funding mechanism which is currently being
developed by a joint board made up of state and federal regulators. In the
second of these proceedings, the FCC will be reforming the current access charge
regime, which could result in an additional reduction in revenues. In the third,
the FCC will be implementing regulations that may require certain LECs to share
their infrastructure, technology, information and facilities with certain
smaller telecommunications service providers.
At the state level, the Public Utilities Commission of Ohio ("PUCO")
recently adopted a set of local service guidelines that largely mirror the
requirements of the Act and the FCC regulations discussed above. In addition,
the PUCO has issued orders granting Time Warner Communications of Ohio, L.P. and
Communications Buying Group, Inc. certificates of public convenience and
necessity to provide local exchange service in CBT's operating territory. Other
entities have been granted certificates to provide basic local exchange service
in Ohio, although not in CBT's operating territory. On November 7, 1996, in
response to the request of CBT and others for rehearing, the PUCO reissued the
guidelines for local competition in Ohio. CBT is currently analyzing the impact
of these guidelines. Cincinnati Bell believes that CBT will face increased
competition under these guidelines which may have a material adverse effect on
its operating results. To date, six competitors have requested interconnection
with CBT's network.
On September 26, 1996, the Public Service Commission of Kentucky ("PSCK")
issued its rules for local competition in Kentucky. A major portion of the rules
outlines the PSCK's perspective regarding universal service and the development
of a universal service fund intended to keep residential rates within the state
affordable. The rules established a workshop process to review universal service
funding. The rules also established an interim resale discount of 17% for most
LECs including CBT pending the submission of company-specific cost studies
supporting a smaller discount. The PSCK did not, however, adopt detailed rules
for interconnection. CBT is reviewing the rules to determine their impact, but
the adopted rules are likely to lead to increased competition for CBT in
Kentucky and may have an adverse effect on its operating results.
The impact of the proposed regulatory changes may be mitigated through
modification of the final rules, waivers of the rules and price increases in
other regulated services (e.g., local rates).
CUSTOMER CONCENTRATION
MATRIXX, CBIS and CBT rely on several significant customers for a large
percentage of their respective revenues. Their relationships with customers are
typically based on written contracts with a set term; however, such contracts
may contain provisions that allow a customer at any time to terminate the
relationship prior to the end of the contract term. In the case of MATRIXX,
three customers represented approximately 38% of its 1995 revenues and 40% of
its first nine months of 1996 revenues. In the case of CBIS, its four largest
customers, other than CBT, collectively represented approximately 70% of its
1995 revenues. Each of Cincinnati Bell's major subsidiaries derives significant
revenues from AT&T and its affiliates by providing network services, billing and
customer care systems and telephone marketing services. During 1995, revenues
from AT&T accounted for 26% of Cincinnati Bell's consolidated revenues under
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<PAGE> 11
various independent contracts with one or more of its subsidiaries. Thus, the
loss of one or more significant customers could have a material adverse effect
on Cincinnati Bell's operating results.
CBT and AT&T are discussing whether to revise portions of their agreement
concerning the joint provision of certain telecommunication services. Revenues
subject to discussion represent approximately $36 million or 6% of CBT's 1995
revenues, but portions of the contract provide above average profit
contribution. The outcome of such discussions cannot be predicted, but
significant changes in the relationship could have a material adverse impact on
CBT's future earnings. These discussions with AT&T do not involve AT&T's
relationship with other Cincinnati Bell subsidiaries.
CUSTOMER AND INDUSTRY SUCCESS
The revenues generated by MATRIXX and CBIS are dependent on the success of
their customers. If their customers are not successful, the amount of business
that such customers outsource will be diminished. Several of MATRIXX's and
CBIS's current customers participate in emerging industries. The extent to which
products marketed by such customers (e.g., personal communications services
("PCS")) will be successful is not yet known. Thus, although CBIS and MATRIXX
have signed contracts to provide services to such customers, there can be no
assurance that the level of revenues to be received from such contracts will
meet expectations.
Each of the business segments in which Cincinnati Bell's subsidiaries
conduct their business has grown significantly in the last several years. To the
extent that growth in these industry segments declines, such decline could
adversely affect the growth of each subsidiary's business. In addition, the
possibility of continued growth in these segments could be affected by the
development of new products that provide alternatives to the product offerings
of Cincinnati Bell, and by a change in the trend of businesses generally to
outsource functions unrelated to their core capabilities.
RAPIDLY CHANGING TECHNOLOGY
The telecommunications industry is subject to rapid and significant changes
in technology. Cincinnati Bell's businesses are highly dependent on its
computer, telecommunications and software systems. Cincinnati Bell's failure to
maintain the superiority of its technological capabilities or to respond
effectively to technological changes could have an adverse effect on its
businesses, results of operations or financial condition. Cincinnati Bell's
future success also will be highly dependent upon its ability to enhance
existing services and introduce new services or products to respond to changing
technological developments. There can be no assurance that Cincinnati Bell can
successfully develop and bring to market any new services or products in a
timely manner, that such services or products will be commercially successful or
that competitors' technologies or services will not render Cincinnati Bell's
products or services noncompetitive or obsolete.
POTENTIAL VOLATILITY OF STOCK PRICE
The trading price of Cincinnati Bell's Common Shares is subject to
fluctuations in response to Cincinnati Bell's operating profits, announcements
of new contract awards or new products by Cincinnati Bell and its subsidiaries
or their competitors, general conditions in the market, changes in earnings
estimates by analysts, failure to meet the revenues or earnings estimates of
analysts or other events or factors. The public stock markets have experienced
price and trading volume volatility in recent months. This volatility has
significantly affected the market prices of securities of many companies for
reasons frequently unrelated to the operating performance of the specific
companies. The market price for the Common Shares has been highly volatile.
Future announcements concerning Cincinnati Bell, its subsidiaries or their
competition, including the results of technological innovations, new products,
government regulations, litigation or public concern with respect to Cincinnati
Bell or its subsidiaries and other factors including those described above, may
have a significant impact on the market price of the Common Shares.
It is not possible to predict accurately how or whether any market that
develops for the DECS will influence the market for the Common Shares. For
example, the price of the Common Shares could become more volatile and could be
depressed by investors' anticipation of the potential distribution into the
market,
10
<PAGE> 12
upon the maturity of the DECS, of the 3,000,000 Common Shares which may be
delivered by Waslic upon the maturity of the DECS (currently constituting
approximately 4.5% of the outstanding Common Shares). See "Certain
Relationships." The price of the Common Shares could also be affected by
possible sales of Common Shares by investors who view the DECS as a more
attractive means of equity participation in Cincinnati Bell and by hedging or
arbitrage trading activity that may develop involving the DECS and the Common
Shares.
USE OF PROCEEDS
Cincinnati Bell will not receive any of the proceeds from the sale of the
DECS by Salomon Inc or the sale of the Common Shares by the Cincinnati Bell
Pension Plans Trust.
PRICE RANGE OF COMMON SHARES AND DIVIDENDS
The Common Shares are traded under the symbol "CSN" on the NYSE and on the
CSE. The following table sets forth for the indicated calendar quarters the high
and low sales prices for the Common Shares, as reported in the NYSE consolidated
transaction system, and the dividends paid per Common Share since January 1,
1994.
<TABLE>
<CAPTION>
SALES PRICES
------------ DIVIDENDS
HIGH LOW PAID
---- ---- ---------
<S> <C> <C> <C>
1994
First Quarter.................................................... $18 7/8 $15 1/2 $ .20
Second Quarter................................................... $17 1/2 $15 3/8 $ .20
Third Quarter.................................................... $20 1/8 $ 16 $ .20
Fourth Quarter................................................... $19 1/2 $16 3/4 $ .20
1995
First Quarter.................................................... $22 1/8 $16 7/8 $ .20
Second Quarter................................................... $26 1/4 $20 7/8 $ .20
Third Quarter.................................................... $28 1/8 $24 3/4 $ .20
Fourth Quarter................................................... $35 1/4 $26 1/8 $ .20
1996
First Quarter.................................................... $ 53 $32 1/4 $ .20
Second Quarter................................................... $57 3/4 $46 7/8 $ .20
Third Quarter.................................................... $53 1/4 $45 3/8 $ .20
Fourth Quarter (through November 13, 1996)....................... $56 7/8 $46 1/4 $ .20
</TABLE>
As of September 30, 1996, there were approximately 18,532 holders of record
of the Common Shares and 67,393,953 Common Shares outstanding, including
8,171,378 shares held by or for the account of Cincinnati Bell, its subsidiaries
and its employee benefit plans.
Cincinnati Bell has paid consecutive cash dividends on its Common Shares
since 1879. The payment of future dividends will depend upon future earnings,
the financial condition of Cincinnati Bell and other factors.
11
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected historical consolidated financial
and operating data of Cincinnati Bell and its subsidiaries. The selected
historical consolidated financial data as of and for each of the five years in
the period ended December 31, 1995 have been derived from the audited
consolidated financial statements of Cincinnati Bell. The selected consolidated
financial data as of and for the nine month periods ended September 30, 1996 and
1995 have been derived from the unaudited consolidated financial statements of
Cincinnati Bell. The statements for such nine month periods, in the opinion of
management, include all adjustments necessary to present fairly the financial
results for such periods. All adjustments are of a normal or recurring nature
except those outlined in Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Form 10-Ks and Form 10-Qs of Cincinnati Bell for those
periods. The results of operations for the nine month period ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
full fiscal year. The historical consolidated financial data set forth below
should be read in conjunction with the audited and unaudited consolidated
financial statements of Cincinnati Bell incorporated by reference herein. See
"Available Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues.................................. $1,141.3 $ 992.9 $1,336.1 $1,228.2 $1,096.2 $1,101.4 $1,064.7
Costs and expenses (excluding special
items).................................. 933.7 825.4 1,110.7 1,057.1 982.0 990.8 920.0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (excluding special
items).................................. 207.6 167.5 225.4 171.1 114.2 110.6 144.7
Special items............................. (14.4) 134.5 178.7 5.7 132.9 19.4 26.8
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)................... 222.0 33.0 46.7 165.4 (18.7) 91.2 117.9
Other income (expense), net............... 9.4 0.7 (13.5) 1.7 9.4 10.9 4.2
Interest expense.......................... 25.1 39.8 52.8 49.5 45.8 46.2 52.8
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes,
extraordinary charges and cumulative
effect of change in accounting
principle............................... 206.3 (6.1) (19.6) 117.6 (55.1) 55.9 69.3
Income taxes.............................. 72.9 (2.3) 5.7 42.1 1.7 17.0 26.6
Extraordinary charges and cumulative
effect of change
in accounting principle................. -- -- (7.0) (2.9) -- (3.7) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)......................... $ 133.4 $ (3.8) $ (32.3) $ 72.6 $ (56.8) $ 35.2 $ 42.7
=========== =========== =========== =========== =========== =========== ===========
Earnings (loss) per common share.......... $ 1.94 $ (.06) $ (.49) $ 1.11 $ (.93) $ .50 $ .63
Dividends declared per common share....... $ .60 $ .60 $ .80 $ .80 $ .80 $ .80 $ .80
Weighted average common shares outstanding
(000)................................... 68,645 66,204 66,271 65,443 63,296 61,914 61,334
Operating margin (excluding special
items).................................. 18.2% 16.9% 16.9% 13.9% 10.4% 10.0% 13.6%
FINANCIAL POSITION
Total assets.............................. $1,631.3 $1,743.5 $1,591.7 $1,723.4 $1,664.1 $1,632.5 $1,743.1
Long-term debt............................ $ 381.3 $ 491.1 $ 386.8 $ 528.3 $ 522.9 $ 350.1 $ 445.2
Total debt................................ $ 517.4 $ 605.2 $ 512.9 $ 597.0 $ 634.9 $ 543.0 $ 618.1
Common shareowners' equity................ $ 585.4 $ 516.8 $ 478.1 $ 552.4 $ 515.6 $ 568.9 $ 581.6
OTHER DATA
Total capital additions (including
acquisitions)........................... $ 135.5 $ 102.7 $ 166.8 $ 156.2 $ 235.4 $ 140.1 $ 193.3
Telephone plant construction.............. $ 71.5 $ 68.2 $ 90.3 $ 112.8 $ 111.6 $ 95.0 $ 115.9
Access minutes of use (millions) --
Interstate... 2,046 1,889 2,536 2,336 2,132 1,985 1,852
Intrastate... 715 716 956 932 888 836 793
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total............................... 2,761 2,605 3,492 3,268 3,020 2,821 2,645
</TABLE>
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cincinnati Bell is a major U.S. diversified telecommunications company with
principal businesses in three industry segments. The telephone operations
segment, CBT, provides telecommunications services and products, which include
local service, network access and toll telephone services in the Greater
Cincinnati area. The information systems segment, CBIS, provides data processing
services and software development services through long-term contracts primarily
to the U.S. telecommunications industry. The telephone marketing services
segment, MATRIXX, provides telephone marketing, research, fulfillment, database
management, interactive voice response and Internet services. The operations of
Cincinnati Bell's long distance, directory services, and equipment supply
businesses are included with corporate operations in the Other category. The
following discussion should be read in conjunction with Cincinnati Bell's
Consolidated Financial Statements and the accompanying Notes. Results for
interim periods may not be indicative of results for the full year.
RESULTS OF OPERATIONS
CONSOLIDATED OVERVIEW
First Nine Months of 1996 Compared to First Nine Months of 1995
Cincinnati Bell's consolidated revenues were $1,141.3 million compared to
$992.9 million, an increase of 15%. Net income was $133.4 million compared to a
net loss of $3.8 million in 1995. Earnings per share for the first nine months
of 1996 were $1.94 compared to a loss per share of $.06 for the first nine
months of 1995.
Results for the first nine months of 1996 include $16.5 million of pension
settlement gains from a business restructuring of Cincinnati Bell in 1995.
During the quarter ended September 30, 1996, Cincinnati Bell incurred a $2.1
million charge for acquired research and development and reversed $2.5 million
of accrued interest expense related to overearnings liabilities. These items
increased net income $10.8 million and earnings per share $.15. The results for
the first nine months of 1995 also include $132.0 million of special charges for
business restructuring at CBT ($124.0 million) and Cincinnati Bell ($8.0
million) and a $2.5 million charge for acquired research and development. These
charges reduced net income by $85.6 million or $1.29 per share.
1995 Compared to 1994 and 1994 Compared to 1993
Revenues increased 9% in 1995 to $1,336.1 million from $1,228.2 million in
1994. 1994 revenues increased 12% from 1993. Revenue growth in 1995 was 4% at
CBT, 9% at CBIS and 20% at MATRIXX.
Cincinnati Bell's consolidated net loss was $32.3 million in 1995 compared
to net income of $72.6 million in 1994 and a net loss of $56.8 million in 1993.
1995 loss per share was $.49 compared to earnings per share of $1.11 in 1994 and
a loss per share of $.93 in 1993.
Excluding special items, consolidated net income was $114.2 million in 1995
or $1.72 per share, a 44% increase in net income versus 1994. Consolidated net
income was $79.2 million in 1994 or $1.21 per share and $50.1 million in 1993 or
$.76 per share.
In 1995, Cincinnati Bell approved a business restructuring plan for CBT and
Cincinnati Bell. The restructuring plan resulted in the need for fewer employees
to operate their businesses. Most of the reductions in personnel came from the
offering of early retirement incentives. The charges were primarily related to
pension enhancements and associated postretirement health care costs for
retirees. More than 1,300 employees accepted the early retirement offer
including approximately 1,000 hourly workers. Through the end of 1995
approximately 250 management and 450 hourly employees had left as a result of
the offer. The remainder will leave through early 1997. New employees are being
added in certain areas to support new business efforts. Results in 1995 included
after-tax charges of $84 million for these restructurings.
Results in 1995 also included a $39.4 million after-tax charge to write
down goodwill associated with MATRIXX's French subsidiary, $8.5 million after
tax to terminate an interest rate and currency swap agreement used to hedge the
French MATRIXX investment and $7 million after tax to retire certain long-term
debt. Finally, $4.6 million after tax was charged to in-process research and
development on two CBIS acquisitions. (See Note 2 of Notes to Cincinnati Bell's
Consolidated Financial Statements incorporated herein
13
<PAGE> 15
by reference to Cincinnati Bell's Annual Report on Form 10-K for the period
ended December 31, 1995 for greater detail on these subjects.) These special
items reduced net income in 1995 by $146.5 million or $2.21 per share.
Results in 1994 included an after-tax charge of $6.6 million or $.10 per
share for special items and a change in accounting for the adoption of Statement
of Financial Accounting Standards (SFAS) 112 for post-employment benefits. (See
Note 2 of Notes to Cincinnati Bell's Consolidated Financial Statements for a
discussion of the SFAS 112 impact.)
TELEPHONE OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER YEAR ENDED YEAR ENDED
30, DECEMBER 31, DECEMBER 31,
--------------- % CHANGE --------------- % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
------ ------ -------- ------ ------ -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Local service................ $276.6 $262.6 5% $352.6 $329.3 7% $304.1 8%
Network access............... 118.6 106.6 11% 142.6 141.0 1% 138.5 2%
Long distance................ 21.1 25.8 (18)% 33.5 37.2 (10)% 41.4 (10)%
Other........................ 67.2 71.2 (6)% 95.7 92.2 4% 98.1 (6)%
------ ------ ------ ------ ------------
Total...................... 483.5 466.2 4% 624.4 599.7 4% 582.1 3%
Operating expenses (excluding
special items)............... 387.4 379.6 2% 508.7 496.6 2% 481.9 3%
------ ------ ------ ------ ------------
Operating income (excluding
special items)............... 96.1 86.6 11% 115.7 103.1 12% 100.2 3%
Special items.................. (16.5) 124.0 -- 121.7 3.6 -- 6.6 --
------ ------ ------ ------ ------------
Operating income (loss)........ $112.6 $(37.4) -- $ (6.0) $ 99.5 -- $ 93.6 6%
Access lines (000)............. 936 900 4% 906 877 3% 848 3%
CBT employees.................. 2,900 3,000 (3)% 2,700 3,300 (18)% 3,400 (3)%
Access lines per CBT
employee..................... 323 300 8% 336 266 26% 249 7%
Minutes of use (millions)
Interstate................... 2,046 1,889 8% 2,536 2,336 9% 2,132 10%
Intrastate................... 715 716 -- 956 932 3% 888 5%
------ ------ ------ ------ ------------
Total...................... 2,761 2,605 6% 3,492 3,268 7% 3,020 8%
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
Local service revenues increased $14.0 million for the first nine months of
1996 compared to 1995 primarily due to continuing access line growth. Much of
the access line growth was attributed to higher installations of second
residential lines for home office and on-line computer services. Growth in
enhanced custom calling services, central office features, public telephone
revenues and new rates approved by the PSCK that became effective in May 1995
accounted for the remainder of the increase. The approval by the PSCK maintained
uniform rates for basic services in CBT's Kentucky and Ohio metropolitan areas.
Network access revenues increased $12.0 million from a 6% growth in access
minutes of use, higher end user charges as a result of access line growth and a
change in estimates for potential overearnings liability.
The $4.7 million decrease in long distance revenues was caused by lower
settlement revenues from interexchange carriers and independent companies and a
decline in long distance message revenues from the expansion of local service
areas in some Northern Kentucky counties in November 1995.
Other telephone operations revenues decreased $4.0 million. Billing and
collection services decreased as more customers are now performing these
services in-house. Commission revenue decreased from less sales subject to
commissions. An increase in the provision for uncollectible accounts caused a
decrease in revenues. Partially offsetting the decreases were higher sales of
wiring services and increases in payphone agent revenues because of increased
levels of business activity.
14
<PAGE> 16
Operating expenses were comparable to the first nine months of 1995 after
excluding special charges and credits for the 1995 business restructuring.
Contracted services, consulting fees and data processing costs increased $8.9
million as a result of business restructuring projects, many of which started in
the second quarter of 1996. Advertising costs were higher by $1.6 million
because of specific campaigns marketing new services, additional lines and
internet access. The level of cost reduction due to salaries and wages is less
than the headcount reduction as costs have increased concurrently for overtime
resulting from business growth and the need to maintain high quality service.
The extremely wet weather in the Cincinnati area during the second quarter of
1996 also contributed to increased labor costs required for repairs.
Depreciation and amortization expenses increased $2.7 million primarily as a
result of increases in switching, circuit and outside plant assets.
Right-to-use fees were lower for the first nine months of 1996 by $1.8
million as a result of network software upgrades made in 1995 to provide
additional customer services. Operating taxes decreased $4.7 million primarily
from a 1995 Ohio tax law change on equipment placed into service after January
1, 1994. Facilities expenses decreased $3.5 million because certain leases for
administrative buildings were terminated or expired as part of the business
restructuring. The remaining differences were primarily in costs of goods sold,
supplies and miscellaneous expenses.
1995 Compared to 1994 and 1994 Compared to 1993
Continued record growth in access lines, a full year's effect of the
increases in rates in Ohio (which took effect in mid 1994) and new rates
approved by the PSCK effective May 1995 increased local service revenues by
$14.8 million in 1995. The remaining increase of $8.5 million was primarily from
increased customer usage of enhanced custom calling services and directory
assistance.
Growth in access lines and an increase in rates approved by the PUCO in
Ohio effective May 1994 accounted for $14.7 million of the increase in local
service revenues in 1994. Revenues were also higher by $9.3 million as a result
of sales of enhanced custom calling services and increased usage of both
directory assistance and public telephone services.
Network access revenues increased in 1995 from access line growth and
increased minutes of use, as well as lower support payments to the National
Exchange Carrier Association ("NECA").
The increase in interstate network access revenues in 1994 was primarily
attributable to the $6.6 million reduction in 1993 revenues resulting from
orders of the FCC. In addition, higher minutes of use and lower support payments
to NECA accounted for $5.5 million of the increase. FCC orders involving
overearnings complaints against CBT for the 1987-1988 monitoring period were
recorded as a reduction of access revenues in 1993.
Long distance revenues decreased $3.7 million in 1995 because of lower
settlements with interexchange carriers and independent companies due primarily
to decreases in rates. Long distance revenues declined $4.2 million in 1994
because of lower settlement revenues from independent companies, the effect of a
favorable retroactive interexchange carrier adjustment in February 1993 and an
interstate message toll rate reduction in January 1994.
Other telephone operations revenues increased $3.5 million in 1995 from
growth in customer premises equipment repairs, payphone agent services for
interexchange carriers, voice mail and billing and collection services. The
increases were partially offset by lower sales of merchandise and an increased
provision for uncollectibles.
In 1994 other telephone operations revenues were lower by $10.3 million
because CBT discontinued its leasing of telecommunications equipment in late
1993 and sold its residential equipment leasing and PhoneCenter store businesses
in the first quarter of 1993.
Operating expenses excluding special items increased $12.1 million in 1995
compared to 1994. Contract services for systems development and other services
increased $10.3 million primarily as a result of the business restructuring. The
increase also includes higher depreciation and amortization expenses of $2.3
million as a result of rate represcriptions in Ohio which became effective in
July 1994 and higher levels of
15
<PAGE> 17
depreciable plant. Right-to-use fees were lower by $3.2 million as a consequence
of fewer switch conversions and network software upgrades.
Operating expenses excluding special items increased $14.7 million in 1994.
Right-to-use fees for advanced intelligent network software upgrades increased
$3.5 million. Postretirement benefit costs increased $4.5 million primarily from
expensing 1993 costs which were deferred with regulatory approval. Expenses were
$5.2 million higher in 1994 because of a 1993 change in vacation policy which
resulted in a one-time expense reduction. Depreciation and amortization expense
increased $11.4 million in 1994, with $9.7 million resulting from depreciation
rate represcriptions by the Federal and Kentucky authorities effective January
1, 1994, and the PUCO effective July 1, 1994. In November 1994, CBT presented a
separation offer to its senior managers which resulted in $3.6 million of
special charges in 1994.
Partially offsetting the 1994 increase in operating expenses was a $7.4
million reduction reflecting businesses sold and discontinued and a $3.7 million
decline resulting from lower software costs.
INFORMATION SYSTEMS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------------- % CHANGE --------------- % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
------ ------ -------- ------ ------ -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $346.5 $275.8 26% $373.9 $343.8 9% $ 356.6 (4)%
Operating expenses (excluding
special items).................. 290.0 242.1 20% 327.9 316.7 4% 357.9 (12)%
------ ------ ------ ------ ------------
Operating income (loss) (excluding
special items).................. 56.5 33.7 68% 46.0 27.1 70% (1.3) --
Special items..................... 2.1 2.5 (16)% 7.5 -- -- 123.3 --
------ ------ ------ ------ ------------
Operating income (loss)........... $ 54.4 $ 31.2 74% $ 38.5 $ 27.1 42% $ (124.6) --
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
Revenues increased $70.7 million. Data processing revenues contributed
$22.1 million of the increase as a result of strong subscriber growth of
cellular customers. Professional and consulting service revenues increased $24.4
million from a combination of development requests from existing and new
customers, new PCS opportunities and the acquisition of Information Systems
Development Partnership ("ISD"), a cable software company, in the fourth quarter
of 1995. Hardware sales of ISD accounted for most of the $13.5 million increase
in licenses and other fees. International revenues grew $10.7 million from
improved contractual agreements and the acquisition in the third quarter of 1996
of International Computer Systems, Inc. ("ICS").
Operating expenses excluding special items increased $47.9 million. Costs
associated with new and existing customers resulted in an increase of $25.1
million. Research and development costs increased $13.5 million from development
activity for billing solutions software. An increase in depreciable assets
increased depreciation and amortization expenses by $2.2 million. Sales,
marketing and general and administrative costs increased $7.1 million primarily
as a result of additional business. Non-recurring charges of $2.1 million and
$2.5 million for acquired in-process research and development expenses were
recorded in the third quarter of 1996 and the first quarter of 1995,
respectively.
1995 Compared to 1994 and 1994 Compared to 1993
CBIS had a strong year of continuing growth and profit progress in 1995,
with revenues up 9% and operating income excluding special items up 70%. Strong
subscriber growth in the cellular telecommunications market contributed to a 19%
domestic revenue growth at CBIS in 1995 to $343 million, as CBIS generated a
record 140 million bills for wireless and wireline telecommunications companies.
International revenues were down 50% to $31 million due to the completion of one
contract in early 1995 and the delayed delivery of another contract. All
anticipated costs due to the delay were recorded in 1995.
16
<PAGE> 18
1994 revenues increased by about 20% versus 1993 when 1993's figures are
adjusted to exclude operations sold or closed ($67.4 million). Revenue growth in
1994 was primarily the result of higher data processing and professional
services provided to the cellular industry, and professional service contracts
with international clients for development of telecommunications solutions.
Operating expenses increased just 4% in 1995 compared with 1994, after
excluding special items. CBIS increased research and development spending by
43%, with total 1995 spending of $32 million (excluding $7.5 million of acquired
research and development). General and administrative expenses decreased in 1995
by $8.5 million.
Operating expenses increased 9% in 1994 compared to 1993 after excluding
$88.6 million of 1993 expenses related to operations sold or closed and $102
million in special charges. (See Note 2 of Notes to Cincinnati Bell's
Consolidated Financial Statements for a discussion of special items.) The
increase primarily reflected additional production costs of $28 million to
support cellular and wireline billing clients and a $23 million increase in
international contract costs. The higher international costs reflected
provisions resulting from CBIS cost estimates exceeding expected revenues on
certain long-term contracts.
TELEPHONE MARKETING SERVICES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------------- % CHANGE --------------- % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
------ ------ -------- ------ ------ -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ $252.9 $200.8 26% $271.1 $226.1 20% $108.2 109%
Operating expenses (excluding
special items).................... 221.7 176.4 26% 238.8 203.5 17% 106.2 92%
------ ------ ------ ------ ------
Operating income (excluding special
items)............................ 31.2 24.4 28% 32.3 22.6 43% 2.0 --
Special items....................... -- -- -- 39.6 -- -- -- --
------ ------ ------ ------ ------
Operating income (loss)............. $ 31.2 $ 24.4 28% $ (7.3) $ 22.6 -- $ 2.0 --
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
Telephone marketing services revenues increased $52.1 million representing
strong growth in the outsourced dedicated services sector, which provided $39.2
million (or 75%) of the growth while traditional telephone marketing services
provided $9.2 million (or 18%) of the growth. Industries experiencing the
greatest growth were telecommunications and technology. The remaining increase
was primarily from international operations.
Operating expenses excluding special items increased $45.3 million, at a
rate comparable to that of revenues. The increase for the period was principally
the result of higher direct labor costs reflecting higher activity. In 1996,
MATRIXX expanded its DIRECTV(R) dedicated call center near Cincinnati and opened
a new dedicated call center in Orem, Utah. There were approximately 13,300
MATRIXX employees at September 30, 1996, an increase of 4,300 employees from
September 30, 1995.
1995 Compared to 1994 and 1994 Compared to 1993
Revenues increased by 20% in 1995 representing strong growth in the
outsourced sector and solid growth in the traditional telephone marketing
services programs. Total revenues were up $45 million with 66% of the increase
generated from outsourcing sales support and customer service contracts. The
balance of the growth came from the more traditional inbound/outbound services
and from international operations. Industries with the strongest increases were
telecommunications, technology (including DIRECTV(R)) and financial services. In
1995, the growth in outsourced customer service programs was further supported
by the opening of a new 500 workstation facility in Salt Lake City.
17
<PAGE> 19
Revenue growth in 1994 primarily reflects the acquisition of WATS Marketing
of America ("WATS") from First Data Corp. in late 1993 as well as internal
growth from existing operations. Revenues in 1994 would have increased by 20% if
WATS had been part of MATRIXX throughout 1993. The growth was broad-based across
all types of services and industries.
Operating expenses excluding special items in 1995 increased at a lower
rate than revenues. Cost control efforts among production and staff served to
reduce variable and administrative costs as a percentage of sales. The $35.3
million increase in operating expenses was directly related to the significant
increase in revenues. Labor expenses increased $19.4 million, while telephone,
information systems and systems design increases comprised most of the remaining
expense increase.
