<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
BROADWING COMMUNICATIONS INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
<TABLE>
<S> <C>
Broadwing Communications Inc. NOTICE OF ACTION BY WRITTEN
1122 Capital of Texas Highway South CONSENT OF STOCKHOLDER
Austin, Texas 78746
</TABLE>
- --------------------------------------------------------------------------------
To our Stockholders:
Cincinnati Bell Inc., doing business as Broadwing Inc., is the holder of all
of the outstanding shares of common stock, $.01 par value, of Broadwing
Communications Inc. (the "Company") and has approved in writing the election of
Richard G. Ellenberger as a director of the Company for a one-year term ending
in 2001. Mr. Ellenberger has served as a director of the Company since
November 9, 1999. The re-election of Mr. Ellenberger as a director shall not
become effective until at least 20 days after the mailing of the enclosed
Information Statement.
Your consent is not required and is not being solicited in connection with
this action. Pursuant to Section 228 of the Delaware General Corporation Law,
you are hereby being provided with notice of the approval by less than the
unanimous written consent of the eligible voting stockholders of the Company.
Pursuant to the Securities Exchange Act of 1934, you are hereby being furnished
with an Information Statement relating to this action.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ATTACHED INFORMATION STATEMENT IS BEING SENT TO YOU FOR INFORMATION
PURPOSES ONLY.
By Order of the Board of Directors
April 13, 2000 Thomas E. Taylor, Secretary
<PAGE>
Broadwing Communications Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746
Information Statement Relating to the
Election of Richard G. Ellenberger as a Director
For a One-Year Term Ending in 2001
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
The Approximate Date of Mailing of this Information Statement is
April 13, 2000
This Information Statement is being furnished by Broadwing
Communications Inc., a Delaware corporation (the "Company"), to the holders of
the Company's 12 1/2% Series B Junior Exchangeable Preferred Stock Due 2009,
$.01 par value (the "Preferred Shares"), in connection with the election of
Richard G. Ellenberger as a director of the Company for a one-year term ending
in 2001.
The director who receives the greatest number of votes is elected to the
Board of Directors. Cincinnati Bell Inc., doing business as Broadwing Inc.
("Broadwing"), is the holder of all of the outstanding Common Stock, $.01 par
value, of the Company (the "Common Shares") and has consented in writing to the
election of Richard G. Ellenberger as a director for a one-year term ending in
2001. Broadwing's approval constitutes over 90% of the votes entitled to be cast
on the election of Mr. Ellenberger as a director. Mr. Ellenberger has served as
the sole director of the Company since November 9, 1999.
Accordingly, all corporate actions necessary to elect Mr. Ellenberger as a
director for a one-year term ending in 2001 have been taken. Pursuant to the
regulations promulgated under the Securities Exchange Act of 1934, the
re-election of Mr. Ellenberger as a director shall not become effective until at
least 20 days after the Company has mailed this Information Statement to the
holders of the Preferred Shares.
The Company has asked brokers and other custodians and fiduciaries to
forward this Information Statement to the beneficial owners of the Preferred
Shares held of record by such persons and will reimburse such persons for
out-of-pocket expenses incurred in forwarding such materials.
The executive offices of the Company are located at 1122 Capital of Texas
Highway South, Austin, Texas 78746. All holders of record of the Preferred
Shares at the close of business on March 20, 2000 will receive this Information
Statement.
<PAGE>
VOTING SECURITIES
The Company's Board of Directors has fixed the close of business on
March 20, 2000 as the record date (the "Record Date") for the determination of
stockholders entitled to vote. As of the Record Date, 500,000 Common Shares and
395,120 Preferred Shares were entitled to vote. Broadwing owns 100% of the
Common Shares and is entitled to one vote for each Common Share. All other
stockholders are entitled to one-tenth of one vote for each Preferred Share
owned on the Record Date. The Preferred Shares vote with the Common Shares as
one class.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The Company is not aware of any directors or officers that own any equity
securities of the Company. The Company has only limited information concerning
the beneficial ownership of the Preferred Shares because substantially all of
the Preferred Shares are registered in the name of nominees.
The following table sets forth certain information as of the Record Date
regarding the only stockholder of the Company known by the Company to be the
beneficial owner of more than 5% of any class of the Company's voting
securities:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ---------------- ---------- --------
<C> <S> <C> <C>
Common Shares Cincinnati Bell Inc. 500,000 100%
d/b/a Broadwing Inc.
201 East Fourth Street
P.O. Box 2301
Cincinnati, Ohio 45201
</TABLE>
CHANGE OF CONTROL OF THE COMPANY
On Tuesday, November 9, 1999, the Company consummated its merger with
Broadwing's wholly owned subsidiary, Ivory Merger Inc. ("Ivory"). In accordance
with the terms of the Agreement and Plan of Merger among the Company, Broadwing
and Ivory dated July 20, 1999, as amended (the "Merger Agreement"), upon the
filing of the certificate of merger with the Delaware Secretary of State, Ivory
was merged with and into the Company with the Company as the surviving
corporation and the Company became a wholly owned subsidiary of Broadwing (other
than with respect to the Preferred Shares). Each issued and outstanding Common
Share (except for shares owned by Broadwing or the Company) was converted into
the right to receive 2.0976 common shares of Broadwing ("Broadwing Common
Shares"). In addition, each issued and outstanding share of the Company's 7 1/4%
Junior Convertible Preferred Stock Due 2007 and the Company's Depositary Shares
representing 1/20 of a share of the Company's 6 3/4% Cumulative Convertible
Preferred Stock was converted into the right to receive Broadwing's 7 1/4%
Junior Convertible Preferred Stock Due 2007 and Broadwing's Depositary Shares
representing 1/20 of a share of Broadwing's 6 3/4% Cumulative Convertible
Preferred Stock. The Company's stockholders and Broadwing's shareholders
approved the merger at Shareholder Meetings held on October 29, 1999.