In 1995, special charges related to MATRIXX's French operations of
approximately $39 million for the impairment of goodwill were recognized. While
the French business continues to be strategically important to Cincinnati Bell's
future, it was determined that projected operating results no longer supported
the carrying value of the goodwill.
Operating expenses increased in 1994 due to the inclusion of WATS for a
full year and from higher costs of providing services associated with increased
revenues. Operating expenses excluding special items would have increased only
14% if WATS had been a part of MATRIXX throughout 1993. The increased costs and
expenses came primarily from workforce additions and long distance telephone
costs.
OTHER
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------------- % CHANGE --------------- % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
------ ------ -------- ------ ------ -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $116.3 $103.5 12% $136.6 $129.6 5% $124.4 4%
Operating expenses (excluding
special items).................. 95.3 82.6 15% 107.6 115.4 (7)% 118.3 (2)%
------ ------ ------ ------ ------------
Operating income (excluding
special items).................. 21.0 20.9 -- 29.0 14.2 104% 6.1 133%
Special items..................... -- 8.0 -- 9.9 2.1 -- -- --
------ ------ ------ ------ ------------
Operating income.................. $ 21.0 $ 12.9 63% $ 19.1 $ 12.1 58% $ 6.1 98%
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
Revenues increased from growth in directory sales, higher levels of
wholesale long distance traffic partially offset by price discounts and an
increase in computer sales in the equipment supply business. Operating expenses
excluding special items increased from direct printing and production costs,
commissions, sales headcount, increased costs of materials and higher corporate
costs for several items. In the first quarter of 1995, special charges of $8.0
million were included at Cincinnati Bell for pension enhancements and associated
postretirement health benefits related to employees accepting early retirement
incentives.
1995 Compared to 1994 and 1994 Compared to 1993
Higher sales of used telecommunications equipment, commodities scrap and
directory advertising accounted for the 1995 increase in other revenues.
Revenues of Cincinnati Bell's long distance business increased $5 million in
1994 primarily from an increased customer base, higher usage levels, its 800
service and paging and voice mail services.
Operating expenses of the long distance business decreased in 1995
primarily from lower telecommunications network costs and a reduction in Ohio
personal property taxes. Operating expenses of the supply business decreased in
1995 as a result of a lower level of provisions for inventory losses than in
1994.
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<PAGE> 20
The decrease in operating expenses in 1994 was caused primarily by a
decrease in directory expenses and the effect in 1993 of a $3 million provision
for inventory loss in the equipment supply business. Partially offsetting the
decreases were increases in costs associated with the growth in the long
distance business.
Special items of $9.9 million recorded in 1995 were primarily for pension
enhancements and associated postretirement health benefits related to employees
accepting the early retirement incentives and other restructuring costs.
OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------- % CHANGE --------------- % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
----- ----- -------- ------ ------ -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other income (expense), net......... $ 9.4 $ .7 -- $(13.5) $ 1.7 -- $ 9.4 (82)%
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
The increase in other income (expense), net is principally the result of
increased earnings from Cincinnati Bell's investment in a cellular partnership
and lower contributions to Cincinnati Bell's charitable foundation. The increase
was partially offset by a decrease in interest income on temporary cash
investments.
1995 Compared to 1994 and 1994 Compared to 1993
Other income (expense), net decreased in 1995 as a result of certain
non-recurring transactions. The 1995 results include a charge of $13.3 million
resulting from the termination by Cincinnati Bell of an interest rate and
currency swap agreement in December 1995. Also included is a $5 million charge
to reduce to market value certain real estate held for sale. Partially
offsetting the increased costs was $5.4 million of additional interest income
primarily from temporary cash investments. Income from joint ventures in 1995
increased $5.6 million over 1994 amounts net of litigation fees. Other increases
in 1995 expenses were the result of a higher level of charitable foundation
contributions and costs of special projects.
1993 results include a $9.8 million gain from the sale of CBT's residential
equipment leasing and PhoneCenter stores partially offset by a $4.2 million loss
on an investment in an international distributor of CBIS products and services.
INTEREST EXPENSE
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------- % CHANGE ------------- % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
----- ----- -------- ----- ----- -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest expense...................... $25.1 $39.8 (37)% $52.8 $49.5 7% $ 45.8 8%
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
The retirement of high cost long-term debt (including an interest rate and
currency swap) at Cincinnati Bell in late 1995 and CBT in early 1996 resulted in
a reduction of $13.5 million in interest expense for the first nine months of
1996 compared with the same period in 1995. Additionally, CBT reversed $2.5
million of interest expense related to overearnings liabilities in the third
quarter of 1996. The weighted average interest rate for debt decreased from 8.5%
at September 30, 1995 (including the swap agreement) to 7.0% at September 30,
1996. Average debt outstanding decreased from $600.5 million to $510.2 million
during the same time period.
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<PAGE> 21
1995 Compared to 1994 and 1994 Compared to 1993
A combination of higher interest rates on short-term borrowings, additional
amounts accrued subject to refund under FCC orders and higher interest costs
under the swap agreement were the principal causes of the $3.3 million increase
in interest expense in 1995. Cincinnati Bell's average debt outstanding
decreased marginally to $599 million in 1995 from $601 million in 1994. The
weighted average interest rate increased to 8.5% in 1995 from 8.2% in 1994.
Without Cincinnati Bell's swap agreement, the weighted average interest rates
would have been 7.7% and 7.4% in 1995 and 1994, respectively. As part of a debt
restructuring in 1995, Cincinnati Bell retired $75 million of 9.1% notes due in
2000 and terminated the swap agreement. Also, CBT called $40 million of 7.30%
notes due in 1996 and $40 million of 8 5/8% notes due in 1999. The called notes
were redeemed at par in January 1996.
Interest expense increased $3.7 million in 1994 compared to 1993 primarily
from long-term refinancing of short-term debt to reduce exposure to short-term
interest rate increases.
INCOME TAXES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------- % CHANGE ------------ % CHANGE ------------ % CHANGE
1996 1995 96 VS 95 1995 1994 95 VS 94 1993 94 VS 93
----- ------ -------- ---- ----- -------- ------------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income taxes.......................... $72.9 $ (2.3) -- $5.7 $42.1 (86)% $1.7 --
</TABLE>
First Nine Months of 1996 Compared to First Nine Months of 1995
Higher income before taxes was the principal reason for the increase in
income tax expense. Cincinnati Bell's effective tax rate for the first nine
months of 1996 was 35.3%, compared to 37.0% for the same period last year. The
effective tax rate, excluding 1995 special items, would have been 36.3% for the
first nine months of 1995. A reduction in state income taxes was the principal
reason for the decrease in the effective tax rate from 1995 to 1996.
1995 Compared to 1994 and 1994 Compared to 1993
Cincinnati Bell's effective tax rate for 1995 was 29.3% compared to 35.7%
in 1994 and 3.1% in 1993. The 1995 effective tax rate without special items was
35.6%.
Lower pre-tax income was the principal reason for the decrease in income
taxes in 1995. The writedown of goodwill in MATRIXX's French subsidiary resulted
in losses of $39 million which did not create income tax benefits. Higher income
before taxes was the principal reason for the increase in income taxes in 1994.
The 1993 decrease in income taxes was principally the result of lower
income before taxes. The decision to sell CBIS Federal Inc. resulted in losses
which did not create income tax benefits (e.g., unrecovered goodwill).
FINANCIAL CONDITION
Capital Investment, Resources and Liquidity
Management believes that Cincinnati Bell has adequate internal and external
resources available to finance its on-going operating requirements, including
network expansion and modernization, business development and dividend programs.
Cincinnati Bell maintains adequate lines of credit with several institutions to
provide borrowings as needed for general corporate purposes.
Cash provided by operating activities, which is Cincinnati Bell's primary
source of liquidity, was $161.6 million for the first nine months of 1996 and
was used primarily to pay for capital expenditures, including acquisitions, and
dividends.
Cincinnati Bell's most significant investing activity for the first nine
months of 1996 continued to be capital expenditures. Capital expenditures were
$112.7 million, up $31.5 million from the first nine months of
20
<PAGE> 22
1995. Most of the increase was for a new data center in Orlando, Florida for
CBIS and for expansion of facilities to accommodate new business at MATRIXX.
Cincinnati Bell continuously evaluates requirements for additional updating of
facilities based on customer and market demands, and engineering economics. Due
to stronger-than-expected growth in all its businesses, Cincinnati Bell has
increased its estimate of 1996 capital expenditures and anticipates spending
approximately $160 million with $100 million of that total expected for CBT.
Other investing activities in the first nine months of 1996 included
payments for acquisitions in late 1995 and in 1996. Offsetting the acquisition
payments was cash received for the disposition of certain real estate. The
primary cause of the increase in Common Shares issued during the first nine
months of 1996 was the exercise of 577,000 stock options by Cincinnati Bell
employees.
Receivables increased $35.5 million from December 31, 1995 primarily as a
result of increased sales. Investments in unconsolidated entities increased $9.9
million principally as a result of the increase in Cincinnati Bell's cellular
partnership investment which is accounted for using the equity method. Accounts
payable and accrued liabilities decreased $36.2 million primarily due to the
payment of acquisition costs for a fourth quarter 1995 acquisition, reductions
in overearnings liabilities at CBT from payments and adjustments, and funding
for Cincinnati Bell's charitable foundation. The balance of accrued taxes
decreased $9.1 million primarily due to property tax payments. Long-term
liabilities decreased as a result of the $16.5 million in settlement gains that
reduced Cincinnati Bell's pension liabilities.
Cash provided by operating activities in 1995 was $196.1 million. Other
sources of cash in 1995 resulted from the final note payment for the sale of
CBT's PhoneCenter stores and related leasing business and the issuance of shares
under Cincinnati Bell's employee benefit plans. Cash generated internally
allowed Cincinnati Bell to fund all of its capital expenditures, pay dividends,
make $31.4 million of acquisitions, and reduce net debt (short-term and
long-term debt less cash and equivalents) from $519 to $510 million. This figure
includes $49.9 million of cash required to terminate the swap agreement and
$11.0 million for costs of early retirement of debt.
Cincinnati Bell's most significant investing activity in 1995 continued to
be capital expenditures which were $115.3 million, down from $146.7 million in
1994. The majority of Cincinnati Bell's capital expenditures in 1995 ($90.3
million) were at CBT, and were used primarily for digital equipment, fiber-optic
cable and other telephone plant and equipment. Capital expenditures at CBIS and
MATRIXX were $11.1 and $13.8 million, respectively.
Acquisitions were another significant use of cash in 1995. The acquisitions
of ISD and X International by CBIS, along with final payments for the 1993 WATS
acquisition by MATRIXX, totaled $31.4 million.
During 1996 and 1995, Cincinnati Bell used a portion of its operating cash
flows to restructure its debt by retiring long-term debt, reducing short-term
debt and terminating its swap agreement. The debt to capitalization ratio was
46.9% at September 30, 1996, compared with 51.8% and 51.9% at December 31, 1995
and 1994, respectively.
In their published ratings, Duff & Phelps, Moody's Investors Service and
Standard & Poor's rated Cincinnati Bell's senior unsecured debt at A-, A3 and A-
and its commercial paper D-1-, P-2 and A-2, respectively. The published ratings
by such agencies of CBT's senior unsecured debt are AA-, Aa3 and AA-,
respectively. Duff & Phelps has stated that Cincinnati Bell's long-term and
commercial paper ratings and CBT's long-term rating are under review for
possible upgrade due to strengthened financial condition. These ratings are not
a recommendation to purchase, hold or sell any Common Shares or DECS, and such
ratings do not comment as to the marketability of the Common Shares or the DECS,
any market price or the suitability of any such investment for a particular
investor. There is no assurance that any rating will not be lowered or withdrawn
entirely by a rating agency.
Other Information
New three-year contracts between CBT and the Communications Workers of
America (the "CWA") and CBIS and the CWA were approved in the second and third
quarters of 1996. The contracts include pay
21
<PAGE> 23
increases of 10.5% over the three-year period 1996-1999 with bonus incentives
based on service and/or financial performance. The contracts also address job
security and benefit issues, while providing additional flexibility in the
pension plan for hourly employees.
Recently Issued Accounting Standards
Cincinnati Bell has adopted Statement of Financial Accounting Standards
(SFAS) 123 "Accounting for Stock-Based Compensation," which became effective for
1996. SFAS 123 requires either the recognition or the pro forma disclosure of
compensation expense for stock options and other equity instruments determined
by a fair value method of accounting. Cincinnati Bell intends to disclose pro
forma net income and earnings per share in the 1996 Annual Report, which will
have no effect on its consolidated financial statements.
REGULATORY MATTERS
Telecommunications Competition
Regulatory agencies on the state and federal levels are accelerating
initiatives to increase competition in the telecommunications industry. At the
federal level, Congress passed the Telecommunications Act of 1996 in February
1996, which mandates the development of competitive markets. The full impact for
CBT will not be known until the FCC and state authorities complete the numerous
rulemakings mandated by the Act. See "Risk Factors -- Regulatory and Competitive
Trends."
At the state level, the PUCO issued its local exchange competition decision
and guidelines in June 1996, which certify competing carriers and establish
certain rules that must be complied with by LECs. In July 1996, CBT and other
interveners requested that the PUCO reconsider certain parts of the guidelines.
On November 7, 1996, in response to the request for rehearing, the PUCO reissued
the rules for local competition in Ohio. CBT is currently analyzing the impact
of these rules. Cincinnati Bell believes that CBT will face increased
competition under these rules which may have a material adverse effect on its
operating results. On July 18, 1996, CBT filed an amendment to its alternative
regulation plan with the PUCO. The proposed amendments, if approved, would make
CBT's telecommunications network available to would-be competitors for local
telephone service. The amendments also would provide CBT with greater pricing
and marketing flexibility. In conjunction with these proposed amendments, CBT
proposed to reduce its rates to customers by approximately $2.7 million
annually. On September 5, 1996, the PUCO issued an order stating that CBT's July
18, 1996 filing would be processed as a new plan, rather than as an amendment.
Since the PUCO decided to process the filing as a new plan and because of
various regulatory developments, on November 5, 1996, CBT notified the PUCO that
it would be filing a revised plan in the near future.
On September 26, 1996, the PSCK issued its rules for local competition in
Kentucky. A major portion of the rules outlines the PSCK's perspective regarding
universal service and the development of a universal service fund intended to
keep residential rates within the state affordable. The rules established a
workshop process to review universal service funding. The rules also established
an interim resale discount of 17% for most LECs including CBT pending the
submission of company-specific cost studies supporting a smaller discount. The
PSCK did not, however, adopt detailed rules for interconnection. CBT is
reviewing the rules to determine their impact, but the adopted rules are likely
to lead to increased competition for CBT in Kentucky and may have an adverse
effect on its operating results.
In preparation for potential competition, CBT is redesigning and
streamlining its processes and work activities to improve responsiveness to
customer needs, permit more rapid introduction of new products and services,
improve the quality of products and services and reduce costs. Telephone plant
and network are being upgraded as business judgment dictates. The actions of
regulatory agencies may make it more difficult for CBT to maintain current
revenue and profit objectives.
Alternative Regulation
CBT requested a threshold increase in rates in an alternative regulation
proposal filed with the PUCO in 1993. Thereafter, CBT and the intervenors signed
a settlement agreement which was approved by the
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<PAGE> 24
PUCO on May 5, 1994, increasing revenue by $11.9 million annually. The
alternative regulation commitments and new rates became effective May 6, 1994.
CBT's authorized rate of return on capital is 11.18%, but CBT can earn up to
11.93% in a monitoring period without any re-targeting of rates. Earnings higher
than 11.93% will trigger a formula which allows for certain rates to be changed
in the following monitoring period.
Optional Incentive Regulation
CBT began to operate under an optional incentive regulation plan for
interstate services in January 1994. Every two years CBT compares actual return
with the authorized rate of return, currently 11.25%. Rate changes and new
services can be made on a 14-day notice without cost support if CBT sets rates
no higher than a geographically adjacent LEC that operates under price cap
regulation. This allows CBT to be more responsive to customers and the market.
Kentucky Filing
In May 1995, the PSCK approved new regulated rates for CBT customers in
Kentucky. The order maintained uniform rates for basic services in CBT's
Kentucky and Ohio metropolitan service areas. The result was essentially revenue
neutral, as local service increases are offset by carrier common line and other
rate adjustments. CBT filed for a rehearing of certain issues of the rate order.
The PSCK granted a rehearing in February 1996 on the issue of reregulation for
inside wire revenues only. The rest of the issues were denied. In June 1996, the
PSCK determined that inside wire maintenance revenues should remain nonregulated
in the state of Kentucky, upholding CBT's current treatment.
Depreciation Rate Changes
The FCC is required by the Communications Act of 1934 to prescribe the
depreciation rates used to compute depreciation expense for communications
common carriers. It is the FCC's practice to review and revise CBT's
depreciation rates and amortizations once every three years, in conjunction with
the PUCO and the PSCK.
In January 1994, CBT completed a triennial depreciation represcription with
regulators from the FCC, the PUCO and the PSCK. The new depreciation rates were
effective January 1, 1994, in the interstate and Kentucky jurisdictions, and
effective July 1, 1994, in the Ohio jurisdiction. Depreciation rate changes are
up for discussion again in 1997. It is possible that depreciation rates and
depreciation expense will increase as a result of these discussions.
Effects of Regulatory Accounting
CBT presently gives accounting recognition to the actions of regulators
where appropriate as prescribed by SFAS 71, "Accounting for the Effects of
Certain Types of Regulation." Criteria that would give rise to the
discontinuance of SFAS 71 include (1) increasing competition that restricts
CBT's ability to establish prices to recover specific costs, and (2) a
significant change in the manner in which rates are set by regulators from
cost-based regulation to another form of regulation. CBT believes that its
current rate-of-return regulatory plan, under which rates are established that
provide for the recovery of the carrying value of its assets, and the absence of
any significant current competition in its territory support the continued
application of SFAS 71. Uncertainties regarding the future competitive
environment and the ultimate form and impact of recently enacted and expected
legislative and regulatory initiatives on future revenues will require CBT to
review these criteria periodically to evaluate whether continuing application of
SFAS 71 is appropriate.
In the event CBT determines that it no longer meets the criteria for
following SFAS 71, the accounting impact to CBT could be an extraordinary
non-cash charge of an amount that would be material. This would include the
elimination of regulatory assets or liabilities and adjusting the carrying
amount of telephone plant to the extent it is determined such amounts could be
considered overstated as a result of the regulatory process and are not
recoverable in future revenues. Asset lives used for future depreciation expense
would likely be shorter than those approved by regulators. CBT estimates that if
it were to discontinue SFAS 71 any pre-tax charge could be up to $300 million
depending on management's assessment of the competitive environment at
23
<PAGE> 25
the time. Based on its assessment of CBT's current competitive and regulatory
environment, Cincinnati Bell believes that the application of SFAS 71 remains
appropriate.
BUSINESS OUTLOOK
Cincinnati Bell operates businesses in several different markets under the
telecommunications umbrella. All of these markets are becoming more competitive
as regulatory barriers recede and the pace of technological change quickens.
This quickening pace may increase the variability of Cincinnati Bell's financial
results on a period-to-period basis. See "Risk Factors -- Regulatory and
Competitive Trends" and "-- Rapidly Changing Technology." Cincinnati Bell is the
market leader in its three principal businesses -- local telephony in the
Greater Cincinnati area, information systems to the telecommunications market
and telephone marketing services.
CBT is introducing new services and features to meet the challenges of
regulatory actions, competition and the changing market. CBT and AT&T are
discussing whether to revise portions of their agreement concerning the joint
provision of certain telecommunications services. Revenues subject to discussion
represent approximately $36 million or 6% of CBT's 1995 revenues, but portions
of the contract provide above average profit contribution. The outcome cannot be
predicted at this time, but could result in a material adverse impact on CBT's
earnings.
In 1996, CBIS announced several new contracts and contract extensions. Two
new contracts were for long-term billing and customer care agreements with
prominent PCS companies in the United States. A third new contract was for
development and data processing services for AT&T's re-entry into the local
telephone market. An extension of an existing contract was signed in October
1996 with AT&T Wireless Services, Inc. ("AT&T Wireless") and CMT Partners (a
partnership between subsidiaries of AT&T Wireless and AirTouch Communications,
Inc. ("AirTouch")) for billing and billing related services as to those parties
through 2001 with a provision for further extension for an additional two years.
In 1996, CBIS also signed contract extensions with Comcast Cellular Corporation
("Comcast Cellular") and with 360 degrees Communications Company ("360 degrees
Communications"). CBIS's contract with Comcast Cellular was extended to 2003 and
its contract with 360 degrees Communications was extended to 2006. In all three
contracts, CBIS will provide customer care and billing services on a service
bureau basis. The ultimate value and profitability of these contracts hinge on
several factors. First is CBIS's ability to provide cost effective solutions;
second is CBIS's ability to maintain and grow the systems as their clients
increase their penetration of their markets; third is the market success of
CBIS's PCS customers. During all of these activities, CBIS must also continue to
satisfy the current needs of its clients with continued service and value. As
previously reported in Cincinnati Bell's 1995 Annual Report, one of CBIS's
clients, representing approximately 5% of CBIS's 1995 revenues, indicated that
it may transition to another provider of billing services during 1997.
In addition to the contracts discussed above, CBIS announced a joint
marketing relationship with a company that renders solutions to combat cellular
telephone fraud and churn.
The continued trend in the outsourcing of telephone marketing services by
major companies is fueling MATRIXX's continued growth. MATRIXX has executed
several new long-term agreements with key customers in the past year and
continues to expand its facilities for anticipated new business. On November 8,
1996, MATRIXX announced its intention to acquire Software Support, Inc., a
provider of technical assistance over the telephone to users of computer
hardware and software. The parties are currently negotiating the final terms of
the acquisition, but have not entered into any binding agreement as of the date
of this Prospectus.
Cincinnati Bell's other businesses also face competition from businesses
offering similar products and services. These businesses are meeting their
competition by addressing the needs of their customers, and offering superior
value, quality and service.
Cincinnati Bell utilizes software and related technologies throughout its
businesses that will be affected by the date change in the year 2000. An
internal study is currently under way to determine the full scope and related
costs to insure that Cincinnati Bell's systems continue to meet its internal
needs and those of its customers. Cincinnati Bell could begin to incur
significant expenses in 1997 to resolve this issue and such expenses may
continue through the year 2000.
Cincinnati Bell continues to review opportunities for acquisitions and
divestitures for all its businesses to enhance shareowner value.
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<PAGE> 26
BUSINESS
GENERAL
Cincinnati Bell is a major U.S. diversified telecommunications company with
principal businesses in three industry segments. The telephone operations
segment, Cincinnati Bell Telephone Company, provides telecommunications services
and products, which include local service, network access and toll telephone
services in the Greater Cincinnati area. The information systems segment,
Cincinnati Bell Information Systems Inc., provides data processing and software
development services primarily to the U.S. telecommunications industry. The
telephone marketing services segment, MATRIXX Marketing Inc., provides telephone
marketing, research, fulfillment, database management, interactive voice
response and Internet services primarily to large corporations such as AT&T and
DIRECTV(R). Cincinnati Bell's other businesses include: Cincinnati Bell Long
Distance Inc. ("CBLD"), which provides resale long distance telecommunications
services and products as well as voice mail and paging services; Cincinnati Bell
Directory Inc. ("CBD"), which provides Yellow Pages and other directory products
and services, as well as information and advertising services; and companies
having interests in cellular mobile telephone service and the purchase, sale and
reconditioning of telecommunications and computer equipment.
STRATEGY
The three principal businesses and other interests of Cincinnati Bell are
the products of a focused strategy first initiated in 1983 to expand from a
local exchange telecommunications company into a broader, more diversified
company providing value-added customer care services in high growth and
converging communications markets. By leveraging the combined knowledge,
capabilities and experience of its principal subsidiaries, Cincinnati Bell seeks
to take advantage of the opportunities arising from the growing communications
market and the growing trend of outsourcing information and telephone marketing
services. Cincinnati Bell's ability to provide unique insight into the customer
care requirements of outsourcing clients of both CBIS and MATRIXX is enhanced by
the knowledge and expertise developed by serving CBT, a full service
telecommunications provider.
In addition to the growth opportunities and synergies created by working
together, each business -- CBT, CBIS and MATRIXX -- has growth strategies in its
respective markets. CBT's strategy is to leverage off its well regarded brand
name, excellent service record and tradition of quality to be a full service
provider of bundled communications, information and entertainment services.
CBIS's strategy is to utilize the scale of its data processing operations and
its extensive industry knowledge and experience to be the leading provider of
customer care and billing services and network provisioning and management
systems to the communications industry. MATRIXX's strategy is to focus on
developing long-term strategic outsourcing relationships for telephone marketing
support of large clients in the telecommunications, technology, financial
services, consumer products and direct response industries.
CINCINNATI BELL TELEPHONE COMPANY
General
CBT was founded as The City and Suburban Telegraph Association in 1873,
three years before the invention of the telephone. In 1878, CBT became the first
telephonic exchange in Ohio and the tenth in the nation.
CBT is the 14th largest local service telecommunications company in the
United States, based on its network access lines in service at the end of 1995.
In 1995, CBT provided 44% of Cincinnati Bell's revenue and 52% of its operating
income excluding special items, compared to 50% and 85%, respectively, in 1993.
CBT provides telecommunications services and products, mainly local
service, network access and toll telephone services, to business and residential
customers in most of the Greater Cincinnati area, including parts of
southwestern Ohio, six counties in northern Kentucky and parts of two counties
in southeastern Indiana. Approximately 98% of CBT's network access lines are in
one local calling area. The Cincinnati Bell
25
<PAGE> 27
Telephone brand name is well known among CBT's customers and serves as a
foundation for Cincinnati Bell to bundle a broad and increasing range of
communications-related products and services.
CBT's service record is among the best in the industry. Its high service
quality is affirmed by its excellence in network reliability. Based on reports
to the FCC, CBT maintains one of the lowest levels of customer reported service
outages among large U.S. telecommunications companies in the nation. For
example, in 1995 CBT averaged only 1.1 trouble reports per 100 customer lines
per month, compared to reported rates at RBOCs ranging from 1.3 to 2.7 during
the same period. In the face of increased access line growth and orders for
additional lines, CBT maintains an excellent record for the installation
appointments it keeps, and for the percentage of new service orders it completes
within five days of a request.
Since the beginning of 1990, CBT has invested more than $650 million to
upgrade and modernize its plant and equipment with the most modern technology
available. Of its network access lines, 89% are served by digital switches, 93%
have ISDN capability and 98% have Signaling System 7 capability, which supports
enhanced features such as Caller ID, Call Trace and Call Return.
With the benefit of advanced technology, CBT has been able to serve a
growing market with fewer employees. During the first quarter of 1995, CBT
implemented initiatives aimed at improving service to its customers and reducing
costs, resulting in a $124 million special charge for restructuring. During
1995, the number of CBT employees declined by over 18% to 2,700 at year-end. CBT
has been able to achieve cost reductions and productivity improvements through
elimination of duplicative services and procedures and consolidation of
administrative functions. This has resulted in an increase in the number of
access lines per employee from 249 on December 31, 1993 to 323 on September 30,
1996.
On October 22, 1996, Cincinnati Bell announced that David S. Gergacz,
President and Chief Executive Officer of CBT and an Executive Vice President of
Cincinnati Bell, resigned from these positions. Until a successor is named, CBT
management will report to James F. Orr, Chief Operating Officer of Cincinnati
Bell.
Business
On September 30, 1996, CBT had approximately 936,000 network access lines
in service, an increase of 4% or approximately 36,000 lines from September 30,
1995. During 1995, CBT added approximately 29,000 new lines, representing an
annual increase of 3%. Approximately 70% of CBT's network access lines serve
residential customers and 30% serve business customers. The growth in additional
access lines to existing residential customers has been particularly strong at
CBT over the last several years as customers add lines for home offices, on-line
services and increased household telephone usage. In 1995, such additional
residential lines accounted for over 50% of the total residential lines added
during the year. As of September 30, 1996, CBT had installed additional
residential access lines to approximately 8% of its existing residential
customers. CBT expects continued strong growth in additional residential lines.
Approximately 89% of CBT's network access lines are served by digital
switches that facilitate the transmission of voice, video and data content
across CBT's network. The network also includes more than 1,200 miles of
fiber-optic cable, including seven rings of cable equipped with SONET technology
linking Cincinnati's downtown and other major business centers. These SONET
rings offer increased reliability and redundancy to CBT's major business
customers.
Other communications services offered by CBT include voice, data and video
transmission, custom calling services and billing services. In addition, CBT is
a sales agent for certain products and services of AT&T and sells products of
other companies as a full-service provider of communications products and
services to business customers. In September 1996, CBT began selling and
installing direct broadcast satellite ("DBS") services and equipment in its
Cincinnati market under an agreement with DIRECTV(R), United States Satellite
Broadcasting Co. and certain DBS equipment vendors. In March 1996, CBT became
one of the first local exchange telephone companies in the nation to introduce
an Internet access service for its residential and small business customers. CBT
also has introduced high-capacity local area network interconnection services
and ISDN services. These new services demonstrate CBT's ability to innovate and
adapt to emerging trends in telecommunications.
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Local services generated approximately 56% of CBT's revenues in 1995 while
the increasingly competitive network access and toll services generated only 28%
of CBT's 1995 revenues. This represents a smaller percentage of total revenues
than that received by most of the nation's largest local exchange telephone
companies. The remainder of CBT's revenues come from other communications
services, including commissioned sales, maintenance and repair services as well
as billing services.
Market
CBT serves a 2,400 square-mile market encompassing most of the Greater
Cincinnati area, which had a total population of approximately 1.5 million in
1990, including 656,000 households. Its regional economy is strong and diverse,
including six locally headquartered Fortune 500 companies.
Several companies compete or are planning to compete with CBT through the
provision of intraLATA long-distance services, enhanced calling services such as
voice messaging, customer premises maintenance and repair services, wireless
communications services, special access services, public telephone services and
business communications equipment sales and maintenance services. See
"Competition."
Opportunities
CBT plans to develop new products and services and market them in ways that
leverage its well regarded brand name, large installed customer base, reputation
for service quality, communications industry knowledge and experience and
extensive knowledge of its customers' preferences. CBT also will pursue
co-branding opportunities and alliances with other service providers where
appropriate.