Prior to the consummation of the merger, Broadwing had purchased 4,999,345
Company Common Shares from Trustees of the General Electric Pension Trust
("GEPT") for $234,967,250. Each remaining Company Common Share held by GEPT as
of November 9, 1999 was converted into the right to receive 2.0976 Broadwing
Common Shares.
Pursuant to the Merger Agreement, the Board of Directors of the Company was
replaced by the Board of Directors of Ivory, with Richard G. Ellenberger
becoming the sole member of the Company's
2
<PAGE>
Board of Directors. In addition, two former Company directors, John M. Zrno and
Richard D. Irwin, joined the Broadwing Board of Directors.
In connection with the merger, Broadwing sold $400 million of convertible
subordinated debentures to Oak Hill Capital Partners, L.P. ("Oak Hill"). The
debentures have a coupon of 6.75% and are convertible at a price of $29.89 per
Broadwing Common Share. The Broadwing Board of Directors approved using the
proceeds from the sale to Oak Hill to purchase Company Common Shares from GEPT
and to buy back Broadwing Common Shares on the open market.
In addition, Broadwing and the Company completed a $1.8 billion bank credit
facility pursuant to a Credit Agreement dated as of November 9, 1999, among
Broadwing and Broadwing Communications Services Inc., formerly IXC
Communications Services, Inc. ("IXCS"), a subsidiary of the Company, as
Borrowers, Broadwing as Parent Guarantor, the Initial Lenders, Initial Issuing
Banks and Swing Line Banks named therein, Bank of America, N.A., as Syndication
Agent, Citicorp USA, Inc., as Administrative Agent, Credit Suisse First Boston
and The Bank of New York, as Co-Documentation Agents, PNC Bank, N.A., as Agent
and Salomon Smith Barney Inc. and Bank of America Securities LLC, as Joint Lead
Arrangers (the "Credit Agreement"). The Credit Agreement has been amended to
increase the credit facility to $2.1 billion. The Credit Agreement is being used
to refinance certain debt of Broadwing and the Company and for general corporate
purposes of Broadwing. Pursuant to the Credit Agreement, Broadwing pledged all
of its outstanding shares of the Company.
BOARD OF DIRECTORS
GENERAL INFORMATION
The Board of Directors of the Company (the "Board") is responsible for
establishing broad corporate policies and for the overall performance of the
Company. Mr. Ellenberger became the sole member of the Board at the time of the
merger. As the Chief Executive Officer of the Company, Mr. Ellenberger is
involved in day-to-day operating details and is also kept informed of the
Company's business by various operating and financial reports and documents.
Since the Company has one director, the Board does not hold official
meetings. The sole director takes action by written consent in lieu of meeting
whenever needed. There have been no Board committees since the merger.
In 1999, the Board held 24 meetings, all of which were held prior to the
merger.
COMPENSATION OF DIRECTORS
Mr. Ellenberger, as an employee of the Company and of Broadwing, does not
receive any compensation for serving on the Board.
Prior to the merger, in 1999, non-employee directors received annual
compensation of $15,000, $1,000 for participating in each regular Board meeting
and $300 for participating in each telephonic meeting. All compensation which
would otherwise have been payable to Wolfe H. Bragin as a former director of the
Company was paid to GEPT. Prior to the merger, all directors received
reimbursement of reasonable out-of-pocket expenses incurred in connection with
meetings of the Board. Except for Mr. Bragin, on May 28, 1999, each non-employee
director also received an option grant of 2,500 Common Shares under the 1998
Stock Plan. As a result of the unavailability of certain exemptions under the
securities laws, the compensation of Mr. Bragin was slightly different from that
of the other directors. Specifically, rather than receiving a stock option to
purchase 2,500 Common Shares, Mr. Bragin (on behalf of GEPT) received a cash
payment equal to the assumed value of the option.
3
<PAGE>
SHARE OWNERSHIP OF DIRECTOR AND OFFICERS
The Company is not aware of any directors or named executive officers that
own any equity securities of the Company. The following table sets forth the
beneficial ownership of Broadwing Common Shares as of March 20, 2000 by each
director and named executive officer that was employed by the Company as of
March 20, 2000 and by all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
BROADWING COMMON
SHARES BENEFICIALLY
OWNED AS OF PERCENT OF BROADWING
MARCH 20, 2000 (A) COMMON SHARES
------------------- --------------------
<S> <C> <C>
Dominick J. DeAngelo...................................... 302,297 0.15%
Richard G. Ellenberger.................................... 418,543 0.21%
Kevin W. Mooney........................................... 105,719 0.05%
Mark W. Peterson.......................................... 3,950 0.00%
Richard S. Pontin......................................... 83,375 0.04%
Thomas Schilling.......................................... 1,790 0.00%
Jeffrey C. Smith.......................................... 317,491 0.16%
Thomas E. Taylor.......................................... 114,062 0.06%
David A. Torline.......................................... 33,909 0.02%
All directors and officers as a group (consisting of
11 persons, including those named above)................ 1,423,996 0.71%
</TABLE>
- ------------------------
(a) Includes Broadwing Common Shares subject to outstanding options which are
exercisable by such individuals within 60 days. The following options are
included in the totals: 302,297 Broadwing Common Shares for Mr. DeAngelo;
133,975 Broadwing Common Shares for Mr. Ellenberger; 62,300 Broadwing Common
Shares for Mr. Mooney; 313,296 Broadwing Common Shares for Mr. Smith; 52,062
Broadwing Common Shares for Mr. Taylor; and 17,700 Broadwing Common Shares
for Mr. Torline.