CBT will seek to increase its penetration of additional residential lines
within its service area. In addition, CBT has an opportunity to increase the
market penetration rate of higher margin enhanced services such as Caller ID,
Call Return, Call Block and 3-Way Calling.
Under Cincinnati Bell's strategy of pursuing opportunities for growth by
leveraging the strengths of all of its businesses, and under CBT's own strategy
to be a full service provider of communications services, Cincinnati Bell has
unique strengths that could be effective in marketing a broad array of
communications services outside of CBT's existing service territory. Cincinnati
Bell is exploring such opportunities, both on its own or in partnership with
other communications services companies.
Regulation
CBT's local exchange, network access and toll telephone operations are
regulated by the PUCO, the PSCK and the FCC with respect to rates, services and
other matters.
Recently enacted and future legislative and regulatory initiatives will
have an impact on CBT and other incumbent LECs, including the RBOCs and other
independent telephone companies. The extent of that impact will not be known
until the initiatives are fully implemented. The basic thrust of these
initiatives is to encourage and accelerate the development of competition in the
telecommunications industry by removing legal barriers to competition across
major segments of that industry. Under the initiatives, companies that today are
limited to one or more of those segments, including local exchange, long
distance, wireless, cable television and information services, could enter the
other segments to compete with the incumbent providers and other new entrants.
Today's technology makes it possible to interconnect facilities of
competing telecommunications carriers and to provide the service offerings of
multiple competitors through the network facilities of one or more incumbents.
At the federal level, the Act passed in February 1996 requires incumbent LECs
like CBT to interconnect with the networks of other service providers, unbundle
certain network elements and make them available to competing providers at
wholesale rates. Additionally, the Act requires the removal of other perceived
barriers to competitive entry by alternative providers of local exchange
services. Although the Act clearly states these mandates, it does so in general
terms and leaves the implementation of these mandates to the FCC and the state
regulatory agencies.
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On August 8, 1996, the FCC issued an order establishing regulations to
implement the "local competition" provisions of the Act. These regulations
essentially establish parameters under which a LEC must allow other
telecommunications carriers to interconnect with its network, including the
compensation that a LEC would receive for terminating calls originating from the
networks of the other carriers. The FCC's regulations also establish parameters
under which LECs must unbundle network elements and offer them to other
telecommunications carriers. The prices for interconnection and unbundled
elements either are to be negotiated between the parties (and approved by the
relevant state commission) or, if the parties fail to reach an agreement, the
rates are to be set by the relevant state commission based on guidelines
established by the Act and implemented by the FCC. Under the Act, these rates
must be based on the cost of providing the interconnection or unbundled
elements, be nondiscriminatory and include a reasonable profit. The FCC has
determined that the prices for these unbundled elements and interconnection are
to be based on a methodology governed by forward-looking, long-run incremental
costs. The Act also requires LECs to offer to other telecommunications carriers,
at wholesale rates, any retail telecommunications service offered by the LEC to
end-users. The FCC has determined that the wholesale rates are to be based on
the LEC's retail rates, less the costs avoided by the LEC in offering its
services for resale.
CBT and several other LECs believe the FCC's regulations with respect to
interconnection, unbundling and resale unlawfully exceed the requirements of the
Act. Accordingly, they have sought review of the FCC's order in the United
States Court of Appeals. The primary objections raised by CBT and the other LECs
are that the pricing rules and standards for interconnection, unbundling and
resale, and the rules allowing interconnecting carriers to "pick and choose"
from various unbundled elements and services, along with their prices, being
provided by LECs pursuant to pre-approved contracts with other carriers, will
not provide the LECs with adequate compensation. On October 15, 1996, the United
States Court of Appeals for the Eighth Circuit stayed the effectiveness of the
portions of the FCC order establishing the pricing standards and the "pick and
choose" rules. A petition to vacate the Eighth Circuit's stay of these rules is
pending before the United States Supreme Court, but one Justice on the Supreme
Court has already denied a petition to lift the stay. As a result of the stay,
these rules are suspended, pending a final decision on the merits of the
petition for review of these rules. The appeal is scheduled for argument the
week of January 13, 1997. The FCC regulations requiring LECs to negotiate with
new entrants, unbundle and resell still exist; however, pending a decision on
the appeal, pricing will be determined by private negotiations as approved by
state regulatory authorities or by state arbitrations.
If the FCC's order were implemented as written, and if CBT were unable to
obtain waivers to certain requirements or to replace its lost revenues,
Cincinnati Bell believes that the result would have a material adverse impact on
its revenues and earnings. The material impact would result from the elimination
of certain revenues designed to subsidize residential telephone service and
increased costs to develop or modify systems to allow number portability and
interconnection. CBT also believes that implementation of the FCC order would
significantly enhance the position of its competitors, which would have an
additional adverse impact on CBT's revenues and earnings from operations within
its territory.
The outcome of three separate, but related, FCC proceedings could be
significant for CBT. In the first of these proceedings, the FCC will be
implementing a universal service funding mechanism which is currently being
developed by a joint board made up of state and federal regulators. In the
second of these proceedings, the FCC will be reforming the current access charge
regime, which could result in an additional reduction in revenues. In the third,
the FCC will be implementing regulations that may require certain LECs to share
their infrastructure, technology, information and facilities with certain
smaller telecommunications service providers.
At the state level, the PUCO recently adopted a set of local service
guidelines that largely mirror the requirements of the Act and the FCC
regulations discussed above. In addition, the PUCO has issued orders granting
Time Warner Communications of Ohio, L.P. and Communications Buying Group, Inc.
certificates of public convenience and necessity to provide local exchange
service in CBT's operating territory. Other entities have been granted
certificates to provide basic local exchange service in Ohio, although not in
CBT's operating territory. On November 7, 1996, in response to the request of
CBT and others for rehearing, the PUCO reissued the guidelines for local
competition in Ohio. CBT is currently analyzing the impact of these
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guidelines. Cincinnati Bell believes that CBT will face increased competition
under these guidelines which may have a material adverse effect on its operating
results. To date, six competitors have requested interconnection with CBT's
network.
On September 26, 1996, the PSCK issued its rules for local competition in
Kentucky. A major portion of the rules outlines the PSCK's perspective regarding
universal service and the development of a universal service fund intended to
keep residential rates within the state affordable. The rules established a
workshop process to review universal service funding. The rules also established
an interim resale discount of 17% for most LECs including CBT pending the
submission of company-specific cost studies supporting a smaller discount. The
PSCK did not, however, adopt detailed rules for interconnection. CBT is
reviewing the rules to determine their impact, but the adopted rules are likely
to lead to increased competition for CBT in Kentucky and may have an adverse
effect on its operating results.
The impact of the proposed regulatory changes may be mitigated through
modification of the final rules, waivers of the rules and price increases in
other regulated services (e.g., local rates).
CINCINNATI BELL INFORMATION SYSTEMS INC.
General
CBIS was formed in 1983 to leverage Cincinnati Bell's knowledge and
expertise in data processing and billing for the telecommunications industry.
CBIS provides data processing services and software systems that generate
billing information and manage customer information for communications services
businesses. CBIS's customers are large corporations in the U.S.
telecommunications industry. CBIS accounted for approximately 27% of the
Cincinnati Bell's 1995 consolidated revenues and 21% of total operating income
excluding special items. During the first nine months of 1996, CBIS's revenue
and operating income excluding special items increased 26% and 68%,
respectively, compared to the first nine months of 1995.
CBIS is the leading provider of billing and customer care services to the
wireless telecommunications market in North America, which includes the cellular
as well as the PCS industry. The cellular industry has been growing in excess of
30% per year in terms of revenues and subscribers. CBIS has been the market
leader of billing systems to the cellular industry for more than ten years and
serves many of the top cellular carriers. CBIS's systems generate bills for
cellular telephone customers in 23 of the 25 largest U.S. metropolitan areas.
CBIS's service bureaus generated the billing information for monthly customer
statements for approximately 30% of U.S. cellular subscribers in 1995. CBIS's
revenue from cellular clients increased from $144 million in 1993 to $198
million in 1994 and to $257 million in 1995.
CBIS also provides billing and customer care services to companies that
operate traditional wireline telecommunications networks, including CBT. It
develops network management systems for communications companies and customer
care and billing systems for cable television systems operators in the U.S. and
Europe. CBIS's systems also support the provision of telephone services by cable
television system operators in the U.S. and in Europe. CBIS recently began to
offer service bureau billing services to the cable television industry.
In September 1996, CBIS acquired ICS, an international provider of wireline
customer care and billing solutions, from WorldCom, Inc. In December 1995, CBIS
acquired IDS, a developer of advanced billing systems for the cable television
industry. In March 1995, CBIS acquired X International, an established
information technology company located in Bristol, England, that provides
customer care and billing software for a wide range of telecommunications
companies utilizing the Global System for Mobile Communications ("GSM")
standard.
CBIS's headquarters are in Cincinnati, Ohio. It has major operations in
Ohio, Florida, Illinois, Georgia and Virginia. It also has operations in the
United Kingdom, Switzerland and The Netherlands.
Business
CBIS serves clients principally by processing data and creating bills using
proprietary software. CBIS provides and manages billing systems in a service
bureau environment where its extensive experience results in significant cost
and service advantages to clients. These advantages include freeing the client
to concentrate on
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core competencies, predictable costs, information management expertise and
access to advanced technology without capital expense.
CBIS's data processing services are carried out in its data centers in
Cincinnati and Orlando. It uses information from communications service
providers to calculate and generate bills for the usage of communications
services, generally on a monthly cycle. CBIS strives to provide state-of-the-art
systems and facilities that provide reliability and responsiveness. CBIS's
systems select the correct plan for each customer from the thousands of pricing
plans provided by its clients. These systems generate billing information for
more than 12 million bills per month, including approximately 700,000 bills
generated for CBT, based on each customer's billing preferences. CBIS's
computers process over 140 million transactions, including transactions for CBT,
per month. CBIS's revenue from this business is determined in large part by the
number of bills it produces and the number of accounts it manages.
In the wireless industry, pricing plans are complex and change frequently.
Customers of CBIS's clients frequently change service plans and service
providers. Additionally companies in the wireless industry are growing rapidly.
CBIS's ability to manage this change and growth successfully is an important
factor in its success.
CBIS also updates pricing plans and customer records for its clients and
makes customer information available to clients on-line, helping these clients
better manage their relationships with their telecommunications customers. CBIS
typically is compensated at an hourly rate for these and other consulting
services.
Most of CBIS's services are provided under contracts for terms of two to
ten years, certain of which may be terminated at specified times prior to
expiration with prior written notice. CBIS's four largest clients, other than
CBT, are AT&T, 360 DEGREES Communications, Ameritech Corporation and Comcast
Cellular, which collectively accounted for approximately 70% of CBIS's 1995
revenues. Several multi-year contracts cover essentially all of CBIS's
relationships with AT&T businesses, including its contract with AT&T Wireless
and CMT Partners for the provision of wireless customer care and billing
services through 2001. In 1996, CBIS signed contract extensions with Comcast
Cellular and with 360 degrees Communications. CBIS's contract with Comcast
Cellular was extended to 2003 and its contract with 360 degrees Communications
was extended to 2006. Other CBIS customers include selected cable television
systems owned by Time Warner Inc. and Cox Communications, Inc. and the public
telecommunications services providers in Switzerland and The Netherlands. Some
clients, including all of CBIS's current cable television clients, have
purchased CBIS software to operate in their own data centers. CBIS recently
introduced service bureau billing as an option for its cable television clients.
CBIS's systems development and support are dependent on its ability to
attract and retain its professional staff. There can be no assurance that CBIS's
labor costs will not increase in the future.
Markets
An industry study and CBIS's own analysis estimate that the domestic market
for billing and customer care services used by the communications industry was
greater than $4 billion in 1995. This figure includes the estimated cost of
customer care and billing services used by wireless, wireline and cable
television services providers, including services they provide to themselves.
The cellular industry's subscriber base was approximately 34 million at the
end of 1995. At the end of 1995, CBIS's data centers generated billing
information for more than 10 million monthly customer statements for cellular
subscribers. Billing and customer care for cellular and cellular-related
telecommunications services in North America accounted for more than 70% of
CBIS's 1995 total revenue.
Opportunities
The wireless communications industry also includes a number of emerging
services, including PCS, which uses digital technologies to increase the range
of features, service quality and operating efficiency of mobile communications
services. Increased competition in the communications industry should increase
the opportunities for CBIS.
CBIS recently entered into contracts to provide customer care and billing
services to three of the largest potential providers of PCS services in the
United States based on both issued and projected license awards. In March 1996,
PrimeCo Personal Communications L.P. ("PrimeCo"), a wireless partnership among
AirTouch,
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Bell Atlantic Corporation, NYNEX Corporation, and U S WEST Media Group,
announced that it had chosen CBIS to be its exclusive customer care and billing
solutions provider. PrimeCo owns PCS licenses covering approximately 57 million
net POPs (potential customers adjusted for equity ownership) and is ranked as
the third largest owner of PCS A and B block licenses. In July 1996, CBIS signed
an exclusive customer care and billing contract with Sprint Spectrum L.P., a
wireless partnership among Sprint Corporation, Tele-Communications, Inc.
("TCI"), Comcast Cellular and Cox Communications, Inc. Sprint Spectrum L.P. owns
PCS licenses covering approximately 195 million net POPs and is ranked as the
largest owner of PCS A and B block licenses. Additionally, CBIS has an agreement
with AT&T to provide customer care and billing services to AT&T for PCS
services. AT&T Wireless owns PCS licenses covering approximately 114 million net
POPs and is ranked as the second largest owner of PCS A and B block licenses.
These new PCS contract awards coupled with CBIS's existing cellular billing
contracts position CBIS to be a leading provider of customer care and billing
services to a much broader wireless services industry if its clients are
successful in PCS and other wireless services businesses.
In March 1996, CBIS also announced a five-year contract with AT&T to
provide billing, data processing and software development and professional
consulting services in connection with AT&T's proposed reentry into the local
telephone market as either a reseller or a facilities-based provider of local
exchange services. AT&T is registering to offer these services in all 50 states
of the United States and is negotiating for resale agreements with selected
LECs. As with PCS, the benefits to CBIS from this contract will depend in part
upon the success of AT&T in meeting its objectives in this new venture.
On September 19, 1996, CBIS signed a three-year contract with a unit of
TCI, the largest cable television operator in the U.S. based on total
subscribers, to provide customer care and billing services in support of TCI's
planned offering of telephone services to its cable television customers. CBIS's
data center will provide rating (bill calculation), service order entry and bill
finishing services to TCI.
MATRIXX MARKETING INC.
General
Based on annual revenues, MATRIXX is the largest independent provider of
outsourced telephone marketing services. MATRIXX provides a full range of
customer service, sales support and telephone marketing solutions to major
companies in its targeted industries. In 1995, MATRIXX accounted for
approximately 20% of Cincinnati Bell's consolidated revenue and 14% of total
operating income excluding special items. MATRIXX recorded revenues of $271.1
million and operating income excluding special items of $32.3 million in 1995,
representing increases of 20% and 43%, respectively, when compared to 1994.
During the first nine months of 1996, MATRIXX's revenue and operating income
excluding special items increased by 26% and 28%, respectively, when compared to
the first nine months of 1995.
MATRIXX principally focuses on developing long-term, strategic outsourcing
relationships with large clients in the telecommunications, technology,
financial services, consumer products and direct response industries. MATRIXX
focuses on clients in these industries because of the complexity of the service
required, the anticipated growth of their businesses and their continuing need
for customer service support. Often, the level of support these companies
require and the close relationships they build with MATRIXX lead to higher
returns versus short-term client programs. For example, MATRIXX built a team of
sales account managers who are the dedicated sales channel to a consumer
products company's retail and wholesale accounts. MATRIXX's team manages the
company's day-to-day relationships with those accounts. This extension of the
company's sales organization allows for more frequent customer contact at a
lower cost. The dedicated team also assists the company in its marketing efforts
through database management, product movement reports and market trends
analysis.
Many MATRIXX employees who respond to inbound customer service calls are
dedicated to serving a single client. Employees supporting DIRECTV(R) satellite
entertainment services, for example, answer calls to initiate service or to
provide information about programming options, billing and technical aspects of
the service, including installing customers' own satellite dishes. For other
clients, MATRIXX provides help desk support for computer products and services
and responds to customer inquiries submitted via the Internet.
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MATRIXX operates 14 domestic and 2 international call centers with
approximately 5,900 available workstations and more than 10,000 customer call
representatives, including full-time and part-time employees. MATRIXX facilities
handled more than 150 million customer calls in 1995.
MATRIXX is headquartered in Cincinnati. It operates domestic call centers
in Ohio, Utah, Colorado, Arizona, Wisconsin, Nebraska and Florida and
international call centers in Paris, France and Newcastle, England.
Business
MATRIXX provides two categories of telephone marketing services.
Traditional services offer large shared capacities for large sales campaigns and
major direct response programs. Outsourced dedicated services require dedicated
agents to handle a specific company's more complex customer service and sales
account management needs. Complementary services to its traditional and
outsourced dedicated services are interactive voice response, Internet E-mail
response, research, database management and fulfillment. Based on 1995 revenues,
approximately 70% of MATRIXX's business involved responding to inbound calls
from customers of its clients. MATRIXX considers its industry focus and
differentiation of service offerings to be a competitive strength.
Dedicated customer call representative teams and call centers support large
telephone marketing services programs for clients. Many of these centers are
linked to provide optimal call routing, capacity matching and redundancy in
order to best meet the needs of the client. MATRIXX relies on advanced
information systems, including proprietary software, and integrated telephone
systems to effectively meet client expectations. MATRIXX customer service
representatives receive initial training and on-the-job support to develop
calling skills and knowledge of clients' products and services. MATRIXX's
service offerings are very labor intensive and dependent in part on its ability
to minimize personnel turnover. MATRIXX also competes for qualified personnel
with other employers in their geographic markets. There can be no assurance that
MATRIXX will be able to hire and retain a sufficient number of qualified
personnel in a cost-efficient manner to support continued growth.
MATRIXX's client base primarily includes large companies in the
telecommunications, technology, financial services, consumer products and direct
response industries. MATRIXX's largest customers in 1995 were AT&T, DIRECTV(R)
and American Express Company, which collectively accounted for approximately 38%
of 1995 revenues.
Market
Telephone marketing services include consumer and business telephone-based
customer service and sales programs. Historically, companies maintained such
customer care functions in-house because they believed that a direct
relationship with the customer was good business policy and because there were
few outsourcing alternatives. As the size and complexity of these functions have
grown, increasing numbers of companies have chosen to outsource some or all of
these activities in order to focus on their core businesses, reduce costs and
improve operational efficiency. Telephone marketing services companies such as
MATRIXX are able to provide these services in a higher quality, lower cost
manner, which in many cases results in a competitive advantage for MATRIXX's
clients. In addition, telephone marketing services companies often can provide a
client with current, detailed information on its customers and their purchasing
decisions.
According to a Strategic Telemedia Study, the U.S. agency market for
outsourced telephone marketing services, including automated services, was
approximately $6 billion in 1995. In addition, industry sources suggest that a
considerably larger volume of telephone marketing services was managed and
operated internally, through dedicated in-house call centers. MATRIXX believes
that corporations will outsource an increasingly larger percentage of such
telephone marketing services, further fueling the growth of the market for
outsourced telephone marketing services.
MATRIXX segments the market for telephone marketing services into
traditional and outsourced dedicated programs. Traditional programs involve
shared agents who handle shorter campaign-oriented calls. Outsourced dedicated
programs involve agents who handle larger and more complex calls for long-term
clients
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thereby providing added value. Many programs now include an automated and
interactive voice response component in addition to live agents. MATRIXX
recently entered the interactive and voice response market through its
acquisition of certain assets of Scherers Communications, Inc. in August 1996.
The principal drivers of overall telephone marketing services market growth
are expected to be the increasing use of targeted marketing strategies by
companies, the effectiveness of programs that involve frequent one-on-one
contact as a means of enhancing customer loyalty and the lower cost of sales and
marketing over the phone compared to other customer service methods.
Additionally, as companies seek to achieve greater strategic focus and operating
efficiency, a greater percentage are expected to seek to outsource
telephone-based customer care services and sales coverage programs. Cincinnati
Bell believes that MATRIXX is well positioned to capture significant amounts of
this business, because of their ability to provide the marketing expertise and
technological resources required to deal with increasingly complex customer
interactions.
Opportunities
MATRIXX believes that there are significant opportunities to grow its
business, in light of the growth of telephone marketing services as a
communications medium and the trend to outsource customer service and sales
coverage programs. Companies now realize that they can improve customer service
levels and increase sales while reducing costs. In addition, services developed
with other Cincinnati Bell companies are being offered to existing and potential
MATRIXX clients. For example, MATRIXX and CBT worked together to develop
MATRIXX's help desk support service for CBT's new FUSE(R) Internet access
service, a support service MATRIXX is offering to other third-party clients.
CBIS is also collaborating with MATRIXX to provide data processing services and
enhanced customer management software as well as jointly offering end-to-end
value-added solutions for communications providers.
MATRIXX believes that its focus and expertise in the telecommunications,
technology, financial services, consumer products and direct response industries
provide it with a competitive advantage in developing additional relationships
in these industries. These industries include many large corporations with large
and often complex telephone marketing service needs. In addition, MATRIXX
believes its scale and expertise in inbound calling provide it with an advantage
in winning new business from companies currently relying on in-house telephone
marketing service operations.
MATRIXX will actively seek out opportunities to expand its product
offerings and client base through internal development and strategic
acquisitions.
Regulation
Various federal and state legislative initiatives have been enacted to
regulate primarily outbound telephone marketing services, especially calls to
consumers. Since MATRIXX concentrates on inbound service and outbound
business-to-business telephone marketing services, MATRIXX does not believe that
such legislation adversely affects its business presently. However, there can be
no assurance that future legislation will not have an expanded scope and
restrict MATRIXX's ability to conduct its business.
OTHER BUSINESSES
Cincinnati Bell Long Distance resells long distance telecommunications
services and products as well as voice mail and paging services principally to
residential and business customers in Ohio and several adjoining states. Its
principal market focus is small- and medium-sized businesses, particularly
businesses with two to twenty business access lines in service. CBLD augments
its high-quality long-distance services with calling plans, network features and
enhanced calling services to create customized packages of communications
services for its clients. CBLD's resale activities are conducted pursuant to the
regulatory requirements of various state utility commissions. Although no
material regulatory developments are pending with respect to such requirements,
any such development could have an effect on CBLD's resale activities.
Cincinnati Bell Directory provides Yellow Pages and other directory
products and services as well as related information and advertising services.
Its principal products are a White Pages directory and nine
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Yellow Pages directories. CBD continually evaluates new product offerings in
both the print and emerging electronic categories of distribution.
Cincinnati Bell Supply ("Supply") purchases, sells and reconditions
telecommunications and computer equipment. Its principal market is the secondary
market for used and surplus telecommunications systems, including AT&T-brand
systems.
Cincinnati Bell also owns a 45% limited partnership interest in a cellular
telephone service business that covers much of central and southwestern Ohio,
northern Kentucky and small portions of southeastern Indiana. Cincinnati Bell's
proportionate share of this cellular market represents approximately 2.3 million
POPs. In 1994, Cincinnati Bell filed suit in Chancery Court in Delaware against
the partnership's general partner seeking to dissolve the partnership and
reclaim Cincinnati Bell's proportionate share of the partnership's assets. On
September 3, 1996, the Court denied Cincinnati Bell's motion for summary
judgment and granted the general partner's motion for summary judgment.
Cincinnati Bell has appealed the ruling to the Delaware Supreme Court.
COMPETITION
Cincinnati Bell Telephone Company
CBT is currently the sole provider of basic local switched wireline
telecommunications services in its market. Competitors include providers of
special access services, wireless communications services, enhanced calling
services such as voice messaging services and providers of business
communications equipment and services.
Evolving technology, the preferences of consumers and policy makers, and
the convergence of other industries with the telecommunications industry are
causes for increasing competition in the telecommunications industry. The range
of communications services, the equipment available to provide and access such
services and the number of competitors offering such services continue to
increase. That increase expands the means by which CBT's network may be
bypassed. Furthermore, recently enacted legislative and regulatory initiatives
and additional regulatory developments that are expected in the near future are
likely to encourage and accelerate the development of competition in all
segments of the telecommunications industry by removing legal barriers to
competition across segments of that industry. These initiatives and developments
could make it more difficult for CBT to maintain current revenue and profit
objectives. See "Risk Factors -- Regulatory and Competitive Trends -- Cincinnati
Bell Telephone Company."
In the future, CBT expects to compete with other providers of local
exchange telecommunications services, and communications-based entertainment and
information services. Local exchange telecommunications competitors will include
other major local exchange telecommunications companies, wireless services
providers, interexchange carriers, competitive local exchange carriers ("CLECs")
and others. Time Warner Communications of Ohio, L.P. and Communications Buying
Group, Inc. are the only other companies currently certified to offer switched
local exchange service in CBT's Greater Cincinnati market.
Cincinnati Bell Information Systems Inc.
Competition in the information services market is based primarily on
product quality, performance, price and the quality of client service. CBIS's
competitors include large firms with size and capabilities equal to or greater
than CBIS as well as potential competitors from other markets similar to those
served by CBIS. Major competitors of CBIS include Alltel Corporation, EDS
Systems Corp., American Management Systems Inc. and Andersen Consulting Group.
Niche players or new entrants could also capture a segment of the information
services market by developing new systems or services which could impact CBIS's
market potential. In addition, CBIS's clients and potential clients are
generally large companies with substantial resources and the capability to
provide needed services for themselves rather than outsourcing such services.
Faced with increasing competition, there can be no assurance that CBIS can
maintain its future growth at the same rate as that experienced in the past
several years.
CBIS believes that it can provide superior service to its clients, because
of its extensive knowledge of the telecommunications industry, its constant
technological and service enhancements, its information systems
34
<PAGE> 36
capabilities and resources and the quality of its client service. As
telecommunications customer care and billing becomes more complex,
telecommunications providers are increasingly considering customer billing
services as an opportunity to differentiate themselves from competitive service
providers. CBIS believes that its ability to maintain a leadership position in
the technological development of billing systems will be critical to providing
its clients with competitively priced high quality services.
MATRIXX Marketing Inc.
The telephone marketing services industry in which MATRIXX competes is
extremely competitive and highly fragmented. MATRIXX competes with the in-house
telephone marketing services operations of its current and potential clients,
other large telephone marketing services companies such as APAC TeleServices,
Inc., AT&T American Transtech, ITI Marketing Services Inc., SITEL Corporation,
TeleTech Holdings, Inc., West TeleServices Corporation, Precision Response
Corporation and numerous other small companies. MATRIXX also competes with
alternative marketing media such as television, radio and direct mail
advertising. MATRIXX differentiates itself from competitors based on its size
and scale, selective industry and client focus, financial and technical
resources and business reputation.
MATRIXX believes that the principal competitive factors in the telephone
marketing and related marketing services industry are reputation for quality,
sales and marketing skills, price, technological expertise and the ability to
promptly provide clients with customized solutions to their customer service,
sales and marketing needs. The competitive marketplace could begin to place
pressure on MATRIXX's ability to achieve its goals. There can be no assurance
that MATRIXX will be able to achieve the growth and financial results that it
has had in the past several years.
Other Businesses
Cincinnati Bell's other businesses face intense competition in their
markets, principally from larger companies. They primarily seek to differentiate
themselves by providing existing customers with superior service and by focusing
on niche markets and opportunities to develop and market customized packages of
services. CBLD's competitors include other interexchange carriers and selected
local telecommunications services companies. CBD's competitors are other
directory services companies, and newspapers and other media advertising
services providers in its region. Supply's competitors include a number of
larger and smaller vendors of new and used communications and computer
equipment, operating regionally and across the nation.
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<PAGE> 37
MANAGEMENT
Set forth below is certain information concerning directors and certain
executive officers of Cincinnati Bell. Each director holds office (subject to
Cincinnati Bell's Amended Regulations) until the next annual meeting of
shareholders and until his or her successor has been elected and qualified. The
information concerning the directors has been furnished by them to Cincinnati
Bell.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Charles S. Mechem, Jr.................... 66 Director and Chairman of the Board
John T. LaMacchia........................ 55 Director, President and Chief Executive Officer
James F. Orr............................. 50 Director and Chief Operating Officer
Brian C. Henry........................... 39 Executive Vice President and Chief Financial Officer
William H. Zimmer III.................... 42 Secretary and Treasurer
William D. Baskett III................... 57 General Counsel and Chief Legal Officer
David F. Dougherty....................... 40 President and Chief Executive Officer of MATRIXX
Robert J. Marino......................... 49 President and Chief Executive Officer of CBIS
John F. Barrett.......................... 47 Director
Phillip R. Cox........................... 49 Director
William A. Friedlander................... 64 Director
Roger L. Howe............................ 61 Director
Robert P. Hummel, M.D.................... 68 Director
James D. Kiggen.......................... 64 Director
Mary D. Nelson........................... 63 Director
Brian H. Rowe............................ 65 Director
David B. Sharrock........................ 60 Director
</TABLE>
CHARLES S. MECHEM, JR., Director of Cincinnati Bell since December 1995 and
Chairman of Cincinnati Bell since April 22, 1996; Chairman of the Executive
Committee and the Nominating Committee; Commissioner Emeritus, Ladies
Professional Golf Association ("LPGA") (women's professional sports
organization). Retired from LPGA in December 1995, following a five-year tenure.
Chairman of U.S. Shoe Corporation from April 1993 to May 1995. Retired Chairman
& CEO of Taft Broadcasting Company (1967-1990). Director of AGCO, Mead
Corporation, Ohio National Life Insurance Company, J. M. Smucker Company, Star
Banc Corp. and Star Bank, N.A.
JOHN T. LAMACCHIA, President and Chief Executive Officer of Cincinnati Bell
since October 1, 1993; President of Cincinnati Bell since January 1, 1988;
Chairman of Cincinnati Bell Telephone Company since November 1993; Chairman of
Cincinnati Bell Information Systems Inc. since October 1988; Chief Operating
Officer of Cincinnati Bell, 1988-1993. Director of Cincinnati Bell since 1985;
member of the Executive Committee. Director of Burlington Resources, Inc. (oil
and gas production). Director of The Kroger Co. (food retailer).