ELECTION OF DIRECTORS
The Board of the Company presently consists of one director, Richard G.
Ellenberger, Chief Executive Officer of the Company and President and Chief
Executive Officer of Broadwing. The director is elected for a one-year term. The
Board has nominated Richard G. Ellenberger, who is an incumbent director, as a
director, to serve until his successor is elected and qualified. Broadwing has
approved the election of Mr. Ellenberger as a director for a one-year term
ending in 2001 and until his successor is duly elected and qualified.
For Mr. Ellenberger, there follows a brief listing of his principal
occupation during at least the past five years, other major affiliations and his
age on the date of this Information Statement.
DIRECTOR
Richard G. Ellenberger, Chief Executive Officer of the Company since
November 9, 1999; President and Chief Executive Officer of Broadwing
since March 1, 1999; Chief Operating Officer of Broadwing since July 1,
1998; President, Chief Executive Officer and a Director of Cincinnati
Bell Telephone Company since 1997. Director of Broadwing since 1998.
Director of the Company since 1999. Chief Executive Officer of XLConnect,
1996-1997; President, Business Services of MCI Telecommunications,
1995-1996; Senior Vice President, Worldwide Sales of MCI
Telecommunications, 1994-1995; Senior Vice President, Branch Operations
of MCI Telecommunications, 1993-1994; Vice President, Southeast Region of
MCI Telecommunications, 1992-1993. Age 47.
4
<PAGE>
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee that set and approved the executive compensation
paid until the merger consisted of three former directors of the Company who
resigned at the effective time of the merger: Wolfe H. Bragen, Richard D. Irwin
and Ralph J. Swett. The Company currently does not have a compensation
committee. Mr. Ellenberger, the sole director of the Company, is responsible for
administering executive compensation policies for the officers of the Company,
other than for the named executive officers of the Company. The Broadwing
Compensation Committee administers the compensation of Mr. Ellenberger, the
Chief Executive Officer of the Company, Richard S. Pontin, the President and
Chief Operating Officer of the Company, Kevin W. Mooney, the Chief Financial
Officer of the Company, and Thomas E. Taylor, the General Counsel and Secretary
of the Company.
COMPENSATION PHILOSOPHY
The Company's executive compensation program consists of three elements:
base salary, annual incentive compensation and long term incentive compensation
and targets each executive's total direct compensation to be competitive with
the revenue adjusted median of the marketplace, using information from general
industry and telecommunication surveys conducted by outside consultants.
BASE SALARIES. Base salaries have been established at ranges that are
comparable to similar positions at other companies based upon the Company's
market data. The Company intends to adjust salaries based upon individual
performance and upon the results of the Company's market data. The salaries of
the named executive officers appear in the "Summary Compensation Table."
ANNUAL INCENTIVES. For the named executive officers, other than
Mr. Ellenberger, annual bonuses were based on the Company's financial
performance and on personal performance. Mr. Ellenberger is paid by Broadwing
and his compensation was determined by the Broadwing Compensation Committee. The
annual bonuses of the named executive officers appear in the "Summary
Compensation Table."
LONG TERM INCENTIVES. The long term incentives of the named executive
officers of the Company, other than Mr. Ellenberger, are solely in the form of
stock options under the Company's and Broadwing's benefit plans. The stock
option grants to the named executive officers are shown in the "Grants of Stock
Options" table.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Ellenberger served in the
capacity of Chief Executive Officer of the Company from November 9, 1999 through
the end of 1999 and as President and Chief Executive Officer of Broadwing since
March 1, 1999. Prior to that date, he was President and CEO Elect of Broadwing.
Mr. Ellenberger is compensated by Broadwing as set forth in the "Summary
Compensation Table." Mr. Scott served in the capacity as President and CEO of
the Company until May 26, 1999 and his compensation is set forth in the "Summary
Compensation Table." Mr. Zrno served in the capacity as President and CEO
effective May 27, 1999 through November 8, 1999 and his compensation is set
forth in the "Summary Compensation Table."
COMPENSATION LIMITATION. Section 162(m) of the Internal Revenue Code (the
"Code") generally limits the available deduction to the Company for compensation
paid to any of the Company's named executives to $1,000,000, except for
performance-based compensation that meets certain technical requirements.
Mr. Ellenberger and the Broadwing Compensation Committee desire to maximize the
amount of compensation expense that is deductible by the Company when it is
appropriate and in the best interests of the Company and its stockholders.
However, compensation decisions will continue to be based primarily on the
extent to which performance goals have been achieved and on the effectiveness of
each type of compensation for incenting results.
Richard G. Ellenberger
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company currently does not have a compensation committee.
Mr. Ellenberger, the Chief Executive Officer of the Company, is also the sole
director of the Company. During 1999, Mr. Ellenberger, in his capacity as the
sole director of the Company, made decisions concerning executive officer
compensation, other than for the named executive officers of the Company.