JAMES F. ORR, Director and Chief Operating Officer of Cincinnati Bell since
September 16, 1996; Executive Vice President of Cincinnati Bell, June 1, 1995
- -- September 16, 1996; President and Chief Executive Officer of Cincinnati Bell
Information Systems Inc., January 1, 1995 -- September 16, 1996; Chief Operating
Officer of CBIS, February 4, 1994 -- December 31, 1994; President and Chief
Executive Officer of MATRIXX Marketing Inc., January 1, 1993 -- December 31,
1994; Vice President -- Market Development, January 1, 1989 -- December 31,
1992.
BRIAN C. HENRY, Executive Vice President and Chief Financial Officer of
Cincinnati Bell since March 29, 1993; Vice President and Chief Financial Officer
of Mentor Graphics, February 1986 to March 28, 1993.
WILLIAM H. ZIMMER III, Secretary and Treasurer of Cincinnati Bell since August
1, 1991; Secretary and Assistant Treasurer of Cincinnati Bell, December 1, 1988
- -- July 31, 1991. Trustee of Star Funds, an
36
<PAGE> 38
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), since February 1996.
WILLIAM D. BASKETT III, General Counsel and Chief Legal Officer of Cincinnati
Bell since July 1993; Partner of Frost & Jacobs since 1970.
DAVID F. DOUGHERTY, President and Chief Executive Officer of MATRIXX Marketing
Inc. since January 1, 1995; Senior Vice President and Chief Operating Officer
U.S. Operations, January 1, 1993 -- December 31, 1994; President of the Consumer
Division, January 1, 1991 -- December 31, 1992.
ROBERT J. MARINO, President and Chief Executive Officer, of Cincinnati Bell
Information Systems Inc. since September 16, 1996; Chief Operating Officer,
October 2, 1995 -- September 16, 1996; President of the Northeast Region at
Nextel Communications (wireless communications services company) from 1993-1995.
JOHN F. BARRETT, Director of Cincinnati Bell since 1992; member of the Audit
Committee, Compensation Committee and Nominating Committee. President and Chief
Executive Officer of The Western and Southern Life Insurance Company since March
8, 1994; President and Chief Operating Officer, November 1989 -- March 1994;
Executive Vice President and Chief Financial Officer, May 1987 -- October 1989.
Director of The Western and Southern Life Insurance Company, The Fifth Third
Bancorp and its subsidiary, The Fifth Third Bank, and The Andersons, Inc.
PHILLIP R. COX, Director of Cincinnati Bell since 1993; member of the
Compensation Committee and Finance and Benefits Committee. President and Chief
Executive Officer of Cox Financial Corporation (financial planning) since 1972.
Chairman of United Way of Cincinnati, March 1995, Vice Chairman of United Way of
Cincinnati, 1993-1995, Director of Federal Reserve Bank of Cleveland, CINergy
Corp. (gas and electric company), PNC Bank, Ohio, N.A., and Trustee of The
Touchstone Funds, investment companies registered under the 1940 Act.
WILLIAM A. FRIEDLANDER, Director of Cincinnati Bell since 1986; Chairman of the
Audit Committee and a member of the Executive Committee. Chairman of Bartlett &
Co. (a registered investment advisor) since 1989; Chief Executive Officer,
1966-1989. Director and Chief Executive Officer of the Greater Cincinnati
Foundation (community foundation), 1990-1994. Director of The Union Central Life
Insurance Company.
ROGER L. HOWE, Director of Cincinnati Bell since September 16, 1996. Chairman of
U.S. Precision Lens, Inc. (manufacturer of optics for the instrument,
semiconductor, photographic, fiber optic, medical and toy industries) since
1970. Director of Atkins & Pearce, Inc., Baldwin Piano & Organ Co., Cintas
Corporation, Eagle-Picher Industries (diversified manufacturer of industrial
products), The R. A. Jones Co., (manufacturer of packaging systems), Star Banc
Corp and its subsidiary, The Star Bank.
ROBERT P. HUMMEL, M.D., Director of Cincinnati Bell since 1983; Chairman of the
Finance and Benefits Committee and a member of the Executive Committee. Chief of
Staff of University Hospital; Emeritus Professor of Surgery, College of
Medicine, University of Cincinnati.
JAMES D. KIGGEN, Director of Cincinnati Bell since 1983; Chairman of the
Compensation Committee and a member of the Executive Committee. Chairman of the
Board of Xtek, Inc. (manufacturer of engineered steel products for heavy
industry) since 1985; Chief Executive Officer of Xtek, Inc. since 1981;
President of Xtek, Inc. 1979-1995. Director of Fifth Third Bancorp and its
subsidiary, The Fifth Third Bank, The United States Playing Card Company
(worldwide manufacturer of playing cards), The R.A. Jones Co. and Xtek, Inc.
MARY D. NELSON, Director of Cincinnati Bell since 1994; a member of the Audit
Committee and Finance and Benefits Committee. President of Nelson & Co.
(consulting actuaries) since 1975. Director of Blount International, Inc.
(manufacturer of outdoor products, industrial and power equipment and sporting
equipment) and The Union Central Life Insurance Company.
BRIAN H. ROWE, Director of Cincinnati Bell since October 28, 1996. Retired
Chairman of GE Aircraft Engines, 1993-1995. President and Chief Executive
Officer of GE Aircraft Engines and Senior Vice President of the General Electric
Company from 1979-1993. Director of The Fifth Third Bancorp and its subsidiary,
The Fifth Third Bank, Stewart & Stevenson Service, Inc. (manufacturer of turbine
engine systems), Atlas
37
<PAGE> 39
Air, Inc. (cargo carrier), B/E Aerospace, Inc. (manufacturer of aircraft
interior products), Textron, Inc. (manufacturer of aerospace and commercial
products) and Canadian Marconi Company (manufacturer of aircraft parts).
DAVID B. SHARROCK, Director of Cincinnati Bell since 1987; member of the
Compensation Committee and Nominating Committee. Consultant since 1994; Retired
Executive Vice 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 Unitog Co. (uniform rental company), Interneuron
Pharmaceuticals Inc. (pharmaceutical research), Progenitor, Inc. (pharmaceutical
research), Intercardia, Inc. (pharmaceutical product development) and
Pharmaceutical Peptides, Inc. (pharmaceutical research).
CERTAIN RELATIONSHIPS
Waslic and Western & Southern currently own, or have voting power or
investment power with respect to, an aggregate of 6,452,696 Common Shares or
approximately 9.6% of the issued and outstanding Common Shares. Waslic acquired
3,157,896 of such Common Shares upon conversion of Cincinnati Bell's 7.25%
Cumulative Convertible Voting Preferred Shares, no par value (the "Preferred
Shares") and the remainder in open market purchases. Pursuant to a Registration
Rights Agreement relating to the Preferred Shares, Cincinnati Bell has agreed to
indemnify Waslic and Western & Southern against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments Waslic and
Western & Southern may be required to make in respect thereof, in connection
with the DECS Offering. In addition, certain of The Touchstone Funds, which are
mutual funds managed by an affiliate of Western & Southern, and certain
investment advisory clients of Fort Washington Advisors, Inc., a wholly owned
subsidiary of Western & Southern, hold an aggregate of 11,308 Common Shares.
Touchstone Advisors, Inc., a wholly owned subsidiary of Western & Southern, is
the adviser to The Touchstone Funds. Mr. Barrett, a director of Cincinnati Bell
since 1992, is President and Chief Executive Officer of Western & Southern, and
Mr. Cox, a director of Cincinnati Bell since 1993, is a trustee of The
Touchstone Funds.
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<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
The following is a summary description of the capital stock of Cincinnati
Bell and is qualified by reference to Cincinnati Bell's Amended Articles of
Incorporation (the "Articles"), a copy of which has been filed as Exhibit 4.1 to
this Registration Statement. For the text of the provisions summarized below,
reference is made to such exhibit.
The authorized capital stock of Cincinnati Bell consists of 240,000,000
Common Shares, par value $1.00 per share, and 5,000,000 preferred shares,
without par value (the "Preferred Shares"), of which 4,000,000 are voting
preferred shares (the "Voting Preferred Shares"). At September 30, 1996,
67,393,953 Common Shares were outstanding. There are currently no Preferred
Shares outstanding.
All Common Shares of Cincinnati Bell are entitled to participate equally in
such dividends as may be declared by the Board of Directors of Cincinnati Bell
and upon liquidation of Cincinnati Bell, subject to the prior rights of any
Preferred Shares. All Common Shares are fully paid and nonassessable.
Each shareholder has one vote for each Common Share registered in the
shareholder's name. The Board of Directors is divided into three classes as
nearly equal in size as the total number of directors constituting the Board
permits. The number of directors may be fixed or changed from time to time by
the shareholders or the directors.
The Board of Directors is authorized to issue the Preferred Shares from
time to time in series and to fix the dividend rate and dividend dates,
liquidation price, redemption rights and redemption prices, sinking fund
requirements, conversion rights, restrictions, if any, on the creation of
indebtedness and on the issuance of such Preferred Shares, and certain other
rights, preferences and limitations. Each series of Preferred Shares would rank,
with respect to dividends and redemption and liquidation rights, senior to the
Common Shares. It is not possible to state the actual effect of the
authorization of any series of Preferred Shares upon the rights of holders of
the Common Shares until the Board of Directors determines the rights of the
holders of one or more series of Preferred Shares. However, such effects could
include (a) restrictions on dividends on the Common Shares, (b) dilution of the
voting power of the Common Shares to the extent that the Voting Preferred Shares
have voting rights or (c) inability of the Common Shares to share in Cincinnati
Bell's assets upon liquidation until satisfaction of any liquidation preference
granted to the Preferred Shares.
No holders of shares of any class of Cincinnati Bell's capital stock have
pre-emptive rights nor the right to exercise cumulative voting in the election
of directors.
The transfer agent and registrar of the Common Shares is KeyCorp
Shareholder Services, Inc., a subsidiary of KeyBank N.A., P. O. Box 6477,
Cleveland, Ohio 44101.
CHANGE IN CONTROL
The following provisions of Cincinnati Bell's Articles and Ohio law might
have the effect of delaying, deferring or preventing a change in control of
Cincinnati Bell and would operate only with respect to an extraordinary
corporate transaction, such as a merger, reorganization, tender offer, sale or
transfer of assets or liquidation involving Cincinnati Bell and certain persons
described below.
Ohio law provides that the approval of two-thirds of the voting power of a
corporation is required to effect mergers and similar transactions, to adopt
amendments to the articles of incorporation of a corporation and to take certain
other significant actions. Although under Ohio law the articles of incorporation
of a corporation may permit such actions to be taken by a vote that is less than
two-thirds (but not less than a majority), Cincinnati Bell's Articles do not
contain such a provision. The two-thirds voting requirement tends to make
approval of such matters, including further amendments to the Articles,
relatively difficult and a vote of the holders of in excess of one-third of the
outstanding Common Shares of Cincinnati Bell would be sufficient to prevent
implementation of any of the corporation actions mentioned above. In addition,
Article Fifth classifies the Board of Directors into three classes of directors
with staggered terms of office and Cincinnati Bell's Amended Regulations provide
certain limitations on the removal from and filling of vacancies in the office
of director.
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<PAGE> 41
Article Sixth of the Articles requires that certain minimum price
requirements and procedural safeguards be observed by a person or entity after
he or it becomes the holder of 10% or more of the voting shares of Cincinnati
Bell if such person or entity seeks to effect mergers or certain other business
combinations ("Business Combinations") that could fundamentally change or
eliminate the interests of the remaining shareholders. If such requirements and
procedures are not complied with, or if the proposed Business Combination is not
approved by at least a majority of the members of the Board of Directors who are
unaffiliated with the new controlling person or entity (taking into account
certain special quorum requirements), the proposed Business Combination must be
approved by the holders of 80% of the outstanding Common Shares and outstanding
Voting Preferred Shares of Cincinnati Bell (collectively, "Voting Shares"),
voting together as a class, notwithstanding any other class vote required by law
or by the Articles. In the event the price criteria and procedural requirements
are met or the requisite approval by such unaffiliated directors (taking into
account certain special quorum requirements) is given with respect to a
particular Business Combination, the normal voting requirements of Ohio law
would apply.
In addition, Article Sixth of the Articles provides that the affirmative
vote of the holders of 80% of the Voting Shares, voting as a single class, shall
be required to amend or repeal, or adopt any provisions inconsistent with,
Article Sixth. An 80% vote is not required to amend or repeal, or adopt a
provision inconsistent with, Article Sixth if the Board of Directors has
recommended such amendment or other change and if, as of the record date for the
determination of shareholders entitled to vote thereon, no person is known by
the Board of Directors to be the beneficial owner of 10% or more of the Voting
Shares, in which event the affirmative vote of the holders of two-thirds of the
Voting Shares, voting as a single class, shall be required to amend or repeal,
or adopt a provision inconsistent with, Article Sixth.
Ohio, the state of Cincinnati Bell's incorporation, has enacted Ohio
Revised Code Section 1701.831, a "control share acquisition" statute, and
Chapter 1704, a "merger moratorium" statute. The control share acquisition
statute basically provides that any person acquiring shares of an "issuing
public corporation" (which definition Cincinnati Bell meets) in any of the
following three ownership ranges must seek and obtain shareholder approval of
the acquisition transaction that first puts such ownership within each such
range: (i) more than 20% but less than 33 1/3%; (ii) 33 1/3% but not more than
50%; and (iii) more than 50%.
The merger moratorium statute provides that, unless a corporation's
articles of incorporation or regulations otherwise provide, an "issuing public
corporation" (which definition Cincinnati Bell meets) may not engage in a
"Chapter 1704 transaction" for three years following the date on which a person
acquires more than 10% of the voting power in the election of directors of the
issuing corporation, unless the "Chapter 1704 transaction" is approved by the
corporation's board of directors prior to such voting power acquisition. A
person who acquires such voting power is an "interested shareholder," and
"Chapter 1704 transactions" involve a broad range of transactions, including
mergers, consolidations, combinations, liquidations, recapitalization and other
transactions between an "issuing public corporation" and an "interested
shareholder" if such transactions involve 5% of the assets or shares of the
"issuing public corporation" or 10% of its earning power. After the initial
three year moratorium, Chapter 1704 prohibits such transactions absent approval
by disinterested shareholders or the transaction meeting certain statutorily
defined fair price provisions.
Ohio has also enacted a "greenmailer disgorgement" statute which provides
that a person who announces a control bid must disgorge profits realized by that
person upon the sale of any equity securities within 18 months of the
announcement.
In addition, Ohio has a "control bid" statute that provides for the
dissemination of certain information and the possibility of a hearing concerning
compliance with law in connection with a proposed acquisition of more than 10%
of any class of equity securities of a corporation, such as Cincinnati Bell,
that has significant contacts with Ohio.
In October 1986 the Board of Directors of Cincinnati Bell adopted a Share
Purchase Rights Plan. Under the plan, shareholders received, in connection with
each Common Share owned, the right to purchase one one-hundredth of a Series A
Preferred Share at an exercise price of $125, subject to adjustment (the
"Rights"). The Rights expired on November 5, 1996. Cincinnati Bell has no
current intention to implement a successor shareholder rights plan, but it may
do so in the future.
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<PAGE> 42
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among Salomon, Cincinnati Bell and the
Underwriters named below, Salomon has agreed to sell to the Underwriters, and
the Underwriters have agreed to purchase, the aggregate number of DECS set forth
opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS DECS
------------------------------------------------------------------------ ---------
<S> <C>
Salomon Brothers Inc.................................................... 1,500,000
Morgan Stanley & Co. Incorporated....................................... 1,500,000
--------
Total................................................................... 3,000,000
========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the DECS offered pursuant to the DECS Prospectus if
any of the DECS are purchased.
Salomon has been advised by the Underwriters that they propose to offer the
DECS directly to the public initially at the public offering price set forth on
the cover of the DECS Prospectus and to certain dealers at such prices less a
concession not in excess of $ per DECS. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per DECS to
other dealers. After the initial public offering, such public offering price and
such concession and reallowance may be changed.
Cincinnati Bell, Waslic, Western & Southern and the directors and executive
officers of Cincinnati Bell have agreed not to (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any Common Shares or any
securities convertible into or exercisable or exchangeable for Common Shares or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Shares or such other securities, in cash or
otherwise, for a period of at least 90 days from the date of this Prospectus
without the prior written consent of the Underwriters; provided, however, that
(x) Cincinnati Bell may issue, or grant options for, Common Shares pursuant to
any stock plan for employees or directors, or any qualified employee benefit
plan, in effect on the date of this Prospectus, or pursuant to any stock options
outstanding on the date of this Prospectus, and any defined contribution
qualified employee benefit plan in effect on the date of this Prospectus may
sell Common Shares to satisfy plan liquidity needs, (y) such officers and
directors, which may include John T. LaMacchia, James F. Orr and Brian C. Henry,
may sell up to 200,000 Common Shares in the aggregate so long as no one
individual sells more than (A) 5,000 Common Shares or (B) 15% of the sum of the
number of Common Shares currently owned by such individual and the number of
Common Shares that may be purchased by such individual pursuant to currently
exercisable options (whichever of (A) or (B) is greater) and (z) such agreement
will not affect the ability of Waslic to engage in any of the transactions
described in clause (i) or (ii) above in connection with the offering of the
Waslic DECS or any exchange at maturity pursuant to the terms of the Waslic
DECS. If any such consent is given it would not necessarily be preceded or
followed by a public announcement thereof.
Cincinnati Bell and the Cincinnati Bell Pension Plans Trust have entered
into a separate underwriting agreement with the group of underwriters named
therein providing for the offer and sale of 2,000,000 Common Shares owned by the
Cincinnati Bell Pension Plans Trust. The closings of the DECS Offering and the
Pension Trust Offering are not conditioned upon each other.
Salomon has granted to the Underwriters an option, exercisable for the
30-day period after the date of the DECS Prospectus, to purchase up to an
additional 450,000 DECS from Salomon, at the same price per DECS as the initial
DECS to be purchased by the Underwriters. The Underwriters may exercise such
option only for the purpose of covering over-allotments, if any, incurred in
connection with the sale of DECS offered pursuant to the DECS Prospectus. To the
extent that the Underwriters exercise such option, each Underwriter
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<PAGE> 43
will have a firm commitment, subject to certain conditions, to purchase the same
proportion of the DECS as the number of DECS to be purchased and offered by such
Underwriter in the above table bears to the total number of initial DECS to be
purchased by the Underwriters.
The DECS will be a new issue of securities with no established trading
market. The DECS have been approved for listing on the NYSE under the symbol
"CXB," subject to official notice of issuance. The Underwriters intend to make a
market in the DECS, subject to applicable laws and regulations. However, the
Underwriters are not obligated to do so and any such market-making may be
discontinued at any time at the sole discretion of the Underwriters without
notice. Accordingly, no assurance can be given as to the liquidity of such
market.
The Underwriting Agreement provides that Salomon and Cincinnati Bell will
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respects thereof. The Underwriting Agreement also provides
that Cincinnati Bell will indemnify Salomon against certain liabilities,
including liabilities under the Securities Act, or contribute to payments
Salomon may be required to make in respect thereof.
Pursuant to a Purchase Agreement among Waslic, Western & Southern and
Salomon (the "Purchase Agreement"), Salomon has agreed, subject to the terms and
conditions set forth therein, to purchase from Waslic a number of Waslic DECS
equal to the aggregate number of DECS to be purchased by the Underwriters from
Salomon pursuant to the Underwriting Agreement (including any DECS to be
purchased by the Underwriters upon exercise of the over-allotment option).
Pursuant to the terms of the Waslic DECS, Waslic will be obligated to deliver to
Salomon at or prior to maturity of the DECS a number of Common Shares (or, at
Waslic's option, the cash equivalent and/or such other consideration as
permitted or required by the terms of the Waslic DECS), that are expected to
have the same value as the Common Shares delivered pursuant to the DECS. The
closing of the offering of the DECS is conditioned upon the closing of the
purchase of the Waslic DECS pursuant to the Purchase Agreement. For further
information, see the DECS Prospectus.
Salomon Brothers Inc is an indirect wholly owned subsidiary of Salomon. The
participation of Salomon Brothers Inc in the offer and sale of the DECS complies
with the requirements of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc. regarding the underwriting by Salomon
Brothers Inc of the securities of its parent.
In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and investment banking transactions with Salomon,
Cincinnati Bell, Waslic, Western & Southern and their respective affiliates.
LEGAL MATTERS
Certain legal matters in connection with the Common Shares offered hereby
will be passed upon for Cincinnati Bell by Frost & Jacobs, Cincinnati, Ohio. Mr.
Baskett, a partner of Frost & Jacobs, is General Counsel and Chief Legal Officer
of Cincinnati Bell and is the record owner of 1,040 Common Shares and has
options to purchase 80,000 Common Shares. Other attorneys at Frost & Jacobs are
the record or beneficial owners of approximately 4,700 Common Shares in the
aggregate.
EXPERTS
The consolidated balance sheets of Cincinnati Bell Inc. as of December 31,
1995 and 1994 and the consolidated statements of income, shareowners' equity and
cash flows for each of the three years in the period ended December 31, 1995,
which appear in Cincinnati Bell's Annual Report on Form 10-K for the year ended
December 31, 1995, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
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<PAGE> 44
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY CINCINNATI BELL OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
CINCINNATI BELL SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Forward-Looking Statements............. 3
Available Information.................. 3
Incorporation of Certain Documents by
Reference............................ 4
Prospectus Summary..................... 5
Risk Factors........................... 8
Use of Proceeds........................ 11
Price Range of Common Shares and
Dividends............................ 11
Selected Consolidated Financial
Information.......................... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 13
Business............................... 25
Management............................. 36
Certain Relationships.................. 38
Description of Capital Stock........... 39
Plan of Distribution................... 41
Legal Matters.......................... 42
Experts................................ 42
</TABLE>
3,000,000 SHARES
CINCINNATI BELL INC.
COMMON SHARES
($1.00 PAR VALUE)
LOGO
PROSPECTUS
DATED , 1996
<PAGE> 45
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
PROSPECTUS (Subject to Completion)
Issued November 13, 1996
2,000,000 Shares
(Cincinnati Bell Logo)
COMMON SHARES
------------------------
OF THE 2,000,000 COMMON SHARES, PAR VALUE $1.00 PER SHARE (THE "COMMON SHARES")
OFFERED HEREBY, 1,600,000 COMMON SHARES ARE BEING OFFERED INITIALLY IN THE
UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND 400,000 COMMON SHARES
ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." ALL OF THE COMMON SHARES
OFFERED HEREBY ARE BEING SOLD BY BANKERS TRUST COMPANY AS TRUSTEE UNDER
THE CINCINNATI BELL PENSION PLANS TRUST (THE "CINCINNATI BELL PENSION
PLANS TRUST"). SEE "SELLING SHAREHOLDER." NONE OF THE PROCEEDS FROM
THE SALE OF THE COMMON SHARES WILL BE RECEIVED BY CINCINNATI BELL
INC. ("CINCINNATI BELL"). CINCINNATI BELL'S COMMON SHARES ARE
LISTED ON THE NEW YORK AND CINCINNATI STOCK EXCHANGES UNDER THE
SYMBOL "CSN." ON NOVEMBER 13, 1996, THE REPORTED LAST SALE PRICE
OF THE COMMON SHARES ON THE NEW YORK STOCK EXCHANGE WAS $55.75.
------------------------
PURSUANT TO A SEPARATE PROSPECTUS, SALOMON INC IS CONCURRENTLY OFFERING FOR SALE
IN A SEPARATE OFFERING 3,000,000 OF ITS
% EXCHANGEABLE NOTES DUE FEBRUARY 1, 2001 (THE "DECS(SM)"), PLUS UP TO AN
ADDITIONAL 450,000 DECS SOLELY
TO COVER OVER-ALLOTMENTS. AT MATURITY, THE DECS MAY BE EXCHANGED BY SALOMON INC
INTO COMMON SHARES.
------------------------
SEE "RISK FACTORS" ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDER(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Common Share............. $ $ $
Total(3)..................... $ $ $
</TABLE>
- ------------
(1) Cincinnati Bell and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
(2) Expenses of issuance and distribution estimated at $311,575 are payable by
Cincinnati Bell.
(3) The Selling Shareholder has granted the U.S. Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 300,000 additional Common Shares at the price to public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions and
proceeds to the Selling Shareholder will be $ , $ and
$ , respectively. See "Underwriters."
------------------------
The Common Shares are offered, subject to prior sale, when, as and if
accepted by the Underwriters named herein and subject to approval of certain
legal matters by Cleary, Gottlieb, Steen & Hamilton, counsel for the
Underwriters. It is expected that delivery of the Common Shares will be made on
or about , 1996 through the book entry facilities of The Depository
Trust Company, against payment therefor in immediately available funds.
------------------------
Joint Book-Running Managers
MORGAN STANLEY & CO. SALOMON BROTHERS INC
Incorporated
, 1996
<PAGE> 46
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and if given or made, such information or representation must not be relied upon
as having been authorized by Cincinnati Bell or the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered hereby to any person in any
jurisdiction in which it is unlawful to make any such offer or solicitation to
such person. Neither the delivery of this Prospectus nor any sale made hereby
shall under any circumstance imply that the information contained herein is
correct as of any date subsequent to the date hereof.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements.................................................... 3
Available Information......................................................... 3
Incorporation of Certain Documents by Reference............................... 4
Prospectus Summary............................................................ 5
Risk Factors.................................................................. 8
Use of Proceeds............................................................... 11
Price Range of Common Shares and Dividends.................................... 11
Selected Consolidated Financial Information................................... 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 13
Business...................................................................... 25
Management.................................................................... 36
Selling Shareholder........................................................... 38
Description of Capital Stock.................................................. 39
Certain United States Tax Consequences to Non-United States Holders........... 41
Underwriters.................................................................. 42
Legal Opinions................................................................ 44
Experts....................................................................... 45
</TABLE>
2
<PAGE> 47
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
THE COMMON SHARES OFFERING
<TABLE>
<S> <C> <C>
Common Shares offered
United States offering.............................. 1,600,000 shares
International offering.............................. 400,000 shares
-----------
Total....................................... 2,000,000 shares
Common Shares to be outstanding after the offering.... 67,393,953 shares
Use of proceeds....................................... All of the proceeds will be received
by the Cincinnati Bell Pension Plans
Trust (the "Selling Shareholder"). None
of the proceeds will be received by
Cincinnati Bell.
New York Stock Exchange Symbol........................ CSN
</TABLE>
THE DECS OFFERING
Salomon Inc is also offering for sale in a separate offering 3,000,000
DECS, plus up to an additional 450,000 DECS solely to cover over-allotments. At
maturity, the DECS will be manditorily exchanged by Salomon Inc into Common
Shares (or, at Salomon Inc's option, cash with equal value and/or such other
consideration as permitted or required by the terms of the DECS) at the rate
specified in the prospectus for the offering of the DECS.
6
<PAGE> 48
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
Air, Inc. (cargo carrier), B/E Aerospace, Inc. (manufacturer of aircraft
interior products), Textron, Inc. (manufacturer of aerospace and commercial
products) and Canadian Marconi Company (manufacturer of aircraft parts).
DAVID B. SHARROCK, Director of Cincinnati Bell since 1987; member of the
Compensation Committee and Nominating Committee. Consultant since 1994; Retired
Executive Vice 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 Unitog Co. (uniform rental company), Interneuron
Pharmaceuticals Inc. (pharmaceutical research), Progenitor, Inc. (pharmaceutical
research), Intercardia, Inc. (pharmaceutical product development) and
Pharmaceutical Peptides, Inc. (pharmaceutical research).
SELLING SHAREHOLDER
This Prospectus relates to 2,000,000 Common Shares, plus up to an
additional 300,000 Common Shares solely to cover over-allotments, which may be
delivered by the Cincinnati Bell Pension Plans Trust and are offered by the
Cincinnati Bell Pension Plans Trust pursuant to this Prospectus. Assuming the
Cincinnati Bell Pension Plans Trust sells all of such 2,000,000 Common Shares
(representing approximately 3% of the outstanding Common Shares) offered hereby
and the Underwriters do not exercise their over-allotment option, the Cincinnati
Bell Pension Plans Trust will thereafter own 1,457,248 Common Shares
(representing approximately 2% of the outstanding Common Shares).
38
<PAGE> 49
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Shares by a person that, for United States federal income tax purposes, is a
nonresident alien individual, a foreign corporation, a foreign partnership, or a
foreign estate or trust (a "non-U.S. holder"). The discussion does not consider
specific facts and circumstances that may be relevant to a particular non-U.S.
holder's tax position. Accordingly, each non-U.S. holder is urged to consult its
own tax advisor with respect to the United States tax consequences of the
ownership and disposition of Common Shares, as well as any tax consequences that
may arise under the laws of any state, municipality, foreign country or other
taxing jurisdiction.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Shares ordinarily will be
subject to withholding of United States federal income tax at a 30 percent rate,
or at a lower rate under an applicable income tax treaty that provides for a
reduced rate of withholding. However, if the dividends are effectively connected
with the conduct by the holder of a trade or business within the United States,
then the dividends will be exempt from the withholding tax described above and
instead will be subject to United States federal income tax on a net income
basis.
GAIN ON DISPOSITION OF COMMON SHARES
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain realized on a disposition of Common Shares,
provided that (a) the gain is not effectively connected with a trade or business
conducted by the non-U.S. holder in the United States and (b) in the case of a
non-U.S. holder who is an individual and who holds the Common Shares as a
capital asset, such holder is present in the United States for less than 183
days in the taxable year of the sale and other conditions are met.