The Compensation Committee consisted of Messrs. Irwin, Bragin and Swett for
fiscal 1999 prior to the merger. The Compensation Committee was disbanded at the
time of the merger. Mr. Swett was an employee of the Company until
October 1997.
CERTAIN TRANSACTIONS
For the year ended December 31, 1999, the law firm of Riordan & McKinzie, of
which Mr. McKinzie, a director of the Company until the merger, is a principal,
provided certain legal services to the Company in the amount of approximately
$3,217,928 million.
Prior to the merger, GHA, a company whose president is Mr. Irwin, a director
of the Company until the merger, received an annual fee of $100,000 from the
Company for performing certain advisory services with respect to the management,
operation and business development activities of the Company.
EXECUTIVE COMPENSATION
I. SUMMARY COMPENSATION TABLE
The following table shows the compensation of the Chief Executive Officer,
the former Chief Executive Officers who served in such capacity in 1999 prior to
the merger and the other four most highly compensated executive officers of the
Company or any of its subsidiaries for services to the Company and its
subsidiaries in all capacities. Mr. Ellenberger served as a director of the
Company but received no separate compensation in that capacity. The Company
expects that the named executive officers in 2000 will be Richard G.
Ellenberger, CEO, Richard S. Pontin, President, Kevin W. Mooney, Chief Financial
Officer, Jeffrey C. Smith, Chief Legal/Administrator Officer, and Dominick J.
DeAngelo, President, Data and Internet Markets of Broadwing Communications
Services Inc.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSATION STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) AWARDS($) OPTIONS (#) ($)
- --------------------------- -------- --------- -------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard G. Ellenberger............ 1999 $550,000 $576,000 (b) $5,025,000(c) 2,028,000(d) $ 0
CEO(a)
Benjamen L. Scott................. 1999 $385,000 $300,000 $482,000(f) $ 0 0 $ 25,173(g)
Former President and CEO(e) 1998 $358,852 $225,000 $147,001(h) $ 0 94,800(i) $ 80,526(j)
1997 $ 69,000 $350,000 (b) $ 0 500,000(i) $ 3,234(k)
John M. Zrno...................... 1999 $176,212 $ 0 (b) $ 0 1,073,800(m) $ 21,962(n)
Former President and CEO(l)
Michael W. Vent................... 1999 $270,000 $135,000 $ 72,942(p) $ 0 299,742(q) $ 0
President, Network Services and 1998 $225,000 $105,000 (b) $ 0 197,000(i) $ 16,044(r)
Information Technology(o) 1997 $192,377 $80,000 (b) $ 0 50,000(i) $ 14,350(r)
Jeffrey C. Smith.................. 1999 $207,904 $145,000 (b) $ 0 199,741(s) $ 0
Chief Legal/Administrative Officer 1998 $190,000 $70,000 (b) $ 0 22,000(i) $ 0
1997 $127,615 $ 0 (b) $ 0 80,000(i) $154,860(k)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSATION STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) AWARDS($) OPTIONS (#) ($)
- --------------------------- -------- --------- -------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dominick J. DeAngelo.............. 1999 $230,105 $95,000 (b) $ 0 299,742(t) $ 192(k)
President, Data and Internet 1998 $102,308 $ 0 (b) $ 0 102,000(i) $ 75,180(k)
Markets of Broadwing
Communications Services, Inc.
David L. Hughart.................. 1999 $367,228 $191,250 (b) $ 0 299,742(t) $ 34,085(k)
President, U.S. Sales(u) 1998 $105,962 $ 0 (b) $ 0 147,000(i) $ 14,138(k)
</TABLE>
- ------------------------------
(a) Mr. Ellenberger became the CEO effective November 9, 1999. Mr. Ellenberger
is compensated by Broadwing. Compensation information is provided for fiscal
1999 and includes compensation for services provided to Broadwing and the
Company.
(b) Does not include the value of perquisites and other personal benefits
because the total amount of such compensation, if any, does not exceed the
lesser of $50,000 or 10% of the total amount of the annual salary and bonus
for the individual for that year.
(c) Broadwing awarded Mr. Ellenberger 300,000 Broadwing Common Shares, 25%
vesting on December 31, 1999 and December 31 of each year thereafter. The
value of these shares as of December 31, 1999 was $11,118,750. Dividends
were paid on all restricted shares through August 1999 when Broadwing ceased
paying dividends.
(d) Represents Broadwing Common Shares underlying options.
(e) Mr. Scott resigned as the CEO effective May 26, 1999.
(f) Includes an automobile allowance of $12,000 and $470,000 in connection with
the forgiveness of a loan made to Mr. Scott.
(g) Represents payment for accrued vacation upon the termination of his
employment.
(h) Includes an automobile allowance of $12,000 and $135,000 in connection with
the partial forgiveness of a loan, including interest, made to Mr. Scott.
(i) Represents Company Common Shares underlying options. All options outstanding
at the time of the merger were converted into the right to obtain Broadwing
Common Shares upon exercise. The number of Broadwing Common Shares subject
to each such option is equal to the number of Company Common Shares
originally subject to such option multiplied by 2.0976 and rounded down to
the nearest whole share.
(j) Includes an employer contribution of $6,402 under the Company's 401(k) Plan
and reimbursed relocation expenses of $74,124.
(k) Represents reimbursed relocation expenses.
(l) Mr. Zrno served as the CEO effective May 27, 1999 through November 8, 1999.