FEDERAL ESTATE TAXES
Common Shares owned or treated as being owned by a non-U.S. holder at the
time of death will be included in such holder's gross estate for United States
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
U.S. information reporting requirements and backup withholding tax will not
apply to dividends paid on Common Shares to a non-U.S. holder at an address
outside the United States. As a general matter, information reporting and backup
withholding also will not apply to a payment of the proceeds of a sale of Common
Shares effected outside the United States by a foreign office of a foreign
broker. However, information reporting requirements (but not backup withholding)
will apply to a payment of the proceeds of a sale of Common Shares effected
outside the United States by a foreign office of a broker if the broker is a
U.S. person, derives 50 percent or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or is a
"controlled foreign corporation" as to the United States, unless the broker has
documentary evidence in its records that the holder is a non-U.S. holder and
certain conditions are met, or the holder otherwise establishes an exemption.
Payment by a United States office of a broker of the proceeds of a sale of
Common Shares will be subject to both backup withholding and information
reporting unless the holder certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption.
These backup withholding and information reporting rules are under review
by the United States Treasury, and their application to the Common Shares could
be changed by future regulations.
41
<PAGE> 50
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), a syndicate of
United States underwriters (the "U.S. Underwriters") named below has severally
agreed to purchase, and the Selling Shareholder has agreed to sell to them,
severally, the respective number of Common Shares set forth opposite the names
of such U.S. Underwriters below, and a syndicate of international underwriters
(the "International Underwriters") named below has severally agreed to purchase,
and the Selling Shareholder has agreed to sell to them, severally, the
respective number of Common Shares set forth opposite the names of such
International Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME COMMON SHARES
------------------------------------------------------------------- --------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated................................
Salomon Brothers Inc ............................................
--------------
Subtotal.................................................... 1,600,000
--------------
International Underwriters:
Morgan Stanley & Co. International Limited.......................
Salomon Brothers International Limited...........................
--------------
Subtotal.................................................... 400,000
--------------
Total.................................................... 2,000,000
===============
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
Common Shares offered hereby are subject to the approval of certain legal
matters by their counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all of the Common Shares offered hereby (other
than those covered by the over-allotment option described below) if any such
shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions, (i)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any U.S. Shares or distribute any prospectus relating to the U.S. Shares outside
the United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement Between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions, (i) it is not purchasing any International Shares (as defined below)
for the account of any United States or Canadian Person and (ii) it has not
offered or sold, and will not offer or sell, directly or indirectly, any
International Shares or distribute any prospectus relating to the International
Shares within the United States or Canada or to any United States or Canadian
Person. With respect to any Underwriter that is a U.S. Underwriter and an
International Underwriter, the foregoing representations and agreements (i) made
by it in its capacity as a U.S. Underwriter shall apply only to Common Shares
purchased by it in its capacity as a U.S. Underwriter, (ii) made by it in its
capacity as an International Underwriter shall apply only to Common Shares
purchased by it in its capacity as an International Underwriter and (iii) shall
not restrict its ability to distribute any prospectus relating to the Common
Shares to any person. The foregoing limitations do not apply to stabilization
42
<PAGE> 51
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person) and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
Common Shares to be purchased by the U.S. Underwriters and the International
Underwriters are referred to herein as the U.S. Shares and the International
Shares, respectively.
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and the International
Underwriters of any number of Common Shares to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price and
currency of any shares sold shall be the Price to Public set forth on the cover
page hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Common Shares, directly or indirectly, in any province
or territory of Canada or to, or for the benefit of, any resident of any
province or territory of Canada in contravention of the securities laws thereof
and has represented that any offer of Common Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
Common Shares a notice stating in substance that, by purchasing such Common
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, directly or indirectly, any of such Common Shares in any
province or territory of Canada or to, or for the benefit of, any resident of
any province or territory of Canada in contravention of the securities laws
thereof and that any offer of Common Shares in Canada will be made only pursuant
to an exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer is made, and that such dealer will
deliver to any other dealer to whom it sells any of such Common Shares a notice
to the foregoing effect.
Each International Underwriter has agreed that: (i) it has not offered or
sold and will not offer or sell any Common Shares to persons in the United
Kingdom ("U.K.") except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the U.K. within
the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the Common Shares in, from or otherwise
involving the U.K.; and (iii) it has only issued or passed on, and will only
issue or pass on, to any person in the U.K. any document received by it in
connection with the issue of the Common Shares, if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
The Underwriters initially propose to offer part of the Common Shares
directly to the public at the Price to Public set forth on the cover page hereof
and part to certain dealers at a price that represents a concession not in
excess of $ a share under the public offering price. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of
$ a share to other Underwriters or to certain other dealers. After the
initial offering of the Common Shares, the offering price and other selling
terms may from time to time be varied by the Underwriters.
Pursuant to the Underwriting Agreement, the Selling Shareholder has granted
to the U.S. Underwriters an option, exercisable for 30 days from the date of
this Prospectus, to purchase up to an aggregate of 300,000 additional Common
Shares at the Price to Public set forth on the cover page hereof, less
underwriting discounts and commissions. The U.S. Underwriters may exercise such
option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the Common Shares offered hereby.
43
<PAGE> 52
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
To the extent such option is exercised, each U.S. Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional Common Shares as the number set forth next to such
U.S. Underwriter's name in the preceding table bears to the total number of U.S.
Shares offered hereby.
Cincinnati Bell, the Selling Shareholder, Waslic Company II, The Western
and Southern Life Insurance Company and the directors and executive officers of
Cincinnati Bell have agreed, with certain exceptions, not to (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any Common Shares or
any securities convertible into or exercisable or exchangeable for Common Shares
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Shares or such other securities, in cash or
otherwise, except for the shares to be sold in the offerings, for a period of at
least 90 days from the date of this Prospectus without the prior written consent
of the Representatives, on behalf of the several Underwriters; provided,
however, that (x) Cincinnati Bell may issue, or grant options for, Common Shares
pursuant to any stock plan for employees or directors, or any qualified employee
benefit plan, in effect on the date of this Prospectus, or pursuant to any stock
options outstanding on the date of this Prospectus, and any defined contribution
qualified employee benefit plan in effect on the date of this Prospectus may
sell Common Shares to satisfy plan liquidity need and (y) such officers and
directors, which may include John T. LaMacchia, James F. Orr and Brian C. Henry,
may sell up to 200,000 Common Shares in the aggregate so long as no one
individual sells more than (A) 5,000 Common Shares or (B) 15% of the sum of the
number of Common Shares currently owned by such individual and the number of
Common Shares that may be purchased by such individual pursuant to currently
exercisable options (whichever of (A) or (B) is greater). If any such consent is
given it would not necessarily be preceded or followed by a public announcement
thereof.
Cincinnati Bell and Salomon Inc have entered into a separate underwriting
agreement with the group of underwriters named therein providing for the offer
and sale by Salomon Inc to such underwriters of 3,000,000 DECS, plus up to an
additional 450,000 DECS solely to cover over-allotments. At maturity, the DECS
will be mandatorily exchangeable by Salomon Inc into Common Shares (or, at
Salomon Inc's option, cash with an equal value and/or such other consideration
as permitted or required by the terms of the DECS) at the rate specified in the
prospectus for the DECS Offering. The closings of the Common Shares Offering and
the DECS Offering are not conditioned upon each other.
In the ordinary course of their respective businesses, certain of the
Underwriters and their respective affiliates have engaged in and may in the
future engage in commercial and investment banking transactions with Cincinnati
Bell.
Cincinnati Bell, the Selling Shareholder and the Underwriters have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
LEGAL OPINIONS
The legality of the Common Shares and certain other legal matters in
connection with the sale of the Common Shares offered hereby will be passed upon
for Cincinnati Bell by Frost & Jacobs, Cincinnati, Ohio. Mr. Baskett, a partner
of Frost & Jacobs, is General Counsel and Chief Legal Officer of Cincinnati Bell
and is the record owner of 1,040 Common Shares and has options to purchase
80,000 Common Shares. Other attorneys at Frost & Jacobs are the record or
beneficial owners of approximately 4,700 Common Shares in the aggregate. Certain
legal matters in connection with the sale of the Common Shares offered hereby
will be passed upon for the Underwriters by Cleary, Gottlieb, Steen & Hamilton,
New York, New York. Certain legal matters relating to the Selling Shareholder
will be passed upon by Paul, Hastings, Janofsky & Walker LLP, New York, New
York.
44
<PAGE> 53
[ALTERNATE PAGES FOR PENSION TRUST PROSPECTUS]
EXPERTS
The consolidated balance sheets of Cincinnati Bell Inc. as of December 31,
1995 and 1994 and the consolidated statements of income, shareowners' equity and
cash flows for each of the three years in the period ended December 31, 1995,
which appear in Cincinnati Bell's Annual Report on Form 10-K for the year ended
December 31, 1995, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
45
<PAGE> 54
[Cincinnati Bell LOGO]
<PAGE> 55
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................. $ 90,938
Printing and engraving expenses................................................. $190,000
Legal fees and expenses......................................................... $200,000
Accounting fees and expenses.................................................... $ 40,000
Miscellaneous fees and expenses................................................. $200,000
--------
Total...................................................................... $720,938
========
</TABLE>
- ---------------
(1) Estimated, other than SEC registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There is no provision in Cincinnati Bell's Amended Articles of
Incorporation by which an officer or director of Cincinnati Bell may be
indemnified against any liability which he or she may incur in his or her
capacity as such. However, Cincinnati Bell has indemnification provisions in its
Amended Regulations which provide that Cincinnati Bell will, to the full extent
permitted by Ohio law, indemnify all persons whom it may indemnify pursuant
thereto.
Reference is made to sec.1701.13(E) of the Ohio Revised Code which provides
for indemnification of directors and officers in certain circumstances.
Reference is made to the Form of Underwriting Agreement filed as Exhibit
1.1 hereto which contains provisions by which the Underwriters agree to
indemnify Cincinnati Bell, each of its directors and each of its officers who
signs this Registration Statement, with respect to information furnished by the
Underwriters for use in this Registration Statement.
The foregoing references are necessarily subject to the complete text of
the Amended Regulations, the statute and the Form of Underwriting Agreement
referred to above and are qualified in their entirety by reference thereto.
Cincinnati Bell provides liability insurance for its directors and officers
for certain losses arising from certain claims and charges, including claims and
charges under the Securities Act, which may be made against such persons while
acting in their capacities as directors and officers of Cincinnati Bell.
II-1
<PAGE> 56
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------
<C> <S>
1.1(a) Form of Underwriting Agreement relating to the DECS Offering.
1.1(b) Form of Underwriting Agreement relating to the Pension Trust Offering.
4.1 Amended Articles of Incorporation (incorporated by reference to Exhibit (3)(a) to
Cincinnati Bell's Form 10-K for 1989, File No. 1-8519).
4.2 Amended Regulations (incorporated by reference to Exhibit 3.2 to Cincinnati Bell's
Registration Statement on Form S-3, File No. 2-96054).
4.3 Rights Agreement dated as of October 27, 1986 between Cincinnati Bell and Morgan
Shareholder Services Trust Company, Rights Agent (incorporated by reference to
Exhibit (1) to Form 8-A, File No. 1-8519).
4.4 First Amendment to Rights Agreement, dated as of October 3, 1988, between
Cincinnati Bell and Morgan Shareholder Services Trust Company, Rights Agent
(incorporated by reference to Exhibit (4)(b)(ii) to Form 10-K for 1988, File No.
1-8519).
4.5 Indenture dated August 1, 1962 between Cincinnati Bell Telephone Company and Bank
of New York, Trustee (formerly, The Central Trust Company was trustee), in
connection with $20,000,000 of Cincinnati Bell Telephone Company Forty Year 4 3/8%
Debentures, Due August 1, 2002 (incorporated by reference to Exhibit 4(c)(iii) to
Form 10-K for 1992, File No. 1-8519).
4.6 Indenture dated August 1, 1971 between Cincinnati Bell Telephone Company and Bank
of New York, Trustee (formerly The Fifth Third Bank was trustee), in connection
with $50,000,000 of Cincinnati Bell Telephone Company Forty Year 7 3/8%
Debentures, Due August 1, 2011. A copy of this Indenture is not being filed
because it is similar in all material respects to the Indenture filed as Exhibit
4.5 above.
4.7 Indenture dated December 15, 1992 between Cincinnati Bell Inc., Issuer, and The
Bank of New York, Trustee, in connection with $100,000,000 of Cincinnati Bell Inc.
6.70% Notes Due December 15, 1997. A copy of this Indenture is not being filed
because it is similar in all material respects to the Indenture filed as Exhibit
4(e)(ii) to Form 10-K for 1992, File No. 1-8519.
4.8 Indenture dated July 1, 1993 between Cincinnati Bell Inc., Issuer, and The Bank of
New York, Trustee, in connection with $50,000,000 of Cincinnati Bell, Inc. 7 3/8%
Notes Due June 15, 2023 (incorporated by reference to Exhibit 4-A to Form 8-K,
date of report July 12, 1993, File No. 1-8519).
4.9 Indenture dated as of October 27, 1993 among Cincinnati Bell Telephone Company, as
Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4-A to Form 8-K, date of report October 27,
1993, File No. 1-8519).
Pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), no other instrument which
defines the rights of holders of long-term debt of the registrant is filed
herewith. In accordance with such regulation, the registrant hereby agrees to
furnish a copy of any such instrument to the SEC upon request.
5.1 Opinion of Frost & Jacobs, counsel for Cincinnati Bell, as to the legality of the
Common Shares being registered.*
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Frost & Jacobs is contained in opinion of counsel filed as Exhibit
5.1.*
24.1 Powers of Attorney executed by directors and officers.*
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filling of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE> 57
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Cincinnati, State of Ohio on the 13th
day of November, 1996.
CINCINNATI BELL INC.
By: /s/ Brian C. Henry
-------------------
Brian C. Henry
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ------------------------------------ ------------------
<C> <S> <C>
JOHN T. LAMACCHIA* Principal Executive Officer; November 13, 1996
- ------------------------------------- President, Chief Executive Officer
John T. LaMacchia and Director
BRIAN C. HENRY* Principal Accounting and Financial November 13, 1996
- ------------------------------------- Officer; Executive Vice President
Brian C. Henry and Chief Financial Officer
JOHN F. BARRETT* Director November 13, 1996
- -------------------------------------
John F. Barrett
PHILLIP R. COX* Director November 13, 1996
- -------------------------------------
Phillip R. Cox
WILLIAM A. FRIEDLANDER* Director November 13, 1996
- -------------------------------------
William A. Friedlander
ROBERT P. HUMMEL, M.D.* Director November 13, 1996
- -------------------------------------
Robert P. Hummel, M.D.
JAMES D. KIGGEN* Director November 13, 1996
- -------------------------------------
James D. Kiggen
JAMES F. ORR* Director November 13, 1996
- -------------------------------------
James F. Orr
CHARLES S. MECHEM, JR.* Director and Chairman of the Board November 13, 1996
- -------------------------------------
Charles S. Mechem, Jr.
MARY D. NELSON* Director November 13, 1996
- -------------------------------------
Mary D. Nelson
DAVID B. SHARROCK* Director November 13, 1996
- -------------------------------------
David B. Sharrock
*By /s/ BRIAN C. HENRY November 13, 1996
--------------------------------------------
</TABLE>
Brian C. Henry
as attorney-in-fact and on his behalf
as Executive Vice President and
Chief Financial Officer
II-4
<PAGE> 1
SALOMON INC
3,000,000 DECS(SM) (Debt Exchangeable for Common Stock(SM))*
____ % Exchangeable Notes Due February 1, 2001
(Subject to Exchange into Common Shares, par value $1.00
per share, of Cincinnati Bell Inc.)
UNDERWRITING AGREEMENT
New York, New York
November __, 1996
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
As Representatives of the several Underwriters
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Salomon Inc, a Delaware corporation (the "Company"), proposes
to sell to the underwriters named in Schedule I hereto (the "Underwriters"), for
whom you (the "Representatives") are acting as representatives, an aggregate of
3,000,000 DECS(SM) (Debt Exchangeable for Common Stock(SM)) consisting of its
_____% Exchangeable Notes Due February 1, 2001 (the "Firm DECS"), to be issued
under an indenture dated as of December 1, 1988, as supplemented from time to
time, and as supplemented by the Ninth Indenture dated as of November __, 1996
(the indenture, dated as of December 1, 1988, as supplemented from time to time,
the "Indenture"), between the Company and Citibank, N.A., as trustee (the
"Trustee"). The Company also proposes to grant to the Underwriters an option to
purchase up to an additional 450,000 DECS (the "Option DECS;" the Option
DECS,
together with the Firm DECS, being hereinafter called the "DECS") to cover
over-allotments. At maturity (including as a result of acceleration or
otherwise), the DECS may be mandatorily exchanged by the Company into Common
Shares, par value $1.00 per share (the "CBI Common Stock"), of Cincinnati Bell
Inc., an Ohio corporation ("CBI"), (or, at the Company's option as provided in
the Indenture, cash with an equal value) at the rate specified in the Final
Prospectus.
- ----------
* Plus an option to purchase from Saloman Inc up to 450,000 additional DECS
to cover over-allotments. "DECS" and "Debt Exchangeable for Common Stock"
are service marks of Salomon Brothers Inc.
<PAGE> 2
It is further understood by the parties hereto that the Cincinnati Bell
Pension Plans Trust and CBI are concurrently entering into a separate
underwriting agreement dated the date hereof (the "Pension Trust Underwriting
Agreement") with the group of underwriters named therein, which provides for the
sale by the Cincinnati Bell Pension Plans Trust to such underwriters of
2,000,000 shares of CBI Common Stock, plus up to an additional 300,000 shares of
CBI Common Stock solely to cover over-allotments (the "Pension Trust Shares").
In connection with the foregoing and pursuant to the Registration
Rights Agreement dated as of July 22, 1988 between CBI and the parties named
therein and the letter agreements dated January 30, 1984 and January 29, 1988,
respectively, between CBI and Bankers Trust Company (collectively, the
"Registration Rights Agreements"), CBI has filed with the Commission a
registration statement with respect to (i) 3,000,000 shares (the "Firm Shares")
of CBI Common Stock, in respect of the Firm DECS, plus an additional 450,000
shares (the "Option Shares;" the Option Shares, together with the Firm Shares,
being hereinafter called the "Shares") of CBI Common Stock, in respect of the
Option DECS, for delivery by the Company pursuant to the DECS and (ii) the
Pension Trust Shares, which registration statement is referred to in Section
1(b)(i) of this Agreement.
Certain terms used in this Agreement are defined in paragraphs (a)(iii)
and (b)(iv) of Section 1.
1. Representations and Warranties.
(a) Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Underwriter
as set forth below in this Section 1(a).
(i) The Company meets the requirements for use of Form S-3
under the Securities Act of 1933 (the "Act") and has filed with the
Securities and Exchange Commission (the "Commission") a registration
statement (file number 333-01807) on such Form, including a basic
prospectus, for the registration under the Act of the offering and sale
of the DECS. The Company may have filed one or more amendments thereto,
and may have used a Preliminary Final Prospectus, each of which has
previously been furnished to you. Such registration statement, as so
amended, has become effective. The offering of the Securities is a
delayed offering and, although the Basic Prospectus may not include all
the information with respect to the DECS and the offering thereof
required by the Act and the rules thereunder to be included in the
Final Prospectus, the Basic Prospectus includes all such information
required by the Act and the rules thereunder to be included therein as
of the Effective Date. The Company will next file with the Commission
pursuant to Rules 415 and 424(b)(2) or (5) a final supplement to the
form of prospectus included in such registration statement relating to
the DECS and the offering thereof. As filed, such final prospectus
supplement shall include all required information with respect to the
DECS and the offering thereof and, except to the extent the
Representatives shall agree in writing to a modification,
2
<PAGE> 3
shall be in all substantive respects in the form furnished to the
Representatives prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
Basic Prospectus and any Preliminary Final Prospectus) as the Company
has advised the Representatives, prior to the Execution Time, will be
included or made therein.
(ii) On the Effective Date, the Registration Statement did or
will, and when the Final Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as hereinafter
defined), the Final Prospectus (and any supplement thereto) will,
comply in all material respects with the applicable requirements of the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the respective rules thereunder; on the Effective
Date, the Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; on the Effective Date and on the
Closing Date, the Indenture did or will comply in all material respects
with the requirements of the Trust Indenture Act and the rules
thereunder; and, on the Effective Date, the Final Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of
any filing pursuant to Rule 424(b) and on the Closing Date, the Final
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
(A) that part of the Registration Statement which shall constitute the
Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of the Trustee or (B) the information contained in or
omitted from the Registration Statement or the Final Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company (i) by or on behalf of any
Underwriter through the Representatives or (ii) by or on behalf of CBI,
in each case, specifically for inclusion in the Registration Statement
or the Final Prospectus (or any supplement thereto).
(iii) The terms which follow, when used in this Agreement,
shall have the meanings indicated. The term "Effective Date" shall mean
each date that the Registration Statement and any post-effective
amendment or amendments thereto became or become effective. "Execution
Time" shall mean the date and time that this Agreement is executed and
delivered by the parties hereto. "Basic Prospectus" shall mean the
prospectus referred to in paragraph (a)(i) of this Section 1 contained
in the Registration Statement at the Effective Date. "Preliminary Final
Prospectus" shall mean any preliminary prospectus
3
<PAGE> 4
supplement to the Basic Prospectus which describes the DECS and the
offering thereof and is used prior to filing of the Final Prospectus.
"Final Prospectus" shall mean the prospectus supplement relating to the
DECS that is first filed pursuant to Rule 424(b) after the Execution
Time, together with the Basic Prospectus. "Registration Statement"
shall mean the registration statement referred to in paragraph (a)(i)
of this Section 1, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time and, in the
event any post-effective amendment thereto or a registration statement
filed with respect to the DECS pursuant to Rule 462(b) (or
post-effective amendment thereto) becomes effective prior to the
Closing Date, shall also mean such registration statement as so amended
or such registration statement (or amendment thereto) filed pursuant to
Rule 462(b), respectively. The term "Registration Statement" shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 415," "Rule 424," "Rule
430A," "Rule 462" and "Regulation S-K" refer to such rules or
regulation under the Act. "Rule 430A Information" means information
with respect to the DECS and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective
pursuant to Rule 430A. Any reference herein to the Registration
Statement, the Basic Prospectus, any Preliminary Final Prospectus or
the Final Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form
S-3 which were filed under the Exchange Act on or before the Effective
Date of the Registration Statement or the issue date of the Basic
Prospectus, such Preliminary Final Prospectus or the Final Prospectus,
as the case may be; and any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement,
the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the
Registration Statement or the issue date of the Basic Prospectus, such
Preliminary Final Prospectus or the Final Prospectus, as the case may
be, deemed to be incorporated therein by reference.
(b) Representations and Warranties of CBI. CBI represents and
warrants to, and agrees with, the Company and each Underwriter as set forth
below in this Section 1(b).
(i) CBI meets the requirements for use of Form S-3 under the
Act and has filed with the Commission a registration statement (file
number 333-13699) on such Form, including a related preliminary
prospectus, for the registration under the Act of the offering and sale
of the Shares in connection with the offering and sale of the DECS and
an alternate form of related preliminary prospectus, for registration
under the Act of the offering and sale of the Pension Trust Shares. CBI
may have filed one or more amendments thereto, including the related
preliminary prospectuses, each of which amendments has previously been
4
<PAGE> 5
furnished to the Company and the Representatives. CBI will next file
with the Commission one of the following: (A) prior to effectiveness of
such registration statement, a further amendment to such registration
statement, including the final forms of such prospectuses, (B) such
final prospectuses in accordance with Rules 430A and 424(b)(1) or (4)
or (C) such final prospectuses in accordance with Rules 415 and
424(b)(2) or (5). In the case of clause (B), CBI has included in such
registration statement, as amended at the CBI Effective Date, all
information (other than CBI Rule 430A Information) required by the Act
and the rules thereunder to be included in such prospectuses with
respect to the Shares, the Pension Trust Shares and the offering
thereof. As filed, such amendment and final forms of prospectuses, or
such final prospectuses, shall contain all CBI Rule 430A Information,
together with all other such required information, with respect to the
Shares, the Pension Trust Shares and the offering thereof and, except
to the extent the Company and the Representatives shall agree in
writing to a modification, shall be in all substantive respects in the
form furnished to the Company and the Representatives prior to the
Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other
changes (beyond that contained in the latest Preliminary CBI
Prospectus) as CBI has advised the Company and the Representatives,
prior to the Execution Time, will be included or made therein. If the
Registration Statement contains the undertaking specified by Regulation
S-K Item 512(a), the Registration Statement, at the Execution Time,
meets the requirements to Rule 415(a)(1)(x).
(ii) On the CBI Effective Date, the CBI Registration Statement
did or will, and when the CBI Prospectus is first filed (if required)
in accordance with Rule 424(b) and on the Closing Date, the CBI
Prospectus (and any supplement thereto) will, comply in all material
respects with the applicable requirements of the Act, the Exchange Act
and the respective rules thereunder; on the CBI Effective Date, the CBI
Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the CBI Effective Date, the CBI Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of
any filing pursuant to Rule 424(b) and on the Closing Date, the CBI
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that CBI makes no representations or warranties as to the
information contained in or omitted from the CBI Registration Statement
or the CBI Prospectus (or any supplement thereto) in reliance upon and
in conformity with information furnished in writing to CBI by or on
behalf of any Underwriter through the
5
<PAGE> 6
Representatives specifically for inclusion in the CBI Registration
Statement or the CBI Prospectus (or any supplement thereto).
(iii) On the Effective Date, the Registration Statement did
not or will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading; and, on the
Effective Date, the Final Prospectus, if not filed pursuant to Rule
424(b), did not or will not, and on the date of any filing pursuant to
Rule 424(b) and on the Closing Date, the Final Prospectus (together
with any supplement thereto) will not, include any untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
foregoing representations shall apply only to the extent that the
untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company by CBI specifically for inclusion
therein.
(iv) The terms which follow, when used in this Agreement,
shall have the meanings indicated. The term "CBI Effective Date" shall
mean each date that the CBI Registration Statement and any
post-effective amendment or amendments thereto became or become
effective. "Preliminary CBI Prospectus" shall mean any preliminary
prospectus referred to in paragraph (b)(i) of this Section 1 and any
preliminary prospectus included in the CBI Registration Statement at
the CBI Effective Date that omits CBI Rule 430A Information. "CBI DECS
Prospectus" shall mean the prospectus relating to the Shares that is
used in connection with the offering and sale of the DECS, that is
delivered with the Final Prospectus and that is first filed pursuant to
Rule 424(b) after the Execution Time or, if no filing pursuant to Rule
424(b) is required, shall mean the form of such final prospectus
relating to the Shares included in the CBI Registration Statement at
the CBI Effective Date. "CBI Pension Trust Prospectus" shall mean the
prospectus relating to the Pension Trust Shares that is used in
connection with the offering and sale of the Pension Trust Shares and
that is first filed pursuant to Rule 424(b) after the Execution Time
or, if no filing pursuant to Rule 424(b) is required, shall mean the
form of such final prospectus included in the CBI Registration
Statement at the CBI Effective Date. "CBI Prospectus" shall mean the
CBI DECS Prospectus and the CBI Pension Trust Prospectus. "CBI
Registration Statement" shall mean the registration statement referred
to in paragraph (b)(i) of this Section 1, including incorporated
documents, exhibits and financial statements, as amended at the
Execution Time (or, if not effective at the Execution Time, in the form
in which it shall become effective) and, in the event any
post-effective amendment thereto or a registration statement filed with
respect to the Shares pursuant to Rule 462(b) (or post-effective
amendment thereto) becomes effective prior to the Closing Date, shall
also mean such registration
6
<PAGE> 7
statement as so amended or such registration (or amendment thereto)
filed pursuant to Rule 462(b), respectively. The term "CBI Registration
Statement" shall include any CBI Rule 430A Information deemed to be
included therein at the CBI Effective Date as provided by Rule 430A.
"CBI Rule 430A Information" means information with respect to the
Shares and the Pension Trust Shares permitted to be omitted from the
CBI Registration Statement when it becomes effective pursuant to Rule
430A. Any reference herein to the CBI Registration Statement, any
Preliminary CBI Prospectus or the CBI Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Exchange Act
on or before the CBI Effective Date or the issue date of such
Preliminary CBI Prospectus or the CBI Prospectus, as the case may be;
and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the CBI Registration Statement, any
Preliminary CBI Prospectus or the CBI Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act
after the CBI Effective Date or the issue date of any Preliminary CBI
Prospectus or the CBI Prospectus, as the case may be, deemed to be
incorporated therein by reference.
(v) CBI has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the CBI Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would
not have a material adverse effect on CBI and its subsidiaries, taken
as a whole.
(vi) Each subsidiary of CBI has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the CBI Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on CBI
and its subsidiaries, taken as a whole.
(vii) All of the outstanding shares of capital stock of each
subsidiary of CBI have been duly and validly authorized and issued, are
fully paid and nonassessable and are owned beneficially by CBI free and
clear of any security interests, liens, encumbrances, equities or
claims.
7
<PAGE> 8
(viii) This Agreement has been duly authorized, executed and
delivered by CBI.
(ix) CBI's authorized equity capitalization consists of
240,000,000 shares of CBI Common Stock and 5,000,000 preferred shares;
and the authorized capital stock of CBI conforms as to legal matters to
the description thereof contained or incorporated by reference in the
CBI Prospectus.
(x) The shares of CBI Common Stock (including the Shares)
outstanding have been duly authorized and are validly issued, fully
paid and non-assessable.
(xi) The shares of CBI Common Stock (including the Shares)
have been duly authorized for listing on the New York Stock Exchange
(the "NYSE") and the Cincinnati Stock Exchange (the "CSE").
(xii) Coopers & Lybrand L.L.P, whose reports appear in the
documents incorporated by reference in the CBI Registration Statement,
are independent public accountants with respect to CBI and its
subsidiaries as required by the Act and the rules and regulations
thereunder.
(xiii) The historical consolidated financial statements
(including the related notes) included or incorporated by reference in
the CBI Registration Statement present fairly the consolidated
financial position of CBI and its consolidated subsidiaries as of the
dates indicated and the results of operations and changes in financial
condition for the periods specified; such financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis through the periods involved;
and the supporting schedules included or incorporated by reference in
the CBI Registration Statement present fairly the information required
to be stated therein. The selected historical consolidated financial
data included in the CBI Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of
the related historical consolidated financial statements included or
incorporated by reference in the CBI Registration Statement.
(xiv) The execution and delivery by CBI of, and the
performance by CBI of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of
incorporation or by-laws of CBI or any agreement or other instrument
binding upon CBI or any of its subsidiaries that is material to CBI and
its subsidiaries, taken as a whole, or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over CBI or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by CBI of its obligations under this Agreement, except such
as may
8
<PAGE> 9
be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the DECS and the distribution of
the Shares pursuant to the DECS.
(xv) There has not occurred any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of CBI and its subsidiaries, taken as a whole, from that set
forth in the CBI Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(xvi) There is no legal or governmental proceeding pending
or threatened to which CBI or any of its subsidiaries is a party or to
which any of the properties of CBI or any of its subsidiaries is
subject that (A) has adversely affected, or would reasonably be likely
to adversely affect, the execution by CBI of this Agreement, the
performance by CBI of any of its obligations hereunder or the
consummation of any of the transactions contemplated in this Agreement,
(B) except as disclosed in the CBI Prospectus, has had or is reasonably
likely to have, singularly or in the aggregate with all such actions,
suits, proceedings or investigations, a material adverse effect on CBI
and its subsidiaries, taken as a whole, or (C) is required to be
described in the CBI Registration Statement or the CBI Prospectus and
is not so described; and there are no statutes, regulations, contracts
or other documents that are required to be described in the CBI
Registration Statement or the CBI Prospectus or to be filed as exhibits
to the CBI Registration Statement that are not described or filed as
required.
(xvii) CBI is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(xviii) CBI and its subsidiaries (A) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (B) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (C) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on CBI and its subsidiaries, taken as a whole.
(xix) In the ordinary course of its business, CBI conducts a
periodic review of the effect of Environmental Laws on the business,
operations and
9
<PAGE> 10
properties of CBI and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties).
On the basis of such review, CBI has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate,
have a material adverse effect on CBI and its subsidiaries, taken as a
whole.
(xx) There are no contracts, agreements or understandings
between CBI and any person granting such person the right to require
CBI to file a registration statement under the Act with respect to any
securities of CBI (other than the Registration Rights Agreement) or to
require CBI to include such securities with the Shares registered
pursuant to the CBI Registration Statement.
(xxi) CBI has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of any
security of CBI to facilitate the sale or resale of the DECS, the
Shares or the Pension Trust Shares.
(2) Purchase and Sale. (a) Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$_______ per DECS, plus accrued interest, if any, on the DECS from the issue
date of the DECS to the Closing Date, the number of DECS set forth opposite such
Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
450,000 Option DECS at the same purchase price per DECS, plus accrued interest,
if any, from the issue date of the DECS to the date of the closing for the
purchase, as the Underwriters shall pay for the Firm DECS. Said option may be
exercised only to cover over-allotments in the sale of the Firm DECS by the
Underwriters. Said option may be exercised in whole or in part at any time (but
not more than once) on or before the 30th day after the date of the Final
Prospectus upon written or telegraphic notice by the Underwriters to the Company
setting forth the number of Option DECS as to which the Underwriters are
exercising the option and the settlement date. Delivery of certificates for the
Option DECS, and payment therefor, shall be made as provided in Section 3
hereof. The number of Option DECS to be purchased by each Underwriter shall be
the same percentage of the total number of Option DECS to be purchased by the
several Underwriters as such Underwriter is purchasing of the Firm DECS, subject
to such adjustments as the Representatives in their absolute discretion shall
make to eliminate any fractional shares.
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(3) Delivery and Payment. Delivery of and payment for the Firm DECS
(and the Option DECS (if and to the extent the option provided for in Section
2(b) hereof shall have been exercised on or before the first business day prior
to the Closing Date)) shall be made at 10:00 AM, New York City time, on November
__, 1996, or such later date (not later than November __, 1996) as the
Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Company or as provided in Section
9 hereof (such date and time of delivery and payment for the Firm DECS being
herein called the "Closing Date"). Delivery of the DECS shall be made on the
instructions of the Representatives for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Company in immediately available funds. Delivery of, and payment for, the DECS
shall be made through the facilities of The Depository Trust Company.
Certificates for the DECS shall be registered in such names and in such
denominations as the Representatives shall request not less than one full
business day in advance of the Closing.
The Company agrees to have the DECS available for inspection, checking
and packaging by the Representatives in New York, New York, not later than 1:00
PM on the business day prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after
the first full business day prior to the Closing Date, the Company will deliver
(at the expense of the Company) to the Representatives, at Seven World Trade
Center, New York, New York, on the date specified by the Representatives in the
notice described in Section 2(b), or such later date (not later than December
__, 1996) specified by the Representatives, certificates for the Option DECS in
such names and denominations as the Representatives shall have requested against
payment of the purchase price thereof to or upon the order of the Company in
immediately available funds. If settlement for the Option DECS occurs after the
Closing Date, the Company will deliver to the Representatives on the settlement
date for the Option DECS, and the obligation of the Underwriters to purchase the
Option DECS shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
(4) Offering by the Underwriters. It is understood that the several
Underwriters propose to offer the DECS for sale to the public as set forth in
the Final Prospectus.
(5) Agreements.
(a) Agreements of the Company. The Company agrees with the several
Underwriters that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Company will not file any amendment of the
Registration Statement or
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<PAGE> 12
supplement (including the Final Prospectus or any Preliminary Final
Prospectus) to the Basic Prospectus unless the Company has furnished
the Representatives a copy for their review prior to filing and will
not file any such proposed amendment or supplement to which the
Representatives reasonably object. Subject to the foregoing sentence,
the Company will cause the Final Prospectus, properly completed, and
any supplement thereto to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representatives of such
timely filing. The Company will promptly advise the Representatives (A)
when the Registration Statement, if not effective at the Execution
Time, and any amendment thereof, shall have become effective, (B) when
the Final Prospectus, and any supplement thereto, shall have been filed
with the Commission pursuant to Rule 424(b), (C) when, prior to
termination of the offering of the DECS, any amendment to the
Registration Statement shall have been filed or become effective, (D)
of any request by the Commission for any amendment of the Registration
Statement or supplement to the Final Prospectus or for any additional
information, (E) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the DECS or the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the DECS
is required to be delivered under the Act in the opinion of counsel for
the Underwriters, any event occurs or condition exists as a result of
which the Final Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if, in the
opinion of counsel to the Underwriters, it shall be necessary to amend
the Registration Statement or supplement the Final Prospectus to comply
with the Act or the Exchange Act or the respective rules thereunder,
the Company promptly will notify the Representatives and prepare and
file with the Commission, subject to the second sentence of paragraph
(a)(i) of this Section 5, an amendment or supplement which will correct
such statement or omission or effect such compliance.
(iii) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
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<PAGE> 13
(iv) The Company will furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Act, as many copies of any Preliminary
Final Prospectus and the Final Prospectus and any supplement thereto as
the Representatives may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering, other than the CBI Registration Statement, each CBI
Preliminary Prospectus and the CBI Prospectus.
(v) The Company will arrange for the qualification of the
DECS and, with the cooperation of CBI, of the Shares for sale under the
laws of such jurisdictions as the Representatives may designate, will
maintain such qualifications in effect so long as required for the
distribution of the DECS, will arrange for the determination of the
legality of the DECS and of the Shares for purchase by institutional
investors and will pay the fee of the National Association of
Securities Dealers, Inc., in connection with its review, if any, of the
offering.
(vi) The Company will not, until the first business day
following the Closing Date, without prior written consent of the
Representatives, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any debt
securities issued or guaranteed by the Company other than the DECS.
(b)Agreements of CBI. CBI agrees with the Company and the several
Underwriters that:
(i) CBI will use its best efforts to cause the CBI
Registration Statement, if not effective at the Execution Time, and any
amendment thereof to become effective. Prior to the termination of the
offering of the DECS, CBI will not file any amendment of the CBI
Registration Statement or supplement to the CBI Prospectus unless CBI
has furnished the Representatives a copy for their review prior to
filing and will not file any such proposed amendment or supplement to
which the Company or the Representatives reasonably object. Subject to
the foregoing sentence, if the CBI Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the CBI
Prospectus is otherwise required under Rule 424(b), CBI will cause the
CBI Prospectus, properly completed, and any supplement thereof to be
filed with the Commission pursuant to the applicable paragraph of Rule
424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. CBI will
promptly advise the Representatives (A) when the CBI Registration
Statement, if not effective at the Execution Time, and any
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<PAGE> 14
amendment thereof, shall have become effective, (B) when the CBI
Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b), (C) when, prior
to termination of the offering of the DECS, any amendment to the CBI
Registration Statement shall have been filed or become effective, (D)
of any request by the Commission for any amendment of the CBI
Registration Statement or supplement to the CBI Prospectus or for any
additional information, (E) of the issuance by the Commission of any
stop order suspending the effectiveness of the CBI Registration
Statement or the institution or threatening of any proceeding for that
purpose and (F) of the receipt by CBI of any notification with respect
to the suspension of the qualification of the DECS or the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. CBI will use its best efforts to prevent
the issuance of any such stop order and, if issued, to obtain as soon
as possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the CBI
Common Stock is required to be delivered under the Act (including in
respect of the offering and sale of the DECS) in the opinion of counsel
for the Company or the Underwriters, any event occurs or condition
exists as a result of which the CBI Prospectus as then supplemented
would include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein in the light
of the circumstances under which they were made not misleading, or if,
in the opinion of counsel for the Company or the Underwriters, it shall
be necessary to amend the CBI Registration Statement or supplement the
CBI Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, CBI (A) immediately will notify the
Company and the Representatives of such event or necessity and (B)
promptly will prepare and file with the Commission, subject to the
second sentence of paragraph (b)(i) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance.
(iii) As soon as practicable, CBI will make generally
available to its security holders, to the Company and to the
Representatives an earnings statement or statements of CBI and its
subsidiaries which will satisfy the provisions of Section 11(a) of the
Act and Rule 158 under the Act.
(iv) CBI will furnish to the Company, the Representatives and
counsel for the Company and the Underwriters, without charge, signed
copies of the CBI Registration Statement (including exhibits thereto)
and to each other Underwriter a copy of the CBI Registration Statement
(without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act (including in
respect of the offering and sale of the DECS), as many copies of each
Preliminary CBI Prospectus, the CBI Prospectus and any supplement
thereto as the Company or the Representatives may reasonably request.
CBI will pay the
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<PAGE> 15
expenses of printing or other production of the CBI Registration
Statement, each Preliminary CBI Prospectus and the CBI Prospectus.
(v) CBI will cooperate with the Company for purposes of
arranging the qualification of the DECS and the Shares for sale under
the laws of such jurisdictions as the Representatives may designate and
will maintain such qualifications in effect so long as required for the
distribution of the DECS and the Shares.
(vi) Without the prior written consent of the Representatives
on behalf of the Underwriters, CBI will not, during the period ending
90 days after the date of the CBI Prospectus, (A) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly,
or announce the offering of, any shares of CBI Common Stock or any
securities convertible into or exercisable or exchangeable for CBI
Common Stock (whether such shares or any such securities are now owned
by CBI or are hereafter acquired) or (B) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the CBI Common Stock, whether any
such transaction described in clause (A) or (B) above is to be settled
by delivery of CBI Common Stock or such other securities, in cash or
otherwise; provided, however, that CBI may issue, or grant options for,
shares of CBI Common Stock pursuant to any stock plan for employees or
directors or any qualified employee benefit plan in effect on the date
of the CBI Prospectus, or pursuant to any stock options outstanding on
the date of the CBI Prospectus, and any defined contribution qualified
employee benefit plan in effect on the date of the CBI Prospectus may
sell shares of CBI Common Stock to satisfy plan liquidity needs. In
addition, CBI agrees that, without the prior written consent of the
Representatives on behalf of the Underwriters, it will not, during the
period ending 90 days after the date of the CBI Prospectus, make any
demand for, or exercise any right with respect to, the registration of
any shares of CBI Common Stock or any security convertible into or
exercisable or exchangeable for CBI Common Stock. CBI further agrees to
establish an internal mechanism for monitoring and ensuring compliance
by each executive officer and director with the aggregate limit on
sales of CBI Common Stock by such persons set forth in the proviso to
the second paragraph of the form of letter agreement to be executed by
such persons attached hereto as Exhibit A.
(vii) CBI will furnish to the Trustee copies of CBI's annual
report to shareholders and reports on Forms 10-K and 10-Q as soon as
practicable after such reports are required to be filed with the
Commission and in sufficient quantities for transmission to holders of
the DECS.
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<PAGE> 16
(viii) CBI will take such actions as may be reasonably
necessary to comply with the rules and regulations of the NYSE and the
CSE in respect of the offering of the Shares in connection with the
DECS.
(6) Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Firm DECS and the Option DECS, as the case
may be, shall be subject to the accuracy of the representations and warranties
on the part of each of the Company and CBI contained herein as of the Execution
Time and the Closing Date and any settlement date pursuant to Section 3 hereof,
to the accuracy of the statements of the Company and CBI made in any
certificates pursuant to the provisions hereof, to the performance by each of
the Company and CBI of its obligations hereunder and to the following additional
conditions:
(a) If the Registration Statement or the CBI Registration Statement has
not become effective prior to the Execution Time, unless the Representatives
agree in writing to a later time, each such registration statement will
become effective not later than (i) 6:00 PM New York City time, on the date
of determination of the public offering price of the DECS, if such
determination occurred at or prior to 3:00 PM New York City time on such
date or (ii) 12:00 Noon New York City time on the business day following the
date of determination of the public offering price of the DECS, if such
determination occurred after 3:00 PM New York City time on such date; if
filing of the Final Prospectus or the CBI Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), such Final Prospectus or CBI
Prospectus, and any such supplement, shall have been filed in the manner and
within the time period required by Rule 424(b); and no stop order suspending
the effectiveness of either the Registration Statement or the CBI
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the Representatives the opinion
of Cravath, Swaine & Moore, counsel for the Company, or Robert H. Mundheim,
counsel for the Company, dated the Closing Date, to the effect, in
aggregate, that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and authority to own its properties and conduct its business as
described in the Final Prospectus;
(ii) the Company's authorized equity capitalization is as
set forth in the Final Prospectus; the DECS conform in all material
respects to the description thereof contained in the Final Prospectus;
(iii) the Indenture has been duly authorized, executed and
delivered, has been duly qualified under the Trust Indenture Act and
constitutes a legal, valid and binding instrument enforceable against
the Company in accordance with its terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium
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<PAGE> 17
or similar laws affecting creditors' rights generally from time to time
in effect); and the DECS have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Underwriters pursuant to this
Agreement, will constitute legal, valid and binding obligations of the
Company entitled to the benefits of the Indenture;
(iv) to the best knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator against or
involving the Company or any of its subsidiaries, of a character
required to be disclosed in the Registration Statement which is not
adequately disclosed in the Final Prospectus; and the statements
included or incorporated by reference in the Final Prospectus
describing any legal proceedings relating to the Company fairly
summarize such matters;
(v) the Registration Statement has become effective under
the Act; any required filing of the Basic Prospectus, any Preliminary
Final Prospectus and the Final Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the best knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued, no proceedings for that purpose have been
instituted or threatened, and the Registration Statement and the Final
Prospectus (except for the financial statements and other information
of an accounting or financial nature contained therein as to which such
counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act, the Exchange Act
and the Trust Indenture Act and the respective rules thereunder; and
such counsel has no reason to believe that at the Effective Date, the
Execution Date or the Closing Date the Registration Statement contained
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Final Prospectus includes
any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the opinions and beliefs expressed pursuant to this
paragraph (v) shall not relate to the CBI Registration Statement, the
CBI Prospectus (together with any supplement thereto) or that part of
the Registration Statement constituting the Statement of Eligibility
and Qualification (Form T-1) and certain other information with respect
to CBI, Western & Southern and Waslic included in the Registration
Statement or Prospectus, as to which such counsel need express no
opinion or belief;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Act and such as
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<PAGE> 18
may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the DECS and the
Shares by the Underwriters as contemplated by this Agreement and such
other approvals (specified in such opinion) as have been obtained;
(viii) none of the issue and sale of the DECS, the
consummation of any other of the transactions herein contemplated or
the fulfillment of the terms hereof will conflict with, result in a
breach of, or constitute a default under the charter or by-laws of the
Company or the terms of any indenture or other agreement or instrument
known to such counsel and to which the Company or any of its
subsidiaries is a party or bound, or any judgment, order or regulation
known to such counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or
any of its subsidiaries; and
(ix) no holders of securities of the Company have rights to
the registration of such securities under the Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the General Corporation Law of the State of Delaware or the Federal
laws of the United States, to the extent deemed proper and specified in such
opinion, upon the opinion of other counsel of good standing believed to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent deemed proper, on certificates of responsible
officers of the Company and public officials. References to the Final Prospectus
in this paragraph (b) include any supplements thereto at the Closing Date.
(c) The Representatives shall have received from Cleary, Gottlieb,
Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the DECS, the
Indenture, the Registration Statement, the Final Prospectus (together with any
supplement thereto), the Shares, the CBI Registration Statement, the CBI
Prospectus (together with any supplement thereto) and other related matters as
the Representatives may reasonably require, and the Company and CBI shall have
furnished to such counsel such documents as such counsel requests for the
purpose of enabling such counsel to pass upon such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Senior Vice President and by the
principal financial or accounting officer of the Company, dated the Closing
Date, to the effect that the signers of such certificate have carefully examined
the Registration Statement, the Final Prospectus, any supplement to the Final
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing
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<PAGE> 19
Date with the same effect as if made on the Closing Date and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Final Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or other), earnings, business, operations or properties of the Company
and its subsidiaries, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in
the Final Prospectus (exclusive of any supplement thereto).
(e) At the Execution Time, Arthur Andersen LLP shall have furnished to
the Representatives a letter or letters (which may refer to letters previously
delivered to the Representatives), dated as of the Execution Time, in form and
substance satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the Exchange Act and
the respective applicable published rules and regulations thereunder and stating
in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules and pro forma financial statements, if
any, included or incorporated in the Registration Statement and the
Final Prospectus and reported on by them comply in form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited interim financial information as indicated in their
reports incorporated in the Registration Statement and the Final
Prospectus; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing standards)
which would not necessarily reveal matters of significance with respect
to the comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and executive and audit
committees of the Company and SBI; and inquiries of certain officials
of the Company who have responsibility for financial and accounting
matters of the Company and its subsidiaries as to transactions and
events subsequent to the date of the most recent audited financial
statements
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<PAGE> 20
included or incorporated in the Final Prospectus, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements included or
incorporated in the Registration Statement and the Final
Prospectus do not comply in form in all material respects with
applicable accounting requirements and with the published
rules and regulations of the Commission with respect to
financial statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; or said unaudited
financial statements are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included or incorporated in the Registration
Statement and the Final Prospectus;
(2) with respect to the period subsequent to the date of
the most recent financial statements (other than any capsule
information), audited or unaudited, included or incorporated
in the Registration Statement and the Final Prospectus, there
were any material changes, at a specified date not more than
three business days prior to the date of the letter, in the
consolidated long-term debt or capital stock of the Company
and its subsidiaries or decreases in the stockholders' equity
of the Company and its subsidiaries as compared with the
amounts shown on the most recent consolidated balance sheet
included or incorporated in the Registration Statement and the
Final Prospectus, except in all instances for changes or
decreases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed
necessary by the Representatives;
(3) the amounts included in any unaudited "capsule"
information included or incorporated in the Registration
Statement and the Final Prospectus do not agree with the
amounts set forth in the unaudited financial statements for
the same periods or were not determined on a basis
substantially consistent with that of the corresponding
amounts in the audited financial statements included or
incorporated in the Registration Statement and the Final
Prospectus.
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Final Prospectus and in
Exhibit 12 to the Registration Statement, including the information
included or incorporated in Items 1, 2, 6, 7 and 11 of the Company's
Annual Report on
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<PAGE> 21
Form 10-K, incorporated in the Registration Statement and the Final
Prospectus, and the information included in the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included or incorporated in the Company's Quarterly Reports
on Form 10-Q, incorporated in the Registration Statement and the Final
Prospectus, agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation; and
(iv) if unaudited pro forma financial statements are included
or incorporated in the Registration Statement and the Final Prospectus,
on the basis of a reading of the unaudited pro forma financial
statements included or incorporated in the Registration Statement and
the Final Prospectus (the "pro forma financial statements"), carrying
out certain specified procedures, inquiries of certain officials of the
Company who have responsibility for financial and accounting matters,
and proving the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the pro forma financial
statements, nothing came to their attention which caused them to
believe that the pro forma financial statements do not comply in form
in all material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of
such statements.
References to the Final Prospectus in this paragraph (e) include any
supplement thereto to the date of the letter.
In addition, at the Closing Date, Arthur Andersen LLP shall have
furnished to the Representatives a letter or letters, dated as of the Closing
Date, in form and substance satisfactory to the Representatives, to the effect
set forth above.
(f) Subsequent to the Execution Time or, if earlier, the dates as
of which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Final Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (e) of this Section 6 or (ii) any
change, or any development involving a prospective change, in or affecting the
condition (financial or other), earnings, business, operations or properties of
the Company and its subsidiaries the effect of which, in any case referred to in
clause (i) or (ii) above, is, in the judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed with
the offering or delivery of the DECS as contemplated by the Registration
Statement (exclusive of any amendment thereof) and the Final Prospectus
(exclusive of any supplement thereto).
(g) Subsequent to the Execution Time, there shall not have been
any decrease in the ratings of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act) or
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any notice given of any intended or potential decrease in any such rating or of
a possible change in any such rating that does not indicate the direction of the
possible change.
(h) CBI shall have furnished to the Company and the
Representatives the opinion of Frost & Jacobs, counsel for CBI, dated as of the
Closing Date, to the effect that:
(i) CBI has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the CBI Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which CBI has informed such counsel that the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on CBI and its subsidiaries, taken as a whole;
(ii) each subsidiary of CBI has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the CBI Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which CBI has informed such
counsel that the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on CBI and its subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of each
subsidiary of CBI have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set forth in
the CBI Prospectus, all outstanding shares of capital stock of each
such subsidiary are owned by CBI either directly or through wholly
owned subsidiaries free and clear of any perfected security interest
and, to the knowledge of such counsel, after due inquiry, any other
security interests, claims, liens or encumbrances;
(iv) this Agreement has been duly authorized, executed and
delivered by CBI;
(v) CBI's authorized equity capitalization consists of
240,000,000 shares of CBI Common Stock and 5,000,000 preferred shares;
and the authorized capital stock of CBI conforms as to legal matters to
the description thereof contained or incorporated by reference in the
CBI Prospectus;
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<PAGE> 23
(vi) the shares of CBI Common Stock (including the Shares)
outstanding have been duly authorized and are validly issued, fully
paid and non-assessable;
(vii) the shares of CBI Common Stock (including the Shares)
have been duly authorized for listing on the NYSE and the CSE;
(viii) the execution and delivery by CBI of, and the
performance by CBI of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of
incorporation or by-laws of CBI or, to the best of such counsel's
knowledge, any agreement or other instrument binding upon CBI or any of
its subsidiaries that is material to CBI and its subsidiaries, taken as
a whole, or, to the best of such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over CBI or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required for the performance by CBI of its obligations
under this Agreement, except such as may be required by the securities
or Blue Sky laws of the various states in connection with the offer and
sale of the DECS and the distribution of the Shares pursuant to the
DECS;
(ix) the statements (A) in the CBI DECS Prospectus under
the captions "Business - Cincinnati Bell Telephone Company -
Regulation," (third and fourth paragraphs), "Business - Other
Businesses" (fourth paragraph), "Certain Relationships" and
"Description of Capital Stock" and (B) in the CBI Registration
Statement in Item 15, in each case insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein;
(x) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which CBI or
any of its subsidiaries is a party or to which any of the properties of
CBI or any of its subsidiaries is subject that are required to be
described in the CBI Registration Statement or the CBI Prospectus and
are not so described or of any statutes, regulations, contracts or
other documents that are required to be described in the CBI
Registration Statement or the CBI Prospectus or to be filed as exhibits
to the CBI Registration Statement that are not described or filed as
required;
(xi) CBI is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
(xii) the CBI Registration Statement has become effective
under the Act; any required filing of the CBI Prospectus, and any
supplements thereto,
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<PAGE> 24
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); and to the best knowledge of such
counsel, no stop order suspending the effectiveness of the CBI
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or threatened;
(xiii) such counsel (A) is of the opinion that the CBI
Registration Statement and CBI Prospectus (except for financial
statements and schedules and other financial and statistical data
included therein as to which such counsel need not express any opinion)
comply as to form in all material respects with the Securities Act and
the applicable rules and regulations of the Commission thereunder, (B)
has no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the CBI Registration Statement and
the prospectus included therein at the time the CBI Registration
Statement became effective contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (C) has
no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the CBI Prospectus contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(xiv) no holders of securities of CBI have rights to the
registration of such securities under the CBI Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Ohio or the United States, to the extent they deem proper and specified in such
opinion, upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to counsel for the Underwriters and (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of CBI and public officials. References to the CBI
Prospectus in this paragraph (b) include any supplements thereto at the Closing
Date.
(i) CBI shall have furnished to the Company and the Representatives a
certificate of CBI, signed by the Chairman of the Board or the President and the
principal financial or accounting officer of CBI, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined the CBI
Registration Statement, the CBI Prospectus, any supplements to the CBI
Prospectus and this Agreement and that:
(i) the representations and warranties of CBI in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and CBI has complied with all the
24
<PAGE> 25
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the CBI
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to CBI's knowledge, threatened; and
(iii) since the date of the most recent financial statements
included in the CBI Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or other), earnings, business, operations or properties of CBI and its
subsidiaries, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the CBI
Prospectus (exclusive of any supplement thereto).
(j) At the Execution Time and at the Closing Date, Coopers & Lybrand
L.L.P., accountants for CBI, shall have furnished to the Company and the
Representatives a letter or letters, dated respectively as of the Execution Time
and as of the Closing Date, in form and substance satisfactory to the Company
and the Representatives, confirming that they are independent accountants within
the meaning of the Act and the Exchange Act and the respective applicable
published rules and regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the CBI
Registration Statement and the CBI Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by CBI and its subsidiaries; their
limited review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited interim
financial information as indicated in their reports incorporated in the
CBI Registration Statement and CBI Prospectus; carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily
reveal matters of significance with respect to the comments set forth
in such letter; a reading of the minutes of the meetings of the
stockholders, directors and Executive, Audit, Finance and Benefits and
Compensation committees of CBI and its subsidiaries; and inquiries of
certain officials of CBI who have responsibility for financial and
accounting matters of CBI and its subsidiaries as to transactions and
events subsequent to December 31, 1995, nothing came to their attention
which caused them to believe that:
(1) any unaudited financial statements included or
incorporated in the CBI Registration Statement and the CBI
Prospectus do not comply
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<PAGE> 26
in form in all material respects with applicable accounting
requirements and with the published rules and regulations of
the Commission with respect to financial statements included
or incorporated in quarterly reports on Form 10-Q under the
Exchange Act; or said unaudited financial statements are not
in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited financial statements included or incorporated in the
CBI Registration Statement and the CBI Prospectus; or
(2) with respect to the period subsequent to December
31, 1995, there were any changes, at a specified date not more
than three business days prior to the date of the letter, in
the long-term debt of CBI and its subsidiaries or capital
stock of CBI or any decreases in the shareowners' equity of
CBI as compared with the amounts shown on the December 31,
1995 consolidated balance sheet included or incorporated in
the CBI Registration Statement and the CBI Prospectus, or for
the period from January 1, 1996 to such specified date there
were any decreases, as compared with the corresponding period
in the preceding year in revenues, operating income or income
before income taxes, extraordinary charges and cumulative
effect of change in accounting principles or in the total or
per-share amounts of net income, except in all instances for
changes or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by CBI as to
the significance thereof unless said explanation is not deemed
necessary by the Company and the Representatives; and
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of CBI and its subsidiaries) set forth or
incorporated in the CBI Registration Statement and the CBI Prospectus,
including the information set forth under the captions "Prospectus
Summary," "Risk Factors," "Selected Consolidated Financial
Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business Outlook," "Business"
and "Description of Capital Stock" in the CBI Prospectus, the
information included or incorporated in Items 1, 2, 6, 7, 8 and 11 of
CBI's Annual Report on Form 10-K, incorporated in the CBI Registration
Statement and the CBI Prospectus, the information included in the
portions of CBI's Proxy Statement dated March 14, 1996 incorporated in
the CBI Registration Statement and the CBI Prospectus and the
information included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included or incorporated
in CBI's Quarterly Reports on Form 10-Q, incorporated in the CBI
Registration Statement and the CBI
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<PAGE> 27
Prospectus, agrees with the accounting records of CBI and its
subsidiaries, excluding any questions of legal interpretation.
References to the CBI Prospectus in this paragraph (j) include any
supplement thereto at the date of the letter.
(k) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the CBI Registration Statements (exclusive of any
amendment thereof) and the CBI Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (j) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or other), earnings, business, operations or properties of CBI and
their respective subsidiaries the effect of which, in any case referred to in
clause (i) or (ii) above, is, in the judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed with
the offering or delivery of the DECS as contemplated by the Registration
Statement (exclusive of any amendment thereof) and the Final Prospectus
(exclusive of any supplement thereto).
(l) Subsequent to the Execution Time, there shall not have been any
decrease in the ratings of any of CBI's debt securities by any "nationally
recognized statistical rating organization" (as defined for purpose of Rule
436(g) under the Act) or any notice given of any intended or potential decrease
in any such rating or of a possible change in any such rating that does not
indicate the direction of the possible change.
(m) At the Execution Time, CBI shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from each
executive officer and director of CBI and from Waslic Company II and The Western
and Southern Life Insurance Company addressed to the Representatives, relating
to sales and certain other dispositions of shares of CBI Common Stock or certain
other securities, and such letter agreements shall be in full force and effect
on the Closing Date.
(n) On or prior to the Closing Date, the Company and Waslic Company II
shall have consummated the purchase and sale by the Company from Waslic Company
II of certain exchangeable notes of Waslic Company II pursuant to the purchase
agreement dated the date of this Agreement between the Company, Waslic Company
II and The Western and Southern Life Insurance Company.