(m) Represents 1,048,800 Broadwing Common Shares underlying options that were
obtained in the merger upon the conversion of options to acquire 500,000
Company Common Shares and 25,000 Broadwing Common Shares underlying an
option that was granted by Broadwing after the merger.
(n) Includes $14,580 for payment for accrued vacation upon the termination of
his employment and reimbursed relocation expenses of $7,382.
(o) Mr. Vent resigned effective December 31, 1999.
(p) Includes an automobile allowance of $8,000 and $64,942 in connection with
the forgiveness of a loan made to Mr. Vent.
(q) Represents 99,342 Broadwing Common Shares underlying options that were
obtained in the merger upon the conversion of options to acquire 47,360
Company Common Shares and 200,400 Broadwing Common Shares underlying options
that were granted by Broadwing after the merger. The 200,400 Broadwing
Common Shares underlying options were terminated in connection with
Mr. Vent's resignation of employment effective December 31, 1999.
(r) Represents an employer contribution under the Company's 401(k) Plan.
(s) Represents 99,341 Broadwing Common Shares underlying options that were
obtained in the merger upon the conversion of options to acquire 47,360
Company Common Shares and 100,400 Broadwing Common Shares underlying options
that were granted by Broadwing after the merger.
(t) Represents 99,342 Broadwing Common Shares underlying options that were
obtained in the merger upon the conversion of options to acquire 47,360
Company Common Shares and 200,400 Broadwing Common Shares underlying options
that were granted by Broadwing after the merger.
(u) Mr. Hughart resigned effective January 27, 2000.
7
<PAGE>
II. GRANTS OF STOCK OPTIONS
The following table shows all individual grants by the Company and Broadwing
of stock options to purchase Common Shares and Broadwing Common Shares granted
to the named executive officers of the Company during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (C)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------------
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ------------ -------------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard G. Ellenberger.... 127,500(a) 1.146%(b) $16.7500 01/04/09 $ 1,341,173 $ 3,402,051
300,000(d) 2.696%(b) $16.7500 01/04/09 $ 3,155,700 $ 8,004,825
500(e) 0.004%(b) $16.7500 01/04/09 $ 5,260 $ 13,341
1,600,000(f) 14.380%(b) $16.7813 09/17/09 $16,861,850 $42,772,177
Benjamen L. Scott......... 0 0 0
John M. Zrno.............. 1,048,800(g) 11.1375%(i) $16.1800 05/27/09 $10,656,899 $27,032,547
25,000(h) .2655%(i) $25.4063 11/09/09 $ 398,879 $ 1,011,806
Michael W. Vent........... 99,342(g) 1.0549%(i) $18.4200 07/06/09 $ 1,149,164 $ 2,914,998
200,000(j) 2.1239%(i) $25.4063 11/09/09 $ 3,191,031 $ 8,094,447
400(e) .0042%(i) $28.9688 01/04/09 $ 6,388 $ 15,735
Jeffrey C. Smith 59,068(g) .6273%(i) $18.4200 07/06/09 $ 683,284 $ 1,733,236
40,273(g) .4277%(i) $15.7100 09/14/09 $ 397,329 $ 1,007,873
100,000(j) 1.0619%(i) $25.4063 11/09/09 $ 1,595,516 $ 4,047,224
400(e) .0042%(i) $28.9688 01/04/09 $ 6,388 $ 15,735
Dominick J. DeAngelo...... 99,342(g) 1.0549%(i) $18.4200 07/06/09 $ 1,149,164 $ 2,914,998
200,000(j) 2.1239%(i) $25.4063 11/09/09 $ 3,191,031 $ 8,094,447
400(e) .0042%(i) $28.9688 01/04/09 $ 6,388 $ 15,735
David L. Hughart.......... 99,342(g) 1.0549%(i) $18.4200 07/06/09 $ 1,149,164 $ 2,914,998
200,000(j) 2.1239%(i) $25.4063 11/09/09 $ 3,191,031 $ 8,094,447
400(e) .0042%(i) $28.9688 01/04/09 $ 6,388 $ 15,735
</TABLE>
- ------------------------
(a) Options to purchase Broadwing Common Shares granted by Broadwing in
January 1999 as the annual grant. The material terms of the options granted
are: grant type, non-incentive; exercise price, fair market value on grant
date; generally exercisable 25% after one year, an additional 25% after the
second year and the remaining 50% after the third year; term of grant,
10 years; except in case of retirement, disability, death or change in
control of the Company, any unexercisable options are generally cancelled
upon termination of employment.
(b) Percentage of total options granted to Broadwing employees in 1999.
(c) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that the Broadwing
Common Shares will appreciate in value from the date of the grant to the end
of the option term (ten years from the date of the grant) at annualized
rates of 5% and 10% (total appreciation of 62.8% and 159.3%) resulting in
values of approximately $27.27 and $43.43 for all options granted to
Mr. Ellenberger expiring on January 4, 2009; $27.37 and $43.60 for all
options expiring on September 17, 2009; $26.34 and $41.95 for all options
expiring on May 27, 2009; $41.16 and $65.88 for all options expiring on
November 9, 2009; $29.99 and $47.76 for all options expiring on July 6,
2009; $45.06 and $68.55 for all options granted to Messrs. Vent, Smith,
8
<PAGE>
DeAngelo and Hughart expiring on January 4, 2009; and $25.58 and $40.74 for
all options expiring on September 14, 2009. They are not intended, however,
to forecast possible future appreciation, if any, in the price of Broadwing
Common Shares. As an alternative to the assumed potential realizable values
stated in the above table, the Securities and Exchange Commission rules
would permit stating the present value of such options at date of grant.