(o) Prior to the Closing Date, each of the Company and CBI shall have
furnished to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and
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<PAGE> 28
certificates mentioned above or elsewhere in this Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Representatives and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the Representatives. Notice of such cancellation
shall be given to the Company in writing or by telephone or telegraph confirmed
in writing.
7. Expenses. (a) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the DECS under the Act and all other fees
or expenses in connection with the preparation and filing of the Registration
Statement, each Preliminary Final Prospectus, the Final Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the DECS to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the DECS under state securities laws and
all expenses in connection with the qualification of the DECS for offer and sale
under state securities laws as provided in Section 5(a)(vi) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and disbursements
of counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the DECS by the National Association of
Securities Dealers, Inc., if any, (v) all costs and expenses incident to listing
the DECS on the NYSE, (vi) the cost of printing certificates representing the
DECS, (vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the offering of the DECS, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, and (ix) all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section.
(b) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, CBI agrees to pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of CBI's counsel
and CBI's accountants in connection with the registration and delivery of the
Shares under the Act and all other fees or expenses in connection with the
preparation and filing of the CBI Registration Statement, each Preliminary CBI
Prospectus, the CBI Prospectus and amendments and supplements to any of the
foregoing,
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including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses incident to
listing the Shares on the NYSE and the CSE, (iii) the cost of printing
certificates representing the Shares, (iv) the costs and charges of any transfer
agent, registrar or depositary, (v) the costs and expenses of CBI relating to
investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of CBI, travel and lodging expenses of the
representatives and officers of CBI and any such consultants, and the cost of
any aircraft chartered in connection with the road show, and (vi) all other
costs and expenses incident to the performance of the obligations of CBI
hereunder for which provision is not otherwise made in this Section.
(c) If the sale of the DECS provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part of
the Company or CBI to perform any agreement herein or comply with any provision
hereof other than by reason of a default by any of the Underwriters, the Company
will reimburse the Underwriters severally upon demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the DECS.
(d) The provisions of this Section 7 shall not supersede or otherwise
affect any agreement that the Company and CBI may otherwise have for the
allocation of such expenses among themselves.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed or in
any amendment thereof, or in the Basic Prospectus, any Preliminary Final
Prospectus or the Final Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made (i) therein in reliance
upon and in conformity with written information furnished to the Company (A) by
or on
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behalf of any Underwriter through the Representatives specifically for inclusion
therein or (B) by or on behalf of CBI specifically for inclusion therein or (ii)
in the CBI Prospectus. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Company agrees to indemnify and hold harmless CBI, each of its
directors, each of its officers who signs the CBI Registration Statement and
each person who controls CBI within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the CBI Registration
Statement as originally filed or in any amendment thereof, or in the Preliminary
CBI Prospectus or the CBI Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to CBI by or on behalf of the Company specifically for inclusion therein, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. The indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(c) CBI agrees to indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person
who controls any Underwriter within the meaning of either the Act or the
Exchange Act and to indemnify and hold harmless the Company, the directors,
officers, employees and agents of the Company and each person who controls the
Company within the meaning of either the Act or the Exchange Act, in either
case, against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in (i) the CBI
Registration Statement as originally filed or in any amendment thereof, or in
any Preliminary CBI Prospectus or the CBI Prospectus, or in any amendment
thereof or supplement thereto, or (ii) the Registration Statement as originally
filed or in any amendment thereof, or in any Preliminary Final Prospectus or the
Final Prospectus, or in any amendment thereto or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state in the
documents referred to in clause (i) or (ii) above a material fact required to be
stated in the documents referred to in clause (i) or (ii) above or necessary to
make the statements therein not misleading, but in the case of the documents
referred to in clause (ii) only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of CBI specifically for
30
<PAGE> 31
inclusion therein, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that CBI shall not be liable under the
indemnity agreement in this paragraph (c) to the extent that any such loss,
claim, damage or liability arises out of or is based on any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the documents referred to in clause (i) above in reliance upon and in conformity
with written information furnished to CBI by or on behalf of the Company
specifically for inclusion therein or by or on behalf of any Underwriter through
the Representatives specifically for inclusion therein. This indemnity agreement
will be in addition to any liability which CBI may otherwise have.
(d) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity in paragraph (a) from the Company to each Underwriter, but
only with reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through the
Representatives specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have.
(e) Each Underwriter severally agrees to indemnify and hold harmless
CBI, each of its directors, each of its officers who signs the CBI Registration
Statement and each person who controls CBI within the meaning of either the Act
or the Exchange Act, to the same extent as the foregoing indemnity in paragraph
(c) from CBI to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to CBI by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have.
(f) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a), (b), (c), (d) or (e) above unless and to the
extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided in
paragraph (a), (b), (c), (d) or (e) above. The indemnifying party shall be
entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party
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or parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (A) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (B) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (C) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (D)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(g) In the event that the indemnity provided in paragraph (a), (b),
(c), (d) or (e) of this Section 8 is unavailable to or insufficient to hold
harmless any indemnified party for any reason, the Company, CBI and the
Underwriters agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, CBI and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company, CBI and the Underwriters from the offering of the DECS; provided,
however, that in no case shall any Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the DECS) be
responsible for any amount in excess of the underwriting discount or commission
applicable to the DECS purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company, CBI and the Underwriters shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, CBI and of the Underwriters in connection
with the statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the Company and
CBI shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses) received by the Company, and benefits received by
the Underwriters shall be deemed to be equal to the total underwriting discounts
and commissions, in each case as set forth on the cover page of the Final
Prospectus. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company, CBI or the Underwriters. The Company, CBI and the Underwriters agree
that it would not be just and equitable if
32
<PAGE> 33
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (g), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter; each person who controls the
Company within the meaning of either the Act or the Exchange Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company; and each person who controls CBI within the meaning of either the Act
or the Exchange Act, each officer of CBI who shall have signed the CBI
Registration Statement and each director of CBI shall have the same rights to
contribution as CBI, subject in each case to applicable terms and conditions of
this paragraph (g).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the DECS agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of DECS set forth
opposite their names in Schedule I hereto bears to the aggregate principal
amount of DECS set forth opposite the names of all the remaining Underwriters)
the DECS which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of DECS
which the defaulting Underwriter or Underwriters agreed but failed to purchase
shall exceed 10% of the aggregate principal amount of DECS set forth in Schedule
I hereto, the remaining Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the DECS, and if such
nondefaulting Underwriters do not purchase all the DECS, this Agreement will
terminate without liability to any nondefaulting Underwriter, the Company or
CBI; provided, further, that in no event shall the number of Shares that any
Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such Shares
without the written consent of such Underwriter. In the event of a default by
any Underwriter as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as the Representatives
shall determine in order that the required changes in the Registration
Statement, the Final Prospectus, the CBI Registration Statement and the CBI
Prospectus or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Underwriter of its
liability, if any, to the Company, CBI and any nondefaulting Underwriter for
damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company and
CBI prior to delivery of and payment for the DECS, if prior to such time (i)
trading in any securities of the Company or CBI shall have been suspended by the
Commission or on any exchange or over-the-
33
<PAGE> 34
counter market or trading in securities generally on the NYSE, the American
Stock Exchange, the NASDAQ National Market System or the CSE shall have been
suspended or limited or minimum prices shall have been established on such
Exchange or System, (ii) a banking moratorium shall have been declared either by
Federal or New York State authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the judgment of the Representatives,
impracticable or inadvisable to proceed with the offering or delivery of the
DECS as contemplated by the Final Prospectus (exclusive of any supplement
thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company, CBI or their officers and of the Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, the Company or CBI or
any of the officers, directors or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the DECS. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York 10048, attention of the Legal
Department; if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at Seven World Trade Center, New York, New York 10048, attention
of the Secretary (except that communications required by paragraph (ii) of
Section 5(b) will be sent by telecopy to Salomon Brothers Inc, Attn: Michelle
Moffat, Esq., telecopy: 212-783-2284, telephone: 212-783-7766 and confirmed by
overnight courier); or if sent to CBI, will be mailed, delivered, telegraphed
and confirmed to it at 201 East Fourth Street, Cincinnati, Ohio 45202, attention
of ________.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
34
<PAGE> 35
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, CBI and the several Underwriters.
Very truly yours,
Salomon Inc
By:________________________________
Name:
Title:
Cincinnati Bell Inc.
By:________________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
Morgan Stanley & Co. Incorporated
By: Salomon Brothers Inc
By:_________________________________
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
35
<PAGE> 36
SCHEDULE I
<TABLE>
<CAPTION>
Number of DECS
Underwriters to be Purchased
- ------------ ---------------
<S> <C>
Salomon Brothers Inc.................................... 1,500,000
Morgan Stanley & Co. Incorporated....................... 1,500,000
---------
Total ......................................... 3,000,000
=========
</TABLE>
36
<PAGE> 37
EXHIBIT A
Salomon Inc
Public Offering of DECS
November __, 1996
Salomon Brothers Inc
Morgan Stanley & Co. Incorporated
c/o Salomon Brothers Inc
Seven World Trade Center
New York, NY 10048
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), between Salomon
Inc, a Delaware corporation (the "Company"), Cincinnati Bell Inc., an Ohio
corporation ("CBI"), and each of you as representatives (the "Representatives")
of a group of Underwriters named therein, relating to an underwritten public
offering (the "Public Offering") of ___ % Exchangeable Notes Due February 1,
2001 of the Company (the "DECS"). The DECS are subject to exchange into common
shares, par value $1.00 per share (the "CBI Common Stock"), of CBI.
In order to induce you and the other Underwriters to enter
into the Underwriting Agreement and to continue your and their efforts in
connection with the Public Offering, the undersigned hereby agrees that, without
the prior written consent of the Representatives on behalf of the Underwriters,
the undersigned will not, during the period commencing on the date hereof and
ending 90 days after the date of the final prospectus relating to the Public
Offering (the "Final Prospectus"), (1) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of CBI Common Stock or any
securities convertible into or exercisable or exchangeable for CBI Common Stock
(whether such shares or any such securities are now owned by the undersigned or
are hereafter acquired), or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the CBI Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of CBI Common Stock or such
other securities, in cash or otherwise; provided, however, that the undersigned
may sell up to (x) 5,000 shares of CBI Common Stock or (y) 15% of the sum of the
number of shares of CBI Common Stock that are owned by the undersigned on the
date of this letter and the number of shares of CBI Common Stock that may be
purchased by the undersigned pursuant to currently exercisable options owned by
the undersigned on the date of this letter (whichever of (x) and (y) is greater)
so long as the aggregate amount of shares of CBI Common Stock sold during such
90-day period by all executive officers or directors of CBI who have entered
into an
37
<PAGE> 38
agreement with the Underwriters in connection with the Public Offering similar
to this letter agreement does not exceed 200,000 shares of CBI Common Stock.* In
addition, the undersigned agrees that, without the prior written consent of the
Representatives on behalf of the Underwriters, the undersigned will not, during
the period commencing on the date hereof and ending 90 days after the date of
the Final Prospectus, make any demand for or exercise any right with respect to,
the registration of any shares of CBI Common Stock or any security convertible
into or exercisable or exchangeable for CBI Common Stock.
Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will only
be made pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company, CBI and the Underwriters.
If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the Underwriting Agreement),
the agreement set forth above shall likewise be terminated.
Yours very truly,
-------------------------------
[Name]
- ----------------
* Proviso applies only to letters from executive officers and directors
of CBI.
38
<PAGE> 1
CINCINNATI BELL INC.
2,000,000 Common Shares*
(par value $1.00 per share)
UNDERWRITING AGREEMENT
New York, New York
November __, 1996
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Ladies and Gentlemen:
The Cincinnati Bell Pension Plans Trust (the "Pension Trust")
proposes to sell to the several Underwriters (as defined below) 2,000,000 common
shares, par value $1.00 per share (the "Firm Shares"), of Cincinnati Bell Inc.,
an Ohio corporation ("CBI").
It is understood that, subject to the conditions hereinafter
stated, 1,600,000 Firm Shares (the "U.S. Firm Shares") will be sold to the
several U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters")
in connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and 400,000 Firm Shares (the "International Shares") will be
sold to the several International
Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and
- -----------------
* Plus an option to purchase from the Cincinnati Bell Pension Plans Trust up
to 300,000 additional Common Shares to cover over-allotments.
<PAGE> 2
Canada to persons other than United States and Canadian Persons. Morgan Stanley
& Co. Incorporated and Salomon Brothers Inc shall act as representatives (the
"U.S. Representatives") of the several U.S. Underwriters, and Morgan Stanley &
Co. International Limited and Salomon Brothers International Limited shall act
as representatives (the "International Representatives") of the several
International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred as to the "Underwriters." The
U.S. Representatives and the International Representatives are collectively
referred to as the "Representatives."
The Pension Trust also proposes to sell to the several U.S.
Underwriters not more than an additional 300,000 common shares, par value $1.00
per share (the "Option Shares"), if and to the extent that the U.S.
Representatives shall have determined to exercise, on behalf of the U.S.
Underwriters, the right to purchase such shares of common stock granted to the
U.S. Underwriters in Section 2 hereof. The Firm Shares and the Option Shares are
hereinafter collectively referred to as the "Shares." The common shares, par
value $1.00 per share, of CBI (including the shares to be outstanding after
giving effect to the sales of Shares contemplated hereby) are hereinafter
referred to as the "CBI Common Stock."
It is further understood by the parties hereto that Salomon
Inc ("Salomon") and CBI are concurrently entering into a separate underwriting
agreement dated the date hereof (the "DECS Underwriting Agreement") with the
group of underwriters named therein, which provides for the sale by Salomon to
such underwriters of 3,000,000 DECSSM (Debt Exchangeable for Common StockSM)
consisting of its _____ % Exchangeable Notes Due February 1, 2001 (the "DECS"),
plus up to an additional 450,000 DECS solely to cover over-allotments. At
maturity (including as a result of acceleration or otherwise), the DECS may be
mandatorily exchanged by Salomon into CBI Common Stock (or, at Salomon's option,
cash with an equal value).
In connection with the foregoing and pursuant to the
Registration Rights Agreement dated as of July 22, 1988 between CBI and the
parties named therein and the letter agreements dated January 30, 1984 and
January 29, 1988, respectively, between CBI and Bankers Trust Company
(collectively, the "Registration Rights Agreements"), CBI has filed with the
Commission a registration statement with respect to (i) 3,000,000 shares (the
"Firm DECS Shares") of CBI Common Stock, in respect of the Firm DECS, plus an
additional 450,000 shares (the "Option DECS Shares;" the Option DECS Shares,
together with the Firm DECS Shares, being hereinafter called the "DECS Shares")
of CBI Common Stock, in respect of the Option DECS, for delivery by Salomon
pursuant to the DECS and (ii) the Shares, which registration statement is
referred to in Section 1(a)(i) of this Agreement.
Certain terms used in this Agreement are defined in paragraph
(a)(iii) of Section 1.
1. Representations and Warranties.
(a) Representations and Warranties of CBI. CBI represents and
warrants to, and agrees with, each Underwriter and the Pension Trust as
set forth below in this Section 1(a).
2
<PAGE> 3
(i) CBI meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed with the Securities
and Exchange Commission (the "Commission") a registration statement
(file number 333-13699) on such Form, including a related preliminary
prospectus, for the registration under the Act of the offering and sale
of the DECS Shares in connection with the offering and sale of the DECS
and an alternate form of related preliminary prospectus, for
registration under the Act of the offering and sale of the Shares. CBI
may have filed one or more amendments thereto, including the related
preliminary prospectuses, each of which amendments has previously been
furnished to the Representatives. CBI will next file with the
Commission one of the following: (A) prior to effectiveness of such
registration statement, a further amendment to such registration
statement, including the final forms of such prospectuses, (B) such
final prospectuses in accordance with Rules 430A and 424(b)(1) or (4)
or (C) such final prospectuses in accordance with Rules 415 and
424(b)(2) or (5). In the case of clause (B), CBI has included in such
registration statement, as amended at the CBI Effective Date, all
information (other than CBI Rule 430A Information) required by the Act
and the rules thereunder to be included in such prospectuses with
respect to the DECS Shares, the Shares and the offering thereof. As
filed, such amendment and final forms of prospectuses, or such final
prospectuses, shall contain all CBI Rule 430A Information, together
with all other such required information, with respect to the DECS
Shares, the Shares and the offering thereof and, except to the extent
the Representatives shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to the
Representatives prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary CBI Prospectus) as CBI has advised the
Representatives, prior to the Execution Time, will be included or made
therein. If the Registration Statement contains the undertaking
specified by Regulation S-K Item 512(a), the Registration Statement, at
the Execution Time, meets the requirements to Rule 415(a)(1)(x).
(ii) On the CBI Effective Date, the CBI Registration Statement
did or will, and when the CBI Prospectus is first filed (if required)
in accordance with Rule 424(b) and on the Closing Date (as hereinafter
defined), the CBI Prospectus (and any supplement thereto) will, comply
in all material respects with the applicable requirements of the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the respective rules thereunder; on the CBI Effective Date, the CBI
Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the CBI Effective Date, the CBI Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of
any filing pursuant to Rule 424(b) and on the Closing Date, the CBI
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
3
<PAGE> 4
circumstances under which they were made, not misleading; provided,
however, that CBI makes no representations or warranties as to the
information contained in or omitted from the CBI Registration Statement
or the CBI Prospectus (or any supplement thereto) in reliance upon and
in conformity with information furnished in writing to CBI by or on
behalf of any Underwriter through the Representatives specifically for
inclusion in the CBI Registration Statement or the CBI Prospectus (or
any supplement thereto).
(iii) The terms which follow, when used in this Agreement,
shall have the meanings indicated. The term "CBI Effective Date" shall
mean each date that the CBI Registration Statement and any post-
effective amendment or amendments thereto became or become effective.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto. "Preliminary CBI
Prospectus" shall mean any preliminary prospectus referred to in
paragraph (a)(i) of this Section 1, any preliminary prospectus included
in the CBI Registration Statement at the CBI Effective Date that omits
CBI Rule 430A Information and any preliminary prospectus relating to
the International Shares that is used in connection with the offering
and sale of the International Shares. "CBI DECS Prospectus" shall mean
the prospectus relating to the DECS Shares that is used in connection
with the offering and sale of the DECS and that is first filed pursuant
to Rule 424(b) after the Execution Time or, if no filing pursuant to
Rule 424(b) is required, shall mean the form of such final prospectus
relating to the DECS Shares included in the CBI Registration Statement
at the CBI Effective Date. "CBI Pension Trust Prospectus" shall mean
(i) the prospectus relating to the U.S. Firm Shares and the Option
Shares that is used in connection with the offering and sale of the
U.S. Firm Shares and the Option Shares and that is first filed pursuant
to Rule 424(b) after the Execution Time or, if no filing pursuant to
Rule 424(b) is required, shall mean the form of such final prospectus
included in the CBI Registration Statement at the CBI Effective Date
and (ii) the prospectus relating to the International Shares that is
used in connection with the offering and sale of the International
Shares. "CBI Prospectus" shall mean the CBI DECS Prospectus and the CBI
Pension Trust Prospectus. "CBI Registration Statement" shall mean the
registration statement referred to in paragraph (b)(i) of this Section
1, including incorporated documents, exhibits and financial statements,
as amended at the Execution Time (or, if not effective at the Execution
Time, in the form in which it shall become effective) and, in the event
any post-effective amendment thereto or a registration statement filed
with respect to the Shares pursuant to Rule 462(b) (or post-effective
amendment thereto) becomes effective prior to the Closing Date, shall
also mean such registration statement as so amended or such
registration (or amendment thereto) filed pursuant to Rule 462(b),
respectively. The term "CBI Registration Statement" shall include any
CBI Rule 430A Information deemed to be included therein at the CBI
Effective Date as provided by Rule 430A. "Rule 415," "Rule 424," "Rule
430A," "Rule 462" and "Regulation S-K" refer to such rules or
regulation under the Act. "CBI Rule 430A Information" means information
with respect to the DECS Shares and
4
<PAGE> 5
the Shares permitted to be omitted from the CBI Registration Statement
when it becomes effective pursuant to Rule 430A. Any reference herein
to the CBI Registration Statement, any Preliminary CBI Prospectus or
the CBI Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form
S-3 which were filed under the Exchange Act on or before the CBI
Effective Date or the issue date of such Preliminary CBI Prospectus or
the CBI Prospectus, as the case may be; and any reference herein to the
terms "amend," "amendment" or "supplement" with respect to the CBI
Registration Statement, any Preliminary CBI Prospectus or the CBI
Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the CBI Effective Date or the
issue date of any Preliminary CBI Prospectus or the CBI Prospectus, as
the case may be, deemed to be incorporated therein by reference.
(iv) CBI has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the CBI Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would
not have a material adverse effect on CBI and its subsidiaries, taken
as a whole.
(v) Each subsidiary of CBI has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the CBI Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on CBI
and its subsidiaries, taken as a whole.
(vi) All of the outstanding shares of capital stock of each
subsidiary of CBI have been duly and validly authorized and issued, are
fully paid and nonassessable and are owned beneficially by CBI free and
clear of any security interests, liens, encumbrances, equities or
claims.
(vii) This Agreement has been duly authorized, executed and
delivered by CBI.
(viii) CBI's authorized equity capitalization consists of
240,000,000 shares of CBI Common Stock and 5,000,000 preferred shares;
and the authorized capital stock of CBI conforms as to legal matters to
the description thereof contained or incorporated by reference in the
CBI Prospectus.
5
<PAGE> 6
(ix) The shares of CBI Common Stock (including the Shares)
outstanding have been duly authorized and are validly issued, fully
paid and non-assessable.
(x) The shares of CBI Common Stock (including the Shares) have
been duly authorized for listing on the New York Stock Exchange (the
"NYSE") and the Cincinnati Stock Exchange (the "CSE").
(xi) CBI has passed title to the Shares to be sold by the
Pension Trust pursuant to this Agreement to the Pension Trust, free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(xii) With respect to the management of the Pension Trust, CBI
has not taken and will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be
expected to cause or result in any action that has caused or would
cause any of the representations and warranties of the Pension Trust
contained in this Agreement to be inaccurate or misleading as of the
date hereof.
(xiii) Coopers & Lybrand L.L.P., whose reports appear in the
documents incorporated by reference in the CBI Registration Statement,
are independent public accountants with respect to CBI and its
subsidiaries as required by the Act and the rules and regulations
thereunder.
(xiv) The historical consolidated financial statements
(including the related notes) included or incorporated by reference in
the CBI Registration Statement present fairly the consolidated
financial position of CBI and its consolidated subsidiaries as of the
dates indicated and the results of operations and changes in financial
condition for the periods specified; such financial statements have
been prepared in conformity with generally accepted accounting
principals applied on a consistent basis throughout the periods
involved; and the supporting schedules included or incorporated by
reference in the CBI Registration Statement present fairly the
information required to be stated therein. The selected historical
consolidated financial data included in the CBI Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the related historical consolidated financial
statements included or incorporated by reference in the CBI
Registration Statement.
(xv) The execution and delivery by CBI of, and the performance
by CBI of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or
by-laws of CBI or any agreement or other instrument binding upon CBI or
any of its subsidiaries that is material to CBI and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over CBI or any subsidiary,
and no consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
6
<PAGE> 7
performance by CBI of its obligations under this Agreement, except such
as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(xvi) There has not occurred any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of CBI and its subsidiaries, taken as a whole, from that set
forth in the CBI Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(xvii) There is no legal or governmental proceeding pending or
threatened to which CBI or any of its subsidiaries is a party or to
which any of the properties of CBI or any of its subsidiaries is
subject that (A) has adversely affected, or would reasonably be likely
to adversely affect, the execution by CBI of this Agreement, the
performance by CBI of any of its obligations hereunder or the
consummation of any of the transactions contemplated in this Agreement,
(B) except as disclosed in the CBI Prospectus, has had or is reasonably
likely to have, singularly or in the aggregate with all such actions,
suits, proceedings or investigations, a material adverse effect on CBI
and its subsidiaries, taken as a whole, or (C) is required to be
described in the CBI Registration Statement or the CBI Prospectus and
is not so described; and there are no statutes, regulations, contracts
or other documents that are required to be described in the CBI
Registration Statement or the CBI Prospectus or to be filed as exhibits
to the CBI Registration Statement that are not described or filed as
required.
(xviii) CBI is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(xix) CBI and its subsidiaries (A) are in compliance with any
and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (B) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (C) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on CBI and its subsidiaries, taken as a whole.
(xx) In the ordinary course of its business, CBI conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of CBI and its subsidiaries, in the course of
which it identifies and
7
<PAGE> 8
evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties).
On the basis of such review, CBI has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate,
have a material adverse effect on CBI and its subsidiaries, taken as a
whole.
(xxi) There are no contracts, agreements or understandings
between CBI and any person granting such person the right to require
CBI to file a registration statement under the Act with respect to any
securities of CBI (other than the Registration Rights Agreements) or to
require CBI to include such securities with the Shares registered
pursuant to the CBI Registration Statement.
(xxii) CBI has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of any
security of CBI to facilitate the sale or resale of the DECS, the DECS
Shares or the Shares.
(xxiii) The execution, delivery and performance of this
Agreement does not and will not constitute a prohibited transaction
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), by reason of Prohibited Transaction Class Exemption 84-14
(respecting Qualified Professional Asset Managers); provided, however,
that for purposes of this representation, CBI may assume that no
Underwriter (or any person controlling, or controlled by, any
Underwriter) owns a five percent or greater interest in Bankers Trust
Company ("Bankers Trust") within the meaning of section V(h) of PTCE
84-14.
(b) Representations and Warranties of CBI and the Pension Trust. Each
of CBI and the Pension Trust represents and warrants to, and agrees with,
each Underwriter as set forth below in this Section 1(b).
(i) This Agreement has been duly authorized, executed and
delivered by the Pension Trust.
(ii) The execution and delivery by the Pension Trust of, and
the performance by the Pension Trust of its obligations under, this
Agreement will not contravene any provision of applicable law (subject
to clause (ix) below), or the trust agreement of the Pension Trust, or
any agreement or other instrument binding upon the Pension Trust or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Pension Trust, and no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required for the performance by the Pension Trust of its
obligations under this Agreement, except such as may be required by
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<PAGE> 9
the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Shares.
(iii) The Pension Trust has, and on the Closing Date will
have, valid title to the Shares to be sold by the Pension Trust and the
legal right and power, and all authorization and approval required by
law, to enter into this Agreement and to sell, transfer and deliver the
Shares to be sold by the Pension Trust.
(iv) The Shares to be sold by the Pension Trust pursuant to
this Agreement have been duly authorized and are validly issued, fully
paid and non-assessable.
(v) Delivery of the Shares to be sold by the Pension Trust
pursuant to this Agreement will pass title to such Shares, free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(vi) The Pension Trust has not taken and will not take,
directly or indirectly, any action designed to or which has constituted
or which might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of the
price of any security of CBI to facilitate the sale or resale of the
DECS, the DECS Shares or the Shares; and the Pension Trust has not
effected any sales of CBI Common Stock which, if effected by the
issuer, would be required to be disclosed in response to Item 701 of
Regulation S-K.
(vii) Bankers Trust, as trustee of the Pension Trust, has full
power and authority to execute and deliver this Agreement for the
account and on behalf of the Pension Trust and to so bind the Pension
Trust.
(viii) The execution, delivery and performance of this
Agreement does not and will not constitute a prohibited transaction
under ERISA by reason of Prohibited Transaction Class Exemption 84-14
(respecting Qualified Professional Asset Managers); provided, however,
that for purposes of this representation, the Pension Trust may assume
that no Underwriter (or any person controlling, or controlled by, any
Underwriter) owns a five percent or greater interest in Bankers Trust
within the meaning of section V(h) of PTCE 84-14.
(c) Representations and Warranties of Bankers Trust. Bankers Trust, in
its corporate and in its fiduciary capacity, represents and warrants to, and
agrees with, each Underwriter as set forth below in this Section 1(c).
(i) This Agreement has been duly authorized, executed and
delivered by the Pension Trust.
(ii) The execution and delivery by the Pension Trust of, and
the performance by the Pension Trust of its obligations under, this
Agreement will not contravene the trust agreement of the Pension Trust
or, to the best knowledge of
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<PAGE> 10
Bankers Trust, any provision of applicable law or any agreement or
other instrument binding upon the Pension Trust, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over the Pension Trust, and, to the best knowledge of Bankers Trust, no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Pension Trust of its obligations under this Agreement, except such as
may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(iii) The Pension Trust has, and on the Closing Date will
have, the legal right and power, and all authorization and approval
required by law, to enter into this Agreement and to sell, transfer and
deliver the Shares to be sold by the Pension Trust.
(iv) Bankers Trust, as trustee of the Pension Trust, has full
power and authority to execute and deliver this Agreement for the
account and on behalf of the Pension Trust and to so bind the Pension
Trust.
(v) The execution, delivery and performance of this Agreement
does not and will not constitute a prohibited transaction under ERISA
by reason of Prohibited Transaction Class Exemption 84-14 (respecting
Qualified Professional Asset Managers); provided, however, that for
purposes of this representation, Bankers Trust may assume that no
Underwriter (or any person controlling, or controlled by, any
Underwriter) owns a five percent or greater interest in Bankers Trust
within the meaning of section V(h) of PTCE 84-14.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Pension
Trust agrees to sell to each Underwriter, and each Underwriter agrees, severally
and not jointly, to purchase from the Pension Trust, at a purchase price of
$_______ per share, the respective number of Firm Shares set forth opposite such
Underwriter's name in Schedules I and II hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Pension Trust hereby grants
an option to the several U.S. Underwriters to purchase, severally and not
jointly, up to 300,000 Option Shares at the same purchase price per share as the
Underwriters shall pay for the Firm Shares. Said option may be exercised only to
cover over-allotments in the sale of the Firm Shares by the Underwriters. Said
option may be exercised in whole or in part at any time (but not more than once)
on or before the 30th day after the date of the CBI Prospectus upon written or
telegraphic notice by the U.S. Underwriters to the Pension Trust and CBI setting
forth the number of Option Shares as to which the U.S. Underwriters are
exercising the option and the settlement date. Delivery of certificates for the
Option Shares, and payment therefor, shall be made as provided in Section 3
hereof. The number of Option Shares to be purchased by each U.S. Underwriter
shall be the same percentage of the total number of Option Shares to be
purchased by the several U.S. Underwriters as such
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<PAGE> 11
U.S. Underwriter is purchasing of the Firm Shares, subject to such adjustments
as the U.S. Representatives in their absolute discretion shall make to eliminate
any fractional shares.