Methods of computing present values suggested by different authorities can
produce significantly different results. Moreover, since stock options
granted by Broadwing are not transferable to persons other than family
members, there are no objective criteria by which any computation of present
value can be verified. Consequently, Broadwing's management does not believe
there is a reliable method of computing the present value of such stock
options for proxy disclosure purposes.
(d) Options to purchase Broadwing Common Shares granted by Broadwing in
January 1999 to provide additional incentive to manage Broadwing after the
spin-off of its subsidiary, Convergys Corporation, on December 31, 1998.
(e) Options to purchase Broadwing Common Shares granted by Broadwing in
January 1999 under a new program whereby almost all employees of Broadwing
and its subsidiaries were granted options for the purchase of Broadwing
Common Shares. Options to purchase 500 Broadwing Common Shares were granted
to eligible employees who were employed on the first business day in
January 1999 and options to purchase 400 Broadwing Common Shares were
granted to employees hired in 1999. 100% of the options granted become
exercisable on January 4, 2002 and have an expiration date of January 4,
2009. The 400 Broadwing Common Shares underlying options granted to
Mr. Vent were terminated in connection with Mr. Vent's resignation of
employment effective December 31, 1999.
(f) Options to purchase Broadwing Common Shares granted by Broadwing in
September 1999 to provide additional incentive to make the acquisition of
the Company a success, 25% of the options become exercisable after three
years, an additional 25% after the fourth year and the remaining 50% after
the fifth year. Exercisability may be accelerated if specific earnings
before interest, taxes, depreciation and amortization results are achieved.
(g) Represents options to acquire Broadwing Common Shares that were converted
from options to acquire Company Common Shares in the merger. Pursuant to the
merger, each option to acquire Company Common Shares was converted into an
option to acquire Broadwing Common Shares on the same terms and conditions.
The number of Broadwing Common Shares subject to each such option is equal
to the number of Company Common Shares originally subject to such option
multiplied by 2.0976 and rounded down to the nearest whole share. The amount
of the exercise price per Broadwing Common Share was adjusted to be equal to
the aggregate amount of the exercise price for the Company Common Shares
subject to each option divided by the total number of Broadwing Common
Shares subject to such option (rounded up to the nearest whole cent). All of
the options became exercisable at the time of the merger.
(h) Option to purchase Broadwing Common Shares granted under the Cincinnati
Bell Inc. 1997 Stock Option Plan for Non-Employee Directors by Broadwing on
the date Mr. Zrno became a director of Broadwing. The option became
exercisable on the date of grant.
(i) Percentage of total options granted to Company employees in fiscal year.
(j) Options to purchase Broadwing Common Shares granted by Broadwing in
November 1999 to provide additional incentive to make the acquisition of the
Company a success, 25% of the options become exercisable after three years,
an additional 25% after the fourth year, and the remaining 50% after the
fifth year. Exercisability may be accelerated if specific earnings before
interest, taxes, depreciation and amortization results are achieved. The
200,000 Broadwing Common Shares underlying options granted to Mr. Vent were
terminated in connection with Mr. Vent's resignation of employment effective
December 31, 1999.
9
<PAGE>
III. AGGREGATE OPTION EXERCISES
The following table shows aggregate option exercises for Common Shares and
Broadwing Common Shares in the last fiscal year and fiscal year-end values:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES (B) VALUE OF UNEXERCISED
COMPANY UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
BROADWING COMMON COMMON OPTIONS AT FY-END (#) FY-END ($)(A)
SHARES ACQUIRED SHARES ACQUIRED VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE (#) ON EXERCISE (#) REALIZED ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- ---- ------------------ --------------- ------------ ------------------------ -----------------------
<S> <C> <C> <C> <C> <C>
Richard G. 0 0 $ 0 (E) 95,300 (E) $ 2,008,571
Ellenberger........ (U) 1,986,900 (U) $40,430,508
Benjamin L. Scott.... 419,520 300,000 $12,960,296 (E) 0 (E) $ 0
(U) 0 (U) $ 0
John M. Zrno......... 0 0 $ 0 (E) 759,160 (E) $15,622,426
(U) 0 (U) $ 0
Michael W. Vent...... 99,250 362,360 $10,442,626 (E) 305,952 (E) $ 8,118,565
(U) 0 (U) $ 0
Jeffrey C. Smith..... 0 0 $ 0 (E) 313,296 (E) $ 7,738,718
(U) 100,400 (U) $ 1,168,857
Dominick J. 11,000 0 $ 183,172 (E) 302,297 (E) $ 5,394,083
DeAngelo........... (U) 200,400 (U) $ 2,334,477
David L. Hughart..... 0 0 $ 0 (E) 407,689 (E) $ 7,326,520
(U) 200,400 (U) $ 2,334,477
</TABLE>
- ------------------------------
(a) On December 31, 1999, the value of a Broadwing Common Share on the New York
Stock Exchange (based on the average of the high and low) was $37.06 per
share.
(b) Pursuant to the merger, each option to acquire Company Common Shares was
converted into an option to acquire Broadwing Common Shares on the same
terms and conditions.