3. Delivery and Payment. Delivery of and payment for the Firm Shares
(and the Option Shares (if and to the extent the option provided for in Section
2(b) hereof shall have been exercised on or before the first business day prior
to the Closing Date)) shall be made at 10:00 AM, New York City time, on November
__, 1996, or such later date (not later than November __, 1996) as the
Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Pension Trust or as provided in
Section 9 hereof (such date and time of delivery and payment for the Firm Shares
being herein called the "Closing Date"). Delivery of the Shares shall be made on
the instructions of the Representatives for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Pension Trust in immediately available funds. Delivery of, and payment for, the
Shares shall be made through the facilities of The Depository Trust Company.
Certificates for the Shares shall be registered in such names and in such
denominations as the Representatives shall request not less than one full
business day in advance of the Closing.
The Pension Trust agrees to have the Shares available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after
the first full business day prior to the Closing Date, the Pension Trust will
deliver (at the expense of the Pension Trust) to the U.S. Representatives, at
1585 Broadway, New York, New York, on the date specified by the U.S.
Representatives in the notice described in Section 2(b), or such later date (not
later than December __, 1996) specified by the U.S. Representatives,
certificates for the Option Shares in such names and denominations as the U.S.
Representatives shall have requested against payment of the purchase price
thereof to or upon the order of the Pension Trust in immediately available
funds. If settlement for the Option Shares occurs after the Closing Date, the
Pension Trust will deliver to the U.S. Representatives on the settlement date
for the Option Shares, and the obligation of the U.S. Underwriters to purchase
the Option Shares shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
4. Offering by the Underwriters. It is understood that the several
Underwriters propose to offer the Shares for sale to the public as set forth in
the CBI Prospectus.
5. Agreements.
(a) Agreements of CBI. CBI agrees with the several Underwriters that:
(i) CBI will use its best efforts to cause the CBI
Registration Statement, if not effective at the Execution Time, and any
amendment thereof to become effective. Prior to the termination of the
offering of the Shares, CBI will
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<PAGE> 12
not file any amendment of the CBI Registration Statement or supplement
to the CBI Prospectus unless CBI has furnished the Representatives a
copy for their review prior to filing and will not file any such
proposed amendment or supplement to which the Representatives
reasonably object. Subject to the foregoing sentence, if the CBI
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the CBI Prospectus is otherwise required under Rule
424(b), CBI will cause the CBI Prospectus, properly completed, and any
supplement thereof to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representatives of such
timely filing. CBI will promptly advise the Representatives (A) when
the CBI Registration Statement, if not effective at the Execution Time,
and any amendment thereof, shall have become effective, (B) when the
CBI Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b), (C) when, prior
to termination of the offering of the Shares, any amendment to the CBI
Registration Statement shall have been filed or become effective, (D)
of any request by the Commission for any amendment of the CBI
Registration Statement or supplement to the CBI Prospectus or for any
additional information, (E) of the issuance by the Commission of any
stop order suspending the effectiveness of the CBI Registration
Statement or the institution or threatening of any proceeding for that
purpose and (F) of the receipt by CBI of any notification with respect
to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. CBI will use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(ii) If, at any time when a prospectus relating to the CBI
Common Stock is required to be delivered under the Act (including in
respect of the offering and sale of the Shares) in the opinion of
counsel for the Underwriters, any event occurs or condition exists as a
result of which the CBI Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if, in the
opinion of counsel for the Underwriters, it shall be necessary to amend
the CBI Registration Statement or supplement the CBI Prospectus to
comply with the Act or the Exchange Act or the respective rules
thereunder, CBI (A) immediately will notify the Representatives of such
event or necessity and (B) promptly will prepare and file with the
Commission, subject to the second sentence of paragraph (a)(i) of this
Section 5, an amendment or supplement which will correct such statement
or omission or effect such compliance.
(iii) As soon as practicable, CBI will make generally
available to its security holders and to the Representatives an
earnings statement or statements of CBI and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
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<PAGE> 13
(iv) CBI will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the CBI Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the CBI Registration Statement (without exhibits thereto) and,
so long as delivery of a prospectus by an Underwriter or dealer may be
required by the Act, as many copies of each Preliminary CBI Prospectus,
the CBI Prospectus and any supplement thereto as the Representatives
may reasonably request. CBI will pay the expenses of printing or other
production of all documents relating to the offering, including the CBI
Registration Statement, each Preliminary CBI Prospectus and the CBI
Prospectus.
(v) CBI will arrange for the qualification of the Shares for
sale under the laws of such jurisdictions as the Representatives may
designate, will maintain such qualifications in effect so long as
required for the distribution of the Shares, will arrange for the
determination of the legality of the Shares for purchase by
institutional investors and will pay the fee of the National
Association of Securities Dealers, Inc., in connection with its review,
if any, of the offering.
(vi) Without the prior written consent of the Representatives
on behalf of the Underwriters, CBI will not, during the period ending
90 days after the date of the CBI Prospectus, (A) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly,
or announce the offering of, any shares of CBI Common Stock or any
securities convertible into or exercisable or exchangeable for CBI
Common Stock (whether such shares or any such securities are now owned
by CBI or are hereafter acquired) or (B) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the CBI Common Stock, whether any
such transaction described in clause (A) or (B) above is to be settled
by delivery of CBI Common Stock or such other securities, in cash or
otherwise; provided, however, that CBI may issue, or grant options for,
shares of CBI Common Stock pursuant to any stock plan for employees or
directors or any qualified employee benefit plan in effect on the date
of the CBI Prospectus, or pursuant to any stock options outstanding on
the date of the CBI Prospectus, and any defined contribution qualified
employee benefit plan in effect on the date of the CBI Prospectus may
sell shares of CBI Common Stock to satisfy plan liquidity needs. In
addition, CBI agrees that, without the prior written consent of the
Representatives on behalf of the Underwriters, it will not, during the
period ending 90 days after the date of the CBI Prospectus, make any
demand for, or exercise any right with respect to, the registration of
any shares of CBI Common Stock or any security convertible into or
exercisable or exchangeable for CBI Common Stock. CBI further agrees to
establish an internal mechanism for monitoring and ensuring compliance
by each executive officer and director with the aggregate limit on
sales of CBI Common Stock by such persons
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<PAGE> 14
set forth in the proviso to the second paragraph of the form of letter
agreement to be executed by such persons attached hereto as Exhibit A.
(vii) CBI will take such actions as may be reasonably
necessary to comply with the rules and regulations of the NYSE and the
CSE in respect of the offering of the Shares.
(b) Agreements of the Pension Trust. The Pension Trust agrees with the
several underwriters that, without the prior written consent of the
Representatives on behalf of the Underwriters, the Pension Trust will not,
during the period ending 90 days after the date of the CBI Prospectus, (A)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, or
announce the offering of, any shares of CBI Common Stock or any securities
convertible into or exercisable or exchangeable for CBI Common Stock (whether
such shares or any such securities are now owned by the Pension Trust or are
hereafter acquired) or (B) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the CBI Common Stock, whether any such transaction described in
clause (A) or (B) above is to be settled by delivery of CBI Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to the Shares to be sold hereunder. In addition, the Pension Trust agrees that,
without the prior written consent of the Representatives on behalf of the
Underwriters, it will not, during the period ending 90 days after the date of
the CBI Prospectus, make any demand for, or exercise any right with respect to,
the registration of any shares of CBI Common Stock or any security convertible
into or exercisable or exchangeable for CBI Common Stock.
6. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Firm Shares and the Option Shares, as the
case may be, shall be subject to the accuracy of the representations and
warranties on the part of each of CBI and the Pension Trust contained herein as
of the Execution Time and the Closing Date and any settlement date pursuant to
Section 3 hereof, to the accuracy of the statements of CBI and the Pension Trust
made in any certificates pursuant to the provisions hereof, to the performance
by each of CBI and the Pension Trust of its obligations hereunder and to the
following additional conditions:
(a) If the CBI Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in
writing to a later time, the CBI Registration Statement will become
effective not later than (i) 6:00 PM New York City time, on the date of
determination of the public offering price of the Shares, if such
determination occurred at or prior to 3:00 PM New York City time on
such date or (ii) 12:00 Noon New York City time on the business day
following the date of determination of the public offering price of the
Shares, if such determination occurred after 3:00 PM New York City time
on such date; if filing of the CBI Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the CBI Prospectus, and
any such supplement, shall have been filed in the manner and within the
time period required
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<PAGE> 15
by Rule 424(b); and no stop order suspending the effectiveness of the
CBI Registration Statement shall have been issued and no proceedings
for that purpose shall have been instituted or threatened.
(b) CBI shall have furnished to the Representatives the
opinion of Frost & Jacobs, counsel for CBI, dated as of the Closing
Date, to the effect that:
(i) CBI has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business
as described in the CBI Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction
in which CBI has informed such counsel that the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on CBI and its subsidiaries, taken as a whole;
(ii) each subsidiary of CBI has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
CBI Prospectus and is duly qualified to transact business and
is in good standing in each jurisdiction in which CBI has
informed such counsel that the conduct of its business or its
ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on
CBI and its subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of
each subsidiary of CBI have been duly and validly authorized
and issued and are fully paid and nonassessable, and, except
as otherwise set forth in the CBI Prospectus, all outstanding
shares of capital stock of each such subsidiary are owned by
CBI either directly or through wholly owned subsidiaries free
and clear of any perfected security interest and, to the
knowledge of such counsel, after due inquiry, any other
security interests, claims, liens or encumbrances;
(iv) this Agreement has been duly authorized,
executed and delivered by CBI;
(v) CBI's authorized equity capitalization consists
of 240,000,000 shares of CBI Common Stock and 5,000,000
preferred shares; and the authorized capital stock of CBI
conforms as to legal matters to the description thereof
contained or incorporated by reference in the CBI Prospectus;
(vi) the shares of CBI Common Stock (including the
Shares) outstanding have been duly authorized and are validly
issued, fully paid and non-assessable;
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(vii) the shares of CBI Common Stock (including the
Shares) have been duly authorized for listing on the NYSE and
the CSE;
(viii) the execution and delivery by CBI of, and the
performance by CBI of its obligations under, this Agreement
will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of CBI or, to the best
of such counsel's knowledge, any agreement or other instrument
binding upon CBI or any of its subsidiaries that is material
to CBI and its subsidiaries, taken as a whole, or, to the best
of such counsel's knowledge, any judgment, order or decree of
any governmental body, agency or court having jurisdiction
over CBI or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any
governmental body or agency is required for the performance by
CBI of its obligations under this Agreement, except such as
may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Shares;
(ix) the statements (A) in the CBI Pension Trust
Prospectus under the captions "Business--Cincinnati Bell
Telephone Company--Regulation" (third and fourth paragraphs),
"Business--Other Businesses" (fourth paragraph), "Description
of Capital Stock" and "Certain United States Tax Consequences
to Non-United States Holders" and (B) in the CBI Registration
Statement in Item 15, in each case insofar as such statements
constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(x) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which CBI or any of its subsidiaries is a party or to which
any of the properties of CBI or any of its subsidiaries is
subject that are required to be described in the CBI
Registration Statement or the CBI Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the CBI
Registration Statement or the CBI Prospectus or to be filed as
exhibits to the CBI Registration Statement that are not
described or filed as required;
(xi) CBI is not an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
(xii) the CBI Registration Statement has become
effective under the Act; any required filing of the CBI
Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period
required by Rule 424(b); and to the best knowledge of such
counsel, no stop order suspending the effectiveness of the CBI
Registration Statement has been issued, and no proceedings for
that purpose have been instituted or threatened;
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(xiii) such counsel (A) is of the opinion that the CBI
Registration Statement and CBI Prospectus (except for financial
statements and schedules and other financial and statistical data
included therein as to which such counsel need not express any opinion)
comply as to form in all material respects with the Securities Act and
the applicable rules and regulations of the Commission thereunder, (B)
has no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the CBI Registration Statement and
the prospectus included therein at the time the CBI Registration
Statement became effective contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (C) has
no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the CBI Prospectus contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(xiv) no holders of securities of CBI have rights to the
registration of such securities under the CBI Registration Statement
(other than pursuant to the Registration Rights Agreements).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Ohio or the United States, to the extent they deem proper and specified in such
opinion, upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to counsel for the Underwriters and (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of CBI and public officials. References to the CBI
Prospectus in this paragraph (b) include any supplements thereto at the Closing
Date.
(c) The Pension Trust shall have furnished to the Representatives the
opinion of David I. Abramson, counsel for Bankers Trust, dated the Closing Date,
to the effect that:
(i) Bankers Trust, as trustee of the Pension Trust, has full
power and authority to execute and deliver this Agreement for the
account and on behalf of the Pension Trust and to so bind the Pension
Trust;
(ii) this Agreement has been duly authorized, executed and
delivered by the Pension Trust;
(iii) the Pension Trust has valid title to the Shares to be
sold by the Pension Trust and the legal right and power, and all
authorization and approval required by law, to enter into this
Agreement and to sell, transfer and deliver the Shares to be sold by
the Pension Trust;
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(iv) upon the delivery of and payment for the Shares to be
sold by the Pension Trust pursuant to this Agreement as herein
contemplated, such delivery of the Shares will pass title to such
Shares to the Underwriters, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity;
(v) the execution, delivery and performance of this Agreement
does not and will not constitute a prohibited transaction under ERISA
by reason of Prohibited Transaction Class Exemption 84-14 (respecting
Qualified Professional Asset Managers), assuming that no Underwriter
(or any person controlling, or controlled by, any Underwriter) owns a
five percent or greater interest in Bankers Trust within the meaning of
section V(h) of PTCE 84-14.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the Underwriters
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of CBI and public officials. References to the CBI
Prospectus in this paragraph (c) include any supplements thereto at the Closing
Date.
(d) The Representatives shall have received from Cleary, Gottlieb,
Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Shares, the CBI
Registration Statement, the CBI Prospectus (together with any supplement
thereto) and other related matters as the Representatives may reasonably
require, and CBI and the Pension Trust shall have furnished to such counsel such
documents as such counsel may reasonably request for the purpose of enabling
such counsel to pass upon such matters.
(e) CBI shall have furnished to the Representatives a certificate of
CBI, signed by the Chairman of the Board or the President and the principal
financial or accounting officer of CBI, dated the Closing Date, to the effect
that the signers of such certificate have carefully examined the CBI
Registration Statement, the CBI Prospectus, any supplements to the CBI
Prospectus and this Agreement and that:
(i) the representations and warranties of CBI in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and CBI has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the CBI
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to CBI's knowledge, threatened; and
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(iii) since the date of the most recent financial statements
included in the CBI Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or other), earnings, business, operations or properties of CBI and its
subsidiaries, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the CBI
Prospectus (exclusive of any supplement thereto).
(f) The Pension Trust shall have furnished to the Representatives a
certificate signed by two appropriate officers of Bankers Trust, dated the
Closing Date, to the effect that each signer of such certificate has carefully
examined the CBI Registration Statement, the CBI Prospectus, any supplement to
the CBI Prospectus and this Agreement and that (i) the representations and
warranties of the Pension Trust and Bankers Trust in this Agreement are true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on the Closing Date and (ii) and the Pension Trust has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date.
(g) At the Execution Time and at the Closing Date, Coopers & Lybrand
L.L.P., accountants for CBI, shall have furnished to the Representatives a
letter or letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of the Act
and the Exchange Act and the respective applicable published rules and
regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the CBI
Registration Statement and the CBI Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by CBI and its subsidiaries; their
limited review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited interim
financial information as indicated in their reports incorporated in the
CBI Registration Statement and CBI Prospectus; carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily
reveal matters of significance with respect to the comments set forth
in such letter; a reading of the minutes of the meetings of the
stockholders, directors and Executive, Audit, Finance and Benefits and
Compensation committees of CBI and its subsidiaries; and inquiries of
certain officials of CBI who have responsibility for financial and
accounting matters of CBI and its subsidiaries as to transactions and
events subsequent to December 31, 1995, nothing came to their attention
which caused them to believe that:
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<PAGE> 20
(1) any unaudited financial statements included or
incorporated in the CBI Registration Statement and the CBI
Prospectus do not comply in form in all material respects with
applicable accounting requirements and with the published
rules and regulations of the Commission with respect to
financial statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; or said unaudited
financial statements are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included or incorporated in the CBI Registration
Statement and the CBI Prospectus; or
(2) with respect to the period subsequent to December
31, 1995, there were any changes, at a specified date not more
than three business days prior to the date of the letter, in
the long-term debt of CBI and its subsidiaries or capital
stock of CBI or any decreases in the shareowners' equity of
CBI as compared with the amounts shown on the December 31,
1995 consolidated balance sheet included or incorporated in
the CBI Registration Statement and the CBI Prospectus, or for
the period from January 1, 1996 to such specified date there
were any decreases, as compared with the corresponding period
in the preceding year in revenues, operating income or income
before income taxes, extraordinary charges and cumulative
effect of change in accounting principle or in the total or
per-share amounts of net income, except in all instances for
changes or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by CBI as to
the significance thereof unless said explanation is not deemed
necessary by the Representatives; and
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of CBI and its subsidiaries) set forth or
incorporated in the CBI Registration Statement and the CBI Prospectus,
including the information set forth under the captions "Prospectus
Summary," "Risk Factors," "Selected Consolidated Financial
Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business Outlook," "Business"
and "Description of Capital Stock" in the CBI Prospectus, the
information included or incorporated in Items 1, 2, 6, 7, 8 and 11 of
CBI's Annual Report on Form 10-K, incorporated in the CBI Registration
Statement and the CBI Prospectus, the information included in the
portions of CBI's Proxy Statement dated March 14, 1996 incorporated in
the CBI Registration Statement and the CBI Prospectus and the
information included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included or incorporated
in CBI's Quarterly Reports on Form 10-Q, incorporated in the CBI
Registration Statement and the CBI
20
<PAGE> 21
Prospectus, agrees with the accounting records of CBI and its
subsidiaries, excluding any questions of legal interpretation.
References to the CBI Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter.
(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the CBI Registration Statements (exclusive of
any amendment thereof) and the CBI Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in
the letter or letters referred to in paragraph (g) of this Section 6 or
(ii) any change, or any development involving a prospective change, in or
affecting the condition (financial or other), earnings, business,
operations or properties of CBI and their respective subsidiaries the
effect of which, in any case referred to in clause (i) or (ii) above, is,
in the judgment of the Representatives, so material and adverse as to make
it impractical or inadvisable to proceed with the offering or delivery of
the Shares as contemplated by the CBI Registration Statement (exclusive of
any amendment thereof) and the CBI Prospectus (exclusive of any supplement
thereto).
(i) Subsequent to the Execution Time, there shall not have been any
decrease in the ratings of any of CBI's debt securities by any "nationally
recognized statistical rating organization" (as defined for purpose of Rule
436(g) under the Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change.
(j) On or prior to the Execution Time, the NYSE and the CSE shall have
approved the Underwriters' participation in the distribution of the Shares
to be sold by the Pension Trust.
(k) At the Execution Time, CBI shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from
each executive officer and director of CBI and from Waslic Company II and
The Western and Southern Life Insurance Company addressed to the
Representatives, relating to sales and certain other dispositions of shares
of CBI Common Stock or certain other securities, and such letter agreements
shall be in full force and effect on the Closing Date.
(l) Prior to the Closing Date, each of CBI and the Pension Trust shall
have furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancellation
21
<PAGE> 22
shall be given to CBI and the Pension Trust in writing or by telephone or
telegraph confirmed in writing.
7. Expenses. (a) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, CBI agrees to pay or
cause to be paid all expenses incident to the performance of the obligations of
CBI and the Pension Trust under this Agreement, including: (i) the fees,
disbursements and expenses of the counsel of CBI and the Pension Trust and CBI's
accountants in connection with the registration and delivery of the Shares under
the Act and all other fees or expenses in connection with the preparation and
filing of the CBI Registration Statement, each Preliminary CBI Prospectus, the
CBI Prospectus and amendments and supplements to any of the foregoing, including
all printing costs associated therewith, and the mailing and delivering of
copies thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery of
the Shares to the Underwriters, including any transfer or other taxes payable
thereon, (iii) the cost of printing or producing any Blue Sky or Legal
Investment memorandum in connection with the offer and sale of the Shares under
state securities laws and all expenses in connection with the qualification of
the Shares for offer and sale under state securities laws as provided in Section
5(a)(vi) hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky or Legal Investment memorandum, (iv) all filing
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., if any, (v) all costs and expenses
incident to listing the Shares on the NYSE and the CSE, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and expenses of
CBI relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of CBI, travel and lodging
expenses of the representatives and officers of CBI and any such consultants,
and the cost of any aircraft chartered in connection with the road show, and
(ix) all other costs and expenses incident to the performance of the obligations
of CBI hereunder for which provision is not otherwise made in this Section .
(b) If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part of
CBI or the Pension Trust to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the Underwriters,
CBI will reimburse the Underwriters severally upon demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Shares.
(c) The provisions of this Section 7 shall not supersede or otherwise
affect any agreement that CBI and the Pension Trust may otherwise have for the
allocation of such expenses among themselves.
22
<PAGE> 23
8. Indemnification and Contribution. (a) CBI agrees to indemnify and
hold harmless each Underwriter, the directors, officers, employees and agents of
each Underwriter and each person who controls any Underwriter within the meaning
of either the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the CBI Registration Statement as originally filed or in any
amendment thereof, or in any Preliminary CBI Prospectus or the CBI Prospectus,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that CBI shall not be liable under the indemnity agreement in this
paragraph (a) to the extent that any such loss, claim, damage or liability
arises out of or is based on any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to CBI by or on behalf of any
Underwriter through the Representatives specifically for inclusion therein. This
indemnity agreement will be in addition to any liability which CBI may otherwise
have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
CBI, each of its directors, each of its officers who signs the CBI Registration
Statement and each person who controls CBI within the meaning of either the Act
or the Exchange Act to the same extent as the foregoing indemnity in paragraph
(a) from CBI to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to CBI by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a), (b) or (c) above unless and to the extent it did
not otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a), (b) or (c) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
23
<PAGE> 24
have the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (A) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (B) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (C) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (D) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless any
indemnified party for any reason, CBI and the Underwriters agree to contribute
to the aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or defending
same) (collectively "Losses") to which CBI and one or more of the Underwriters
may be subject in such proportion as is appropriate to reflect the relative
benefits received by CBI and the Underwriters from the offering of the Shares;
provided, however, that in no case shall any Underwriter (except as may be
provided in any agreement among underwriters relating to the offering of the
Shares) be responsible for any amount in excess of the underwriting discount or
commission applicable to the Shares purchased by such Underwriter hereunder. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, CBI and the Underwriters shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of CBI and the Underwriters in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by CBI shall be deemed to be equal to the
total net proceeds from the offering (before deducting expenses) received by the
Pension Trust, and benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions, in each case as set
forth on the cover page of the CBI Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by CBI or the Underwriters. CBI, the Pension
Trust and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (e), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an
24
<PAGE> 25
Underwriter shall have the same rights to contribution as such Underwriter; and
each person who controls CBI within the meaning of either the Act or the
Exchange Act, each officer of CBI who shall have signed the CBI Registration
Statement and each director of CBI shall have the same rights to contribution as
CBI, subject in each case to applicable terms and conditions of this paragraph
(e).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Shares agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Shares set forth
opposite their names in Schedules I and II hereto bears to the aggregate
principal amount of Shares set forth opposite the names of all the remaining
Underwriters) the Shares which the defaulting Underwriter or Underwriters agreed
but failed to purchase; provided, however, that in the event that the aggregate
amount of Shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate principal amount of Shares
set forth in Schedules I and II hereto, the remaining Underwriters shall have
the right to purchase all, but shall not be under any obligation to purchase
any, of the Shares, and if such nondefaulting Underwriters do not purchase all
the Shares, this Agreement will terminate without liability to any nondefaulting
Underwriter, the Pension Trust or CBI; provided, further, that in no event shall
the number of Shares that any Underwriter has agreed to purchase pursuant to
this Agreement be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such Shares without the written consent of such Underwriter. In the
event of a default by any Underwriter as set forth in this Section 9, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the Representatives shall determine in order that the required changes in the
CBI Registration Statement and the CBI Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to CBI, the Pension Trust
and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to CBI and the
Pension Trust prior to delivery of and payment for the Shares, if prior to such
time (i) trading in any securities of CBI shall have been suspended by the
Commission or on any exchange or over-the-counter market or trading in
securities generally on the NYSE, the American Stock Exchange, the NASDAQ
National Market System or the CSE shall have been suspended or limited or
minimum prices shall have been established on any such Exchange or System, (ii)
a banking moratorium shall have been declared either by Federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the judgment of the Representatives, impracticable or inadvisable
to proceed with the offering or delivery of the Shares as contemplated by the
CBI Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of CBI
or its officers, of the
25
<PAGE> 26
Pension Trust, of Bankers Trust (in its corporate and in its fiduciary capacity)
and its officers, and of the Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter, the Pension Trust or CBI or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Shares. The provisions of Sections
7 and 8 hereof shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telegraphed and confirmed to them, care of Morgan Stanley & Co.
Incorporated, at 1585 Broadway, New York, New York 10036, attention of the Legal
Department; if sent to CBI, will be mailed, delivered, telegraphed and confirmed
to it at 201 East Fourth Street, Cincinnati, Ohio 45202, attention of Brian
Henry; or if sent to the Pension Trust, will be mailed, delivered, telegraphed
and confirmed to it at Bankers Trust Company, 130 Liberty Street, New York, New
York 10006, attention of David I. Abramson.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
26
<PAGE> 27
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among CBI,
the Pension Trust, Bankers Trust (with respect to Section 1(c)) and the several
Underwriters.
Very truly yours,
Cincinnati Bell Inc.
By: _____________________________
Name:
Title:
Cincinnati Bell Pension Plans Trust
By: Bankers Trust Company, Trustee
By: _____________________________
Name:
Title:
Bankers Trust Company
By: _____________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
For themselves and the other several
Underwriters named in Schedule I
to the foregoing Agreement.
By: Morgan Stanley & Co. Incorporated
By: ___________________________
Name:
Title:
27
<PAGE> 28
Morgan Stanley & Co. International Limited
Salomon Brothers International Limited
For themselves and the other several
Underwriters named in Schedule II
to the foregoing Agreement.
By: Morgan Stanley & Co. International Limited
By: ______________________________________
Name:
Title:
28
<PAGE> 29
SCHEDULE I
U.S. Underwriters
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
- ------------ ---------------
<S> <C>
Morgan Stanley & Co. Incorporated.........
Salomon Brothers Inc......................
----------
Total U.S. Firm Shares ......... 1,600,000
==========
</TABLE>
29
<PAGE> 30
SCHEDULE II
International Underwriters
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
- ------------ ---------------
<S> <C>
Morgan Stanley & Co. International Limited.............
Salomon Brothers International Limited.................
--------
Total International Firm Shares ........ 400,000
========
</TABLE>
30
<PAGE> 31
EXHIBIT A
Cincinnati Bell Inc.
Public Offering of Common Shares
November __, 1996
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), between
Cincinnati Bell Inc., an Ohio corporation ("CBI"), Cincinnati Bell Pension Plans
Trust and each of you as representatives (the "Representatives") of a group of
Underwriters named therein, relating to an underwritten public offering (the
"Public Offering") of common shares, par value $1.00 per share (the "CBI Common
Stock"), of CBI.
In order to induce you and the other Underwriters to enter
into the Underwriting Agreement and to continue your and their efforts in
connection with the Public Offering, the undersigned hereby agrees that, without
the prior written consent of the Representatives on behalf of the Underwriters,
the undersigned will not, during the period commencing on the date hereof and
ending 90 days after the date of the final prospectus relating to the Public
Offering (the "CBI Prospectus"), (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, directly or indirectly, any shares of CBI Common Stock or any securities
convertible into or exercisable or exchangeable for CBI Common Stock (whether
such shares or any such securities are now owned by the undersigned or are
hereafter acquired), or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the CBI Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of CBI Common Stock or such
other securities, in cash or otherwise; provided, however, that the undersigned
may sell up to (x) 5,000 shares of CBI Common Stock or (y) 15% of the sum of the
number of shares
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<PAGE> 32
of CBI Common Stock that are owned by the undersigned on the date of this letter
and the number of shares of CBI Common Stock that may be purchased by the
undersigned pursuant to currently exercisable options owned by the undersigned
on the date of this letter (whichever of (x) or (y) is greater) so long as the
aggregate amount of shares of CBI Common Stock sold during such 90-day period by
all executive officers or directors of CBI who have entered into an agreement
with the Underwriters in connection with the Public Offering similar to this
letter agreement does not exceed 200,000 shares of CBI Common Stock.* In
addition, the undersigned agrees that, without the prior written consent of the
Representatives on behalf of the Underwriters, the undersigned will not, during
the period commencing on the date hereof and ending 90 days after the date of
the CBI Prospectus, make any demand for or exercise any right with respect to,
the registration of any shares of CBI Common Stock or any security convertible
into or exercisable or exchangeable for CBI Common Stock.
Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will only
be made pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between CBI, the Cincinnati Bell Pension Plans Trust and the
Underwriters.
If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the Underwriting Agreement),
the agreement set forth above shall likewise be terminated.
Yours very truly,
__________________________
[Name]
- ----------------
* Proviso applies only to letters from executive officers and directors of
CBI.
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Amendment No. 2 to Form S-3
(File Number 333-13699) of our report dated February 14, 1996 on our audits of
the consolidated financial statements and financial statement schedules of
Cincinnati Bell, Inc. and subsidiaries as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995. We also consent
to the reference to our firm under the caption "Experts."
/S/ COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
November 13, 1996