IV. PERFORMANCE UNIT AWARDS UNDER THE LONG TERM INCENTIVE PLAN--LAST FISCAL YEAR
The following table provides information concerning performance unit awards
granted to Mr. Ellenbeger during 1999 under the Long Term Incentive Plan. Each
performance unit is equivalent to a percent, not more than 200%, of the value of
a Common Share, based upon the extent to which the Company's total shareholder
return ("TSR"), which includes dividends and share price appreciation, for a
three-year performance period, compares with a comparison group mean total
shareholder return for the same period. No performance unit awards will be
awarded at the end of the performance period if the Company's TSR is negative.
If the Company's TSR is 80% of the comparison group mean TSR, 50% of the value
of the targeted number of performance units will be awarded. If the Company's
TSR is greater than 80% of the comparison group mean TSR, up to 200% of the
targeted number of performance units will be awarded, with, for example, 100%
being awarded if the Company's TSR is 100% of the comparison group mean TSR and
200% being awarded if the Company's TSR is 140% of the comparison group mean
TSR.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, UNDER NON-STOCK PRICED BASED-PLANS
UNITS OR OTHER PERFORMANCE OR OTHER PERIOD ----------------------------------------
NAME RIGHTS (#) UNTIL MATURATION OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
- ---- ----------------- --------------------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Richard G.
Ellenberger........... 17,350 1999-2001 8,875 17,350 34,700
</TABLE>
V. DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
Mr. Ellenberger participated during 1999 in both the Cincinnati Bell
Management Pension Plan (the "Management Pension Plan"), which is a
tax-qualified defined benefit pension plan, and a
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<PAGE>
non-tax-qualified pension plan known as the Cincinnati Bell Inc. Pension Program
(the "Pension Program").
Under the Pension Program, each current active participant's pension at
retirement, if paid in the form of a single life annuity, generally will be an
amount equal to the difference between 50% of the participant's average monthly
compensation (for the 36-month period that occurs during the 60-month period
preceding retirement that produces the highest compensation amount) and the sum
of the participant's benefits payable under the Management Pension Plan
(including for this purpose amounts which are intended to supplement or be in
lieu of benefits under the Management Pension Plan) and Social Security
benefits. Also, there is a reduction in such pension amount of 2.5% for each
year by which the sum of the participant's years of age and years of service at
retirement total less than 75, and no benefits are payable if the participant
terminates employment (other than by reason of his or her death) prior to
attaining age 55 and completing at least 10 years of service credited for the
purposes of the plan.
The basic benefit formula under the Management Pension Plan is a cash
balance formula. Under this formula, each participant has an account to which
pension credits are allocated at the end of each year based upon the
participant's attained age and plan compensation for the year (with such plan
compensation being subject to a maximum legal annual compensation limit, which
limit is $160,000 for 1999 and $170,000 for 2000). To the extent that a
participant's plan compensation exceeds the Social Security old age retirement
taxable wage base, additional pension credits are given for such excess
compensation. The following chart shows the annual pension credits which are
given at the ages indicated:
<TABLE>
<CAPTION>
ATTAINED AGE PENSION CREDITS
<S> <C>
Less than 30 years 2.50% of total plan compensation plus 2.50%
of excess compensation
30 but less than 35 years 2.75% of total plan compensation plus 2.75%
of excess compensation
35 but less than 40 years 3.25% of total plan compensation plus 3.25%
of excess compensation
40 but less than 45 years 4.00% of total plan compensation plus 4.00%
of excess compensation
45 but less than 50 years 5.25% of total plan compensation plus 5.25%
of excess compensation
50 but less than 55 years 6.50% of total plan compensation plus 6.50%
of excess compensation
55 or more years 8.00% of total plan compensation plus 8.00%
of excess compensation
</TABLE>
A participant's account under the Management Pension Plan is also generally
credited with assumed interest for each calendar year at a certain interest
rate. Such interest rate is 7.75% per annum for 1999 and 2000 with respect to a
participant while he or she is still employed by the Company or a subsidiary of
it and 3 1/2% (or 4% if a participant elects out of a preretirement death
benefit) for a participant while he or she is not so employed. (In the case of a
participant who was a participant in the Management Pension Plan on
December 31, 1993 or who has benefits transferred from other plans to the
Management Pension Plan, the participant's account also was credited with
pension credits equivalent to the participant's accrued benefit on that date or
when such benefits are transferred, as the case may be.)
After retirement or other termination of employment, a participant under the
Management Pension Plan is entitled to elect to receive a benefit under the plan
in the form of a lump sum payment or as an annuity, generally based on the
balance credited to the participant's cash balance account under the plan
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<PAGE>
when the benefit begins to be paid (but also subject to certain transition or
special benefit formula rules in certain situations).
As a participant under the Pension Program, if Mr. Ellenberger continues in
employment and retires at age 65, his estimated single life annuity annual
pension amounts under both the Management Pension Plan and the Pension Program
combined, prior to deduction for Social Security benefits, would be $563,000.
This annual pension amount would be reduced if Mr. Ellenberger (age 47 and two
years of service) retires prior to age 60.
VI. 401(k) PLAN
The Company's 401(k) Plan (the "401(k) Plan") is a tax-qualified retirement
plan. In general, all employees of the Company who have attained age 20 1/2 and
completed six months of service are eligible to participate in the 401(k) Plan.
Participants may make pre-tax contributions to the 401(k) Plan in an amount not
to exceed $10,500 per year for 2000. The Company may elect to make matching
contributions each year, which are allocated among participants depending on the
amount that they contribute to the 401(k) Plan. The Company may also elect to
make profit-sharing contributions to the 401(k) Plan, which are allocated among
participants as a percentage of compensation.
VII. EFFECT OF CHANGE IN CONTROL ON CERTAIN EXECUTIVE COMPENSATION PLANS
Under the Long Term Incentive Plan, in the event of a change in control, all
outstanding stock options will become immediately exercisable, all restrictions
applicable to restricted stock awards will lapse and a pro rata portion of all
accrued incentive awards will be paid in cash. The present values of all accrued
unfunded benefits under the Management Pension Plan and the Pension Program will
be funded within five days after a change in control.
VIII. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Effective January 1, 1999, Broadwing entered into an Employment Agreement
with Mr. Ellenberger which provides for the employment and retention of
Mr. Ellenberger for a four-year term commencing on January 1, 1999, subject to
automatic one year extensions unless terminated prior to the beginning of the
final year. The Employment Agreement provides for a minimum base salary of
$550,000 per year; a minimum bonus target of $360,000 per year; a grant of
options to purchase 300,000 Broadwing Common Shares, which options will become
exercisable as to 75,000 Broadwing Common Shares on January 1 of each year
commencing January 1, 2000 (this grant was amended to provide that it became
exercisable as to the first 75,000 Broadwing Common Shares on December 31, 1999
rather than January 1, 2000); a restricted stock award of 300,000 Broadwing
Common Shares which will vest on December 31, 2002 (this grant was amended to
provide that one-fourth of its shares vest on December 31 of each of 1999, 2000,
2001 and 2002); and annual grants of long term incentives with a present value
of not less than $750,000. The Employment Agreement provides that, if
Mr. Ellenberger's employment terminates within two years following a change in
control of Broadwing, Mr. Ellenberger will receive a lump sum payment equal to
three times his annual base salary and bonus target on the date of termination,
plus certain continued medical, dental, vision and life insurance coverages as
well as retiree medical benefits. In the event that Broadwing terminates
Mr. Ellenberger's employment (other than for cause or disability or within two
years of a change in control of Broadwing), Mr. Ellenberger will receive a lump
sum payment equal to the greater of (a) two times his base salary rate and bonus
target or (b) the base salary rate and bonus target for the remainder of the
term of the Employment Agreement, plus the medical benefits and retiree medical
benefits described above. In addition, to the extent that Mr. Ellenberger is
deemed to have received an excess parachute payment by reason of a change in
control, Broadwing shall pay Mr. Ellenberger an additional sum sufficient to pay
(i) any taxes imposed under Section 4999 of the Code plus (ii) any federal,
state and local taxes applicable to any taxes imposed under Section 4999 of the
Code.
12
<PAGE>
Effective November 9, 1999, Broadwing Communications Services Inc., a
subsidiary of the Company, entered into an Employment Agreement with
Mr. DeAngelo which provides for the employment and retention of Mr. DeAngelo for
a one-year term commencing on November 9, 1999, subject to automatic one-year
extensions unless terminated prior to the end of a year. The Employment
Agreement provides for a minimum base salary of $245,100 per year; a minimum
bonus target of $122,550 per year; a grant of options on November 9, 1999 to
purchase 200,000 Broadwing Common Shares, which options will become exercisable
as to 50,000 Broadwing Common Shares on each of September 17, 2002 and
September 17, 2003 and as to 100,000 Broadwing Common Shares on September 17,
2004; and annual grants of options to purchase Broadwing Common Shares. The
Employment Agreement provides that, if Mr. DeAngelo's employment terminates
within one year following a change of control of Broadwing, Mr. DeAngelo will
receive a lump sum payment equal to his annual base salary and bonus target on
the date of termination, plus certain continued medical, dental, vision and life
insurance coverages as well as retiree medical benefits.
PERFORMANCE GRAPH
The Performance Graph is not relevant since the Company has not had a class
of common stock registered under Section 12 of the Securities Exchange Act of
1934 since the merger.
OTHER MATTERS
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Officers, directors and greater than 10% stockholders are required by
regulations of the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it, the Company believes that, during the
period commencing January 1, 1999 and ending December 31, 1999, all such persons
complied on a timely basis with the filing requirements of Section 16(a), with
the exception of General Electric Pension Trust, which failed to file a Form 5
for fiscal year 1999 on a timely basis to report one transaction which was
required to be reported on the Form 5 and which reported two transactions on the
Form 5 for fiscal 1999 which should have been reported on Forms 4.
AUDITORS
The Company has appointed PriceWaterhouseCoopers LLP to continue as the
Company's auditors and to audit the books of account and other records of the
Company for the fiscal year ending December 31, 2000. In connection with the
Company's merger with Broadwing on November 16, 1999, the Company dismissed its
accountants, Ernst & Young LLP, and replaced them with PricewaterhouseCoopers
LLP, Broadwing's existing accountants. The Company's Board of Directors approved
the change in accountants.
13
<PAGE>
FINANCIAL STATEMENTS AVAILABLE
The 1999 Combined Annual Report and Form 10-K of the Company to stockholders
includes the financial statements for the Company and its subsidiaries. If you
would like a copy of the Company's 1999 Combined Annual Report and Form 10-K as
filed with the Securities and Exchange Commission, please write to Thomas E.
Taylor, Secretary, Broadwing Communications Inc., 201 East Fourth Street,
P.O. Box 2301, Cincinnati, Ohio 45201, and the Company will send you one free of
charge.
By Order of the Board of Directors
Thomas E. Taylor
Secretary
April 13, 2000
14
